Operating Segments and Related Information

12 Months Ended

Dec. 31, 2014

Segment Reporting [Abstract]

Operating Segments and Related Information

OPERATING SEGMENTS AND RELATED INFORMATION

We conduct our operations through four reportable segments:

Recovery Audit Services – Americas represents recovery audit services (other than Healthcare Claims Recovery Audit services) provided in the United States of America (“U.S.”), Canada and Latin America.

Recovery Audit Services – Europe/Asia-Pacific represents recovery audit services provided in Europe, Asia and the Pacific region.

Adjacent Services (formerly known as Profit Optimization services) represents data transformation, data analytics and associated advisory services.

Healthcare Claims Recovery Audit Services represents recovery audit services for healthcare claims, which consist primarily of services provided under subcontracts related to the Medicare Recovery Audit Contractor program.

We include the unallocated portion of corporate selling, general and administrative expenses not specifically attributable to the four reportable segments in Corporate Support.

We evaluate the performance of our reportable segments based upon revenue and measures of profit or loss we refer to as EBITDA and Adjusted EBITDA. We define Adjusted EBITDA as earnings from continuing operations before interest and taxes (“EBIT”), adjusted for depreciation and amortization (“EBITDA”), and then further adjusted for unusual and other significant items that management views as distorting the operating results of the various segments from period to period. Such adjustments include restructuring charges, stock-based compensation, bargain purchase gains, acquisition-related charges and benefits (acquisition transaction costs, acquisition obligations classified as compensation, and fair value adjustments to acquisition-related contingent consideration), tangible and intangible asset impairment charges, certain litigation costs and litigation settlements, certain severance charges and foreign currency transaction gains and losses on short-term intercompany balances viewed by management as individually or collectively significant. We do not have any inter-segment revenue.

Segment information for the years ended December 31, 2014 and 2013 and 2012 (in thousands) is as follows:

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific		Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
2014
Revenue	$	106,533	$	44,319	$	10,700		$	2,640		$	—		$	164,192
Net loss														$	(7,526	)
Income tax expense														3,241
Interest income, net														(77		)
EBIT	$	21,066	$	2,772	$	(4,161	)	$	(4,827	)	$	(19,212	)	(4,362		)
Depreciation of property and equipment	4,711		592		722			191			—			6,216
Amortization of intangible assets	2,002		1,195		334			—			—			3,531
EBITDA	27,779		4,559		(3,105		)	(4,636		)	(19,212		)	5,385
Foreign currency transaction (gains) losses on short-term intercompany balances	380		1,828		—			—			(205		)	2,003
Acquisition-related charges	—		—		249			—			—			249
Transformation severance and related expenses	1,348		1,285		418			410			589			4,050
Other (income) loss	—		—		57			—			—			57
Stock-based compensation	—		—		—			—			4,532			4,532
Adjusted EBITDA	$	29,507	$	7,672	$	(2,381	)	$	(4,226	)	$	(14,296	)	$	16,276
Capital expenditures	$	3,930	$	651	$	123		$	5		$	—		$	4,709
Allocated assets	$	50,252	$	18,556	$	4,596		$	820		$	—		$	74,224
Unallocated assets:
Cash and cash equivalents	—		—		—			—			25,735			25,735
Restricted cash	—		—		—			—			53			53
Deferred income taxes	—		—		—			—			41			41
Prepaid expenses and other assets	—		—		—			—			2,729			2,729
Total assets	$	50,252	$	18,556	$	4,596		$	820		$	28,558		$	102,782

	Recovery Audit Services – Americas		Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
2013
Revenue	$	118,649	$	46,436		$	13,183		$	16,948		$	—		$	195,216
Net loss															$	(186	)
Income tax expense															2,755
Interest income, net															(77		)
EBIT	$	27,094	$	3,901		$	(3,480	)	$	(2,240	)	$	(22,783	)	2,492
Depreciation of property and equipment	5,617		514			652			1,448			—			8,231
Amortization of intangible assets	2,792		1,508			697			—			—			4,997
EBITDA	35,503		5,923			(2,131		)	(792		)	(22,783		)	15,720
Impairment charges	2,702		—			71			1,434			—			4,207
Foreign currency transaction (gains) losses on short-term intercompany balances	327		(316		)	—			—			(24		)	(13		)
Acquisition-related charges (benefits)	1,315		(900		)	187			—			—			602
Transformation severance and related expenses	107		1,135			81			87			1,134			2,544
Stock-based compensation	—		—			—			—			6,294			6,294
Adjusted EBITDA	$	39,954	$	5,842		$	(1,792	)	$	729		$	(15,379	)	$	29,354
Capital expenditures	$	5,292	$	781		$	376		$	426		$	—		$	6,875
Allocated assets	$	55,978	$	16,706		$	4,993		$	7,433		$	—		$	85,110
Unallocated assets:
Cash and cash equivalents	—		—			—			—			43,700			43,700
Restricted cash	—		—			—			—			57			57
Deferred income taxes	—		—			—			—			1,708			1,708
Prepaid expenses and other assets	—		—			—			—			2,254			2,254
Total assets	$	55,978	$	16,706		$	4,993		$	7,433		$	47,719		$	132,829

	Recovery Audit Services – Americas			Recovery Audit Services – Europe/Asia- Pacific			Adjacent Services			Healthcare Claims Recovery Audit Services			Corporate Support			Total
2012
Revenue	$	121,638		$	53,783		$	14,990		$	18,092		$	—		$	208,503
Net income																$	5,392
Income tax expense																1,297
Interest expense, net																966
EBIT	$	28,589		$	5,035		$	(3,396	)	$	(407	)	$	(22,166	)	7,655
Depreciation of property and equipment	4,651			322			770			1,341			—			7,084
Amortization of intangible assets	4,355			2,062			807			—			—			7,224
EBITDA	37,595			7,419			(1,819		)	934			(22,166		)	21,963
Foreign currency transaction (gains) losses on short-term intercompany balances	(44		)	(331		)	—			—			(2		)	(377		)
Acquisition-related charges (benefits)	(1		)	(612		)	382			—			—			(231		)
Transformation severance and related expenses	493			1,156			365			29			64			2,107
Wage claim costs	577			—			—			407			—			984
Stock-based compensation	—			—			—			—			6,321			6,321
Adjusted EBITDA	$	38,620		$	7,632		$	(1,072	)	$	1,370		$	(15,783	)	$	30,767
Capital expenditures	$	5,699		$	846		$	369		$	1,017		$	—		$	7,931

The following table presents revenue by country based on the location of clients served (in thousands):

	Years Ended December 31,
	2014		2013		2012
United States	$	91,499	$	115,819	$	124,302
United Kingdom	23,817		24,639		30,437
Canada	15,851		19,584		17,007
France	8,508		10,225		11,330
Australia	5,762		4,461		2,467
Mexico	4,653		4,482		4,877
Brazil	3,050		5,090		5,919
New Zealand	1,353		976		984
Spain	1,275		844		1,252
Thailand	986		971		896
Hong Kong	903		851		743
Colombia	841		752		715
Other	5,694		6,522		7,574
	$	164,192	$	195,216	$	208,503

The following table presents long-lived assets by country based on the location of the asset (in thousands):

	December 31,
	2014		2013
United States	$	29,392	$	33,686
United Kingdom	4,416		6,690
All Other	1,359		1,378
	$	35,167	$	41,754

No client accounted for 10% or more of total revenue in 2014, 2013, or 2012.