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PRGX Global, Inc. (NASDAQ:PRGX)

Q2 2014 Results Earnings Conference Call

July 29, 2014, 08:30 AM ET

Executives

Ronald E. Stewart - President and Chief Executive Officer

Robert B. Lee - Chief Financial Officer

Analysts

Matt Hill - William Blair

Kevin Liu - B. Riley & Company

Nick Nikitas - Robert W. Baird

Gregg Hillman - First Wilshire Securities Management

Operator

Good day, ladies and gentlemen, and welcome to the PRGX Global Inc Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions)

I will now turn the call over to Ron Stewart, President and CEO. Sir, you may begin.

Ronald E. Stewart

Thank you, LaToya, and welcome to today’s earnings conference call. Before I get into my comments however, let me turn it over to Bob Lee, our Chief Financial Officer, who will cover our Safe Harbor Statement.

Robert B. Lee

Thank you, Ron, and good day to everyone. Let me note at the outset that certain statements in this conference call maybe considered forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act. These statements include statements relating to management’s views and with respect to future results and financial performance that are based on management’s current expectations and beliefs and are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements.

For additional information on these factors, please refer to PRGX Global Inc’s filings with the Securities and Exchange Commission, including but not limited to, its reports on Forms 10-K and 10-Q. PRGX undertakes no duty to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. This presentation also contains references to certain non-GAAP financial measures such as EBIT, EBITDA and Adjusted EBITDA, metrics that we use internally to measure our operating performance. A reconciliation between these non-GAAP measures to net income loss, the most directly comparable GAAP measure, is available under the Investor Relations portion of our website at prgx.com.

Ronald E. Stewart

Thanks Bob. So I am pleased to say that we are moving ahead swiftly with our strategy focused squarely on core recovery audit business. As I have previously discussed, we’ve undertaken a number of important initiatives over the past several months that will allow us to operate more efficiently and profitably, thereby creating incremental value for our clients, our people and our investors.

The good news is that we are already seeing some of the early benefits from these changes and we are pleased to see improved financial performance as is evident when comparing to the first and second quarters, quarters which include a increase in revenue of $4.1 million and Adjusted EBITDA OF $3.2 million.

In our core recovery audit business, Q2 revenue increased 14% over the previous quarter although year-over-year we experienced a slight decrease in revenue. This decline was primarily driven by rate and scope changes at certain legacy Americas RA clients that we discussed on the last call; however this was mostly offset by revenue growth from our rebound and our business in Europe and the ramp up of our newer clients in Asia Pacific. In addition, revenue from our commercial clients is scaling nicely.

Looking at our RA business by geography, our most impressive results in Q2 came out of RA in Europe and Asia Pacific where combined revenue increased 28% compared to the first quarter of 2014 and 14% compared to the second quarter last year. Our growth in Asia Pacific is primarily the result of investments in our audit teams and global delivery model to bring leading edge audit capabilities to our Australia clients.

In the Americas, we also saw improvement in recovery audit revenue compared to the first quarter as we benefited from the recognition of certain claims that were delayed from the first quarter along with strong generation of new claims. We also experienced a solid uplift in our commercial RA business, which we expect to continue through the second half of the year based on strong claims pipeline generated in Q2.

Turning to healthcare, while claims generation was generally inline with our expectations, during the second quarter we experienced a higher rate of appeals than usual which resulted in lower revenue than originally projected for the period. As said, we are on track with the execution of the cost reduction plans for this business cycle.

As a reminder, claims auditing for all recovery audit contractors under the Medicare RAC program has been severely limited in 2014 and RAC providers are required to support prior claims and appeals through early 2016. We continue to perform under our Medicare RAC subcontracts as we execute on our private payer and Medicaid contracts. Our goal is to improve the financial performance of our non-Medicare business while meeting our Medicare RAC subcontract applications.

We told you on the last call that we expected our healthcare business to loose between $3 million and $4 million in 2014 due to the wind down of the existing Medicare RAC program. There are many variables which continue to impact the financial performance of this segment, but given our experience in healthcare through the first half of the year, we now expect this loss to be between $4 million and $5 million primarily due to the higher recent appeal losses than historically experienced.

Finally, in Adjacent Services second quarter revenue decreased year-over-year as expected as we continue to rationalize this business segment. We have streamlined our offerings and associated resources to focus on profitable and longer term strategic capabilities. We have seen our backlog of new business expand in the past six weeks and have some promising projects in our pipeline. We are on track to meet our objective of making Adjacent Services profitable by the end of the year.

Overall, I am pleased with the performance compared to the first quarter, although we have more work ahead. 2014 is the transition year as we focus our priorities, our core business to improve audit effectiveness and efficiency as we exit weaker performing parts of our business and build infrastructure for new growth areas of Adjacent Services and higher potential industries.

Let me dig a little deeper into the four corner stones of our strategy. The first element of our strategy is to improve the efficiency and effectiveness of our core RA capabilities. Our goal is to be the highest yielding, most cost effective provider in the industry. We have launched a number of initiatives to standardize audit tools and streamline audit processes. We also continue to make progress in moving work into our shared service centers focusing on our key accounts in the Americas as well as moving work from our European clients into our newest centre in Brno, Czech Republic.

The second part our strategy is to further differentiate ourselves with the most advanced technology platform in the industry. This platform will include advanced security capabilities and high performance data extraction transformation and delivery. This effort should not only enhance our RA capabilities by significantly improving our data processing speed and reducing cost, but we believe it will also make us standout in the industry with some of the most advanced security measures available. We are keenly aware of the importance of data security with our clients, and are taking aggressive measures to provide the most secured environment in our industry. We are well down the path towards implementing our high performance and secure technology infrastructure and should begin seeing real client impact later in 2014 and early 2015

The third part of our strategy is to establish a new set of services that are closely aligned with our core RA services leveraging our unique knowledge of client data, deep experience in procured pay best practices and advanced technology capabilities to drive significantly increased value for our clients. Realizing value from these core capabilities has been a PRGX objective for years and we are making significant progress in our ability to deliver these services using a repeatable and scalable platform.

Last quarter, we narrowed our focus and renamed this segment Adjacent Services with the primary objective of providing our clients with greater insights into opportunities for improved profitability and reduce risk. During the second quarter, we made significant progress selling these services to new and existing clients and we expect to see a ramp up in revenue and profitability to this segment in Q3 and Q4.

Finally, the fourth component of our strategy is expansion into targeted industries and geographies. We have been a dominant player in retail recovery auditing for many years with the primary focus on U.S. Canada, U.K. and France. While we have historically performed accounts payable recovery audits and numerous other industries we have made minimal investment in building formal industry programs.

During the first half of the year, we made considerable investment in building our capabilities and processes and initial industry verticals and are beginning to see the success through new client wins including a very important win at a major oil and gas company for both recovery audit and contract compliance services. We are also seeing increased claim activity which should help drive revenue in future quarters.

We are making excellent progress on all four components of our growth strategy and I look forward to sharing continued progress with all of you on future calls. So with my strategy update complete, I’ll now turn it back over to Bob to provide you details around our second quarter performance and outlook for the remainder of the year. Bob, the floor is all yours.

Robert B. Lee

Thanks, Ron. First, I’ll review of our financial results for the three months ended June 30, 2014. Consolidated revenue was $42 million compared to the prior year’s second quarter revenue of $50.2 million, a 16.4% decrease or $8.2 million with $6.6 million of this decrease attributable to the healthcare segment. On a constant dollar basis, adjusted for changes in foreign currency exchange rates, 2014 second quarter revenue decreased 17.2% compared to the same period in 2013.

Revenue from each of our reporting segments was as follows. Recovery Audit Services Americas revenue was $27 million compared to the prior year’s second quarter revenue of $29.4 million, a decrease of 8%. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services Americas’ second quarter revenue decreased 7.2% compared to the same period in 2013.

This majority of this reduction reflects the rate and scope production of several large clients as previously communicated. Further, while there has been a significant increase in contract compliance claims production, conversion of these claims to revenue is mostly yet to come.

Recovery Audit Services Europe, Asia Pacific Revenue was $12.4 million compared to the prior year’s second quarter revenue of $10.8 million, an increase of 15%. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services Europe, Asia Pacific second quarter revenue increased by 9.1% compared to the same period in 2013. The majority of this increase is due to audit growth in key clients in Australia and improved claim conversion within Europe.

Beginning with the first quarter of 2014, we separated our former New Services segment into its two components - Adjacent Services which we formally referred to as Profit Optimization Services and Healthcare Claims Recovery Audit Services or HCRA. Adjacent Services revenue was $2.3 million compared to the prior year’s second quarter revenue of $3.1 million, the majority of the decrease was expected as the company continues to rationalize and refine its offerings in this segment.

HCRA revenue was $0.3 million compared to the prior year’s second quarter revenue of $6.9 million. This expected decrease in revenue was primarily attributable to substantial reduction and auditing as part of the Medicare RAC program.

We’ve previously announced that we’ve withdrawn from the Medicare RAC rebid process, and we expect the related revenue to continue to decline through the remainder of 2014. Our cost of revenue or COR was $29.9 million in the second quarter of 2014 compared to $32.5 million in last year’s second quarter, which was 71.3% of revenue in 2014 and 64.8% of revenue for the same quarter in 2013.

Nearly half of this margin erosion was due to the wind down of the Medicare RAC program with the remainder due to the decline in revenue and the other segments as well as our investment in our contract compliance services. We believe the investment in contract compliance will prove beneficial for the remainder of 2014, although it had a negative impact on second quarter results, particularly in profit margins in the Americas Recovery Audit segment.

Total SG&A in the 2014 second quarter was $11 million compared to $11.6 million in last year’s second quarter, a decrease of $6 million or 5.1%. Excluding transformation severance and related expenses, the year-over-year decrease in SG&A expenses for the quarter was $1.5 million.

Depreciation expense decreased $0.4 million and amortization decreased $0.4 million compared to the second quarter of 2013. We expect similar year-over-year decreases on a quarterly basis through the remainder of 2014

For the three months ended June 30, 2014, our net loss was $1.5 million or $0.05 per basic and diluted share compared to a net income of $1.8 million or $0.06 per basic and diluted share for the same period in 2013. Although we reduced our cost by over $4.9 million, these reductions were not sufficient to offset the revenue declines we experienced.

Our Adjusted EBITDA for the second quarter of 2014 was $3.8 million compared to $8 million of Adjusted EBITDA for the same period in 2013, a decline of $4.2 million of which $3.5 million is attributable to the HCRA segment.

Now to begin the review of our financial results for the six months ended June 30, 2014. Consolidated revenue was $79.9 million for the six months ended June 30, 2014 compared to the prior years six month periods revenue of $95.3 million, a 16.2% decrease or $15.4 million, $9.4 million attributable to the healthcare segment.

On a constant dollar basis, adjusted for changes in foreign currency exchange rates, the first six months of 2014 revenue decreased 16.3% compared to the same period in 2013. Recovery Audit Services Americas revenue for the six months ended June 30, 2014 was $51.8 million compared to the prior years six months revenue of $55.6 million, a decrease of 6.8%. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services Americas revenue for the six months ended June 30, 2014 decreased 5.4% compared the same period in 2013.

Recovery Audit Services Europe, Asia Pacific Revenue for the six months ended June 30, 2014 was $22.1 million compared to the prior years six months revenue of $21.8 million an increase of 1.4%. On a constant dollar basis, adjusted for changes in foreign exchange rates, Recovery Audit Services Europe, Asia Pacific Revenue for the six months ended June 30, 2014 decreased by 2.7% compared to the same period in 2013.

Adjacent Services revenue for the six months ended June 30, 2014 was $4.6 million compared the prior year’s first half revenue of $7.1 million. HCRA revenue for the six months ended June 30, 2014 was $1.4 million compared to last years first half revenue of $10.8 million.

Our cost of revenue for the six months ended June 30, 2014 was $58.8 million compared to $64.1 million in 2013’s first six months which was 73.6% of revenue in 2014 and 67.2% of revenue in 2013. Over half of the margin erosion was due to the wind down of the Medicare RAC program with the remainder due to the decline in revenue and the other segments as well as our investment in our contract compliance services.

Total SG&A for the six months ended June 30, 2014 was $21 million compared to $22.2 million in last years first half, a decrease of $1.2 million or 5.4%. Excluding transformation severance and related expenses, the year-over-year decrease in SG&A expenses for the six month period was $2.1 million.

Depreciation expense for the first six months of 2014 decreased $0.8 million and amortization expense decreased $0.8 million compared to the six months ended June 30, 2013. For the six months ended June 30, 2014 our net loss was $5.1 million or $0.17 per basic and diluted share compared to net income of $1.3 million or $0.05 per basic and diluted share for the six months ended June 30, 2013.

Although we reduced our cost by over $8.9 million these reductions were not sufficient to offset the revenue declines we experienced. Our Adjusted EBITDA for the six months ended June 30, 2014 was $4.3 million or 5.4% of revenue compared to $11.7 million or 12.2% for the same period in 2013, a decline of $7.4 million of which $4.7 million is attributable to the HCRA segment.

I will now highlight certain balance sheet and cash flow information. As of June 30, 2014, we had unrestricted cash and cash equivalents of $36.4 million no borrowings against our revolving credit facility and no debt outstanding. At June 30, 2014, current assets exceeded current liabilities by $42.7 million. During the first half of 2014, we reduced current accounts receivable balance by approximately $8.1 million, most of this reduction being attributable to collections on Medicare RAC subcontract balances.

Net cash provided by operating activities for the six months ended June 30, 2014 amounted to $5.9 million compared to net cash used in operating activities of $3.1 million for the same period in the prior year. Capital expenditures on property and equipment for the six months ended June 30, 2014 were $2.3 million compared to $3 million for the same period last year.

Since the announcement of our $20 million stock repurchase program during the first quarter through July 25, 2014 we’ve repurchased 2.2 million shares of our common stock for an aggregate purchase price of $14.1 million. This represents 7.2% of the common stock outstanding as of the date of the announcement of the repurchase program.

Let me now give an update for the remainder of 2014. We are seeing positive trends in certain parts of our business and while challenging can see an achievable path to meeting our goals with a strong third and fourth quarter for our core recovery audit segments. For the full year 2014, we continue to expect consolidated revenues to be between $165 million and $170 million, down from $195 million in 2013, approximately half of this revenue decline is from the HCRA segment. We expect Adjacent Services revenues to decline for the year due to the slow start in 2014 primarily due to the weak backlog coming into the year as well as the rationalization of our service offerings.

The balance of the expected decline is primarily located in the Americas Recovery Audit Segment and attributable to the completion of a very large recovery audit project in 2013 along with rate and scope changes at a few recovery audit clients. Excluding healthcare, we are confident that effective control in our operating – over operating cost and corporate overhead plus strong traction and contract compliance should result in favorable year-over-year Adjusted EBITDA comparisons for the second half of the year, however, soft first quarter results combined with significant investments in contract compliance made during the second quarter will challenge us to achieve full year Adjusted EBITDA results comparable to 2013, again exclusive of healthcare.

Ronald E. Stewart

Thank you, Bob. Now let’s turn it over to LaToya to facilitate a few questions.

Question-and-Answer Session

Operator

(Operator Instructions).And the first question is from Tim McHugh of William Blair. Your line is open.

Matt Hill - William Blair

Good morning. This is Matt Hill in for Tim. Just a little bit more on Recovery Audit in the Americas segment. I think you touched on it right before the Q&A started, just trying to balance kind of the dynamic of the scope reductions in there with also this delay in contracting plans, just trying to get a handle with the second half expectations you expect this -- the EBITDA the step up in the second half, so just trying to get a size of that magnitude.

Ronald E. Stewart

And Matt, are you referring to the Recovery Audit?

Matt Hill - William Blair

Yes.

Ronald E. Stewart

Okay. First of all we’ve got quite a nice backlog of claims that are should be coming through in Q3 or early Q4. And so we expect to see that as a positive trend and then we have good momentum in our European clients where the Asia Pacific clients as I mentioned before and continuing to recover from some of those late starts on a few of our larger Recovery Audit clients in the Americas. So, we feel pretty good about when we look at our backlog that we have a strong position going into Q3 and Q4 and as always it’s all about getting the claims through the approval process and turning them into revenue, but we’re on track with reducing our SG&A cost as well as some of our core cost of Recovery Audit.

Matt Hill - William Blair

Okay, thanks. And then, just kind of an update on the progress of transitioning more of this work to the shared services, just to get an idea of how far you are along with maybe the Americas segment and then also kind of balance that with what Europe Asia Pacific looks like at this point in the progress there?

Ronald E. Stewart

Sure. We had set a goal at the beginning of the year to move a higher amount of our work to these offshore centers, and excuse me to our shared service centers and we are I would say through the first half of the year pretty much on track with our reductions in headcount and the movement of work, you know there’s always more to do and when you move more and more work into the synergy, I have to look at streamlining the processes and the automation tools to support that, but I think it will be on track generally with where we want to be there but we have some work to do. And then, as I mentioned in my comments we’ve got a new centre in Brno, Czech Republic that’s coming online. We’ve got a stable staff and leadership team in place and starting to move work in there. And so, that’s good so there is more work to be done, but we are making progress still committed to that path.

Matt Hill - William Blair

Okay. And then just one final one. Just one final one, just on cash plans, I’m assuming continue with the share repurchases. Is there any type of target you guys have out there for what you’d like to see unrestricted cash at?

Robert B. Lee

Well, we’re on track to complete the $20 million repurchase program already. And I also mentioned in my comments we’ve already bought through the end of the second quarter $11 million and through last Friday, over $14 million. So, we still have $6 million to go on our current program based on the pace that has occurred in the past.

Obviously, we’re subject to limits and restrictions on the repurchase programs. But if you just assume the same rate of repurchasing, we should be able to complete that existing program somewhere around the end of this quarter, somewhere around the end of September, maybe possibly early October. And then at that time we will let you know what we’re going to do after that.

Matt Hill - William Blair

Alright. Thank you very much.

Ronald E. Stewart

Thanks, Matt.

Operator

Thank you. And then next question is from Kevin Liu of B. Riley & Company. Your line is open.

Kevin Liu - B. Riley & Company

Hi. Good morning. First thing I want to do is kind of clarify your EBITDA comments for the back half of the year. Are you expecting it to be up just relative to the first half of this year or actually up versus the back half of last year?

Robert B. Lee

We’re expecting to be comparable to the back half of last year excluding healthcare.

Kevin Liu - B. Riley & Company

Got it. And with respect to the contract and plans opportunity, maybe if you could talk about the level of investment that went into the business in Q2 here, it seems like it may have accelerated beyond what you may have talked about earlier in the year. So I just wanted to see if that was the right assumption to make and what sort of opportunity you saw that -- accelerated those investments?

Ronald E. Stewart

Yeah. We have -- coming into the year we had -- seen some initial opportunities as to expand that part of our practice. We’ve been building our team and we’ve got quite a bit of backlog. And the real challenge for us was getting the team staff and getting the work done, getting the claims generated and that’s probably taken a little longer to get the revenues through the pipeline than we’ve originally anticipated.

We have a nice backlog of claims at this point that we expect to come through in the months ahead. And we’ve got I’ll say, production capacity for claims generation in place. But I’d say the first half of the year we did not meet our revenue expectations as we built up that team and some of that is being pushed out to future quarters.

Robert B. Lee

Right, and I’ll add that the decline in margins you saw on Americas EBITDA margins is -- I won’t say a 100% attributable to contract compliance, but pretty close.

Ronald E. Stewart

We are -- let me be clear. We see it as a great growth platform for us. It’s a strong pipeline right now and we’re continuing to add resources to that team.

Kevin Liu - B. Riley & Company

Understood. And as that backlog as contract compliance claims started to come through, do you anticipate being able to return to the levels of the Americas gross margin you were able to put up historically or will it take some more time beyond that just to be able to leverage some of these investments you’ve made this year?

Ronald E. Stewart

Kevin, we should be returning to historical margins more better.

Kevin Liu - B. Riley & Company

Great. And just couple of questions on Europe/APAC performance. One, if you could talk about the level of claims by far you have going into the Q3 or the back half of the year versus what you had coming in the Q2 and then to just at a high level do you expect to be able to sustain the level of revenues you were able to post here in the second quarter?

Ronald E. Stewart

So let me comment on the backlog and just the general conditions and let Bob talk about the projections for Q3 and Q4. But as you recall, on our last earnings call, we talked about some of the holdbacks or the delays in claims in Europe and that has improved. We’ve got a number of those claims through the -- into revenues, we’ve got more to go.

In terms of the backlog, we’ve got a good healthy backlog. Look at Asia-Pacific we’ve got some strong acceleration going on there that should service well through the second half. So I think we’ve got steady -- I won’t call it a rapidly expanding backlog, but it’s a steady, strong backlog of claims and we should have a very solid Q3 and Q4 based on that.

Robert B. Lee

Right, and to the second part of your question, Kevin, yeah, we expect the second half, I’m not going to go to quarters, but we certainly expect the second half within Europe/Asia Pacific to be sequentially and year-over-year improved.

Kevin Liu - B. Riley & Company

Great, thank you. And good luck in the second half.

Ronald E. Stewart

Thanks, Kevin.

Operator

Thank you. The next question is from Nick Nikitas of Robert W. Baird. Your line is open.

Nick Nikitas - Robert W. Baird

Yeah. Thanks for taking the questions. Just looking again at the margins for RA Americas side, could you specifically pass out just the impact from the rate and scope changes versus the contract compliance that seems like that had an impact as well during the quarter?

Robert B. Lee

Well, yeah, we can -- let me just say, I don’t now if it will go that granular, but I’ll just repeat what I said a couple of minutes ago. Most of the margin change from -- in Q2 this year compared to Q2 last year is attributable to the increase and the core cost of contract compliance with the revenue yet to come.

Nick Nikitas - Robert W. Baird

Okay. So looking specifically to the back half you’d expect a year-over-year decline margins, but maybe not as significant as Q2?

Robert B. Lee

No. As Ron said a minute ago, we expect that the margins to rebound as those claims begin to convert that are in the pipe. Whether we’ll catch up the whole first half margin decrease? I don’t know. But for the second half standalone, we recently do.

Ronald E. Stewart

Yeah. But we have a very solid backlog of generating claims that are pending approval in contract compliance today and it did not hit in Q2. But we’re continuing to generate new claims in Q2, excuse me, in Q3, but that will definitely go a long way to recovering some of those margins that we missed in Q2.

Nick Nikitas - Robert W. Baird

Okay. And I think in Q1 you guys mentioned there was a delay in the large audit client that was going to flow through to Q2 and Q3? And did you see that they are starting to come through this quarter or is that kind of even more back unloaded and looking more like a Q3 of that now?

Ronald E. Stewart

We did see some of that will come through in Q2, but the bulk of it will be seen in Q3. Also in Q3 and Q4, but the signing of the contract and getting it through the revenue cycle was later in the quarter and so we’re also at now and should be seeing nice acceleration in that client for the rest of the year.

Nick Nikitas - Robert W. Baird

Okay. I think -- it seems like we’ve heard a lot about kind of like recent success across the oil and gas industry? Can you talk about what’s driving that? Is that more of an internal focus, maybe an industry opportunity that’s your capitalizing on and have you gotten anything out of that you feel could be replicated across other industries?

Ronald E. Stewart

Yes, yes, and yes. So first of all, oil and gas industry as you know and all of us know is expanding and a lot of investment going into that industry, so it’s a very strong and fast growing industry. And the spend patterns are -- meet our criteria for target in that they are large, they are complex and they are global and that fits very well in our model.

And yes, we have targeted oil and gas. We’ve got other industries, we’ve got targeted but oil and gas is a definite investment focus for us. And we are continuing to focus on that industry globally. And we’ve had some great recent success there that we expect to replicate and so stay tuned to more on that industry.

Nick Nikitas - Robert W. Baird

Okay. That’s helpful. Thanks

Ronald E. Stewart

Okay. Thank you, Nick.

Operator

Thank you. (Operator Instructions) And the next question is from Gregg Hillman of First Wilshire Securities Management. Your line is open.

Gregg Hillman - First Wilshire Securities Management

Yeah. Good morning, gentlemen. Congratulations on that continuing turnaround. First of all, Bob, on the platform you mentioned -- I just want to try get into how the new platform is better than the old platform in terms of functionality, speed and what not. And also in terms of the old platform how many old platforms were there in the country companywide that you’re going to convert into one platform?

Ronald E. Stewart

All right. Well Gregg, I hope we have about 45 minutes, so we’ll take a few. You know, but first of all, the objective of creating greater values from the data that we process on behalf of our clients has been an objective for PRGX for many, many years. Now the -- one of the biggest inhibitors or barriers has been the ability to consolidate and to consolidate the data into a platform that we can scale and replicate, and that’s been a challenge in the past to answer question about how many platforms?

This is a company that was build literally dozens of acquisitions over a number of years and each of those acquisitions have their own unique processes and technical environments, and while many of those have evolved over time, there are still quite of number of disparate platforms out there that we’ve got to deal with.

And so what’s different now is I think the state of technology available to us is advanced and evolved. And I think we’ve got a very smart and reasonable approach to bringing that platform to bear in our clients. So we’ve got to be very meticulous in how we migrate our legacy clients into a more standardized technology infrastructure and we’re right in the middle of doing that. So far, we’re on track and so far we’re having very good success.

And some of these advances of new technology are going to really enable us to not only scale the platform, but to provide new capabilities just due to processing speed that we haven’t had before. So I think it’s a combination of the approach. And there’s been some wise investments in technology platforms before I got here that we’re building on, accelerating around, and that’s truly the key to building new revenue streams on top of our existing revenue streams not different, not completely different but in terms of really building on our core clients and core industries we serve. Hope that makes sense?

Gregg Hillman - First Wilshire Securities Management

Okay. And just in terms of gathering the data, I think that you don’t gather data manually or you don’t have people entering numbers any more. You just getting all tapes or feeds or files from you clients? Is that correct?

Ronald E. Stewart

I can’t speak to everyone of our clients, but I’m certain that most of our data would come in electronically, but also I’m quite sure that in certain parts of our business that we have some manual input required. But it would obviously be less and less over time.

Gregg Hillman - First Wilshire Securities Management

Okay, great. And also congratulations on the win on oil and gas. I think that’s great. And I hope -- I hope you have the right marketing team for that vertical you know it’s maybe possibly former oil and gas people?

Ronald E. Stewart

Well, I appreciate that and that’s definitely top on our list. So we feel good about how we’re going to market, but you’re actually right, it’s an industry that requires a lot of knowledge, a lot of network that we can take advantage of.

Gregg Hillman - First Wilshire Securities Management

Thanks, Ron.

Ronald E. Stewart

Thank you, Gregg.

Operator

Thank you. And there are no further questions in queue at this time. I’ll turn the call back over for closing remarks.

Ronald E. Stewart

Okay. Well, thanks everyone for your time this morning. I know we’ve covered a lot of material and as I’ve stated, 2014 is a transition year. We’re right in the middle of it. And -- but we are truly pleased and positive about where we are in this process as we move into our platforms discussed earlier and so we’ll report to updating all of you going forward as things progress.

So, but we appreciate your interest, and being part of this call and all your questions. So, look forward to speaking to you on our next quarter. Thank you very much.

Operator

Thank you. Ladies and gentlemen, this concludes today’s conference. You may now disconnect. Good day.

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Source: PRGX Global, Inc. (PRGX) CEO Ronald Stewart on Q2 2014 Results - Earnings Call Transcript

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