PRGX Global: Investments Mask Earning Power of Recovery Audit Services Leader

Ben Terk of Active Owners Fund presented his in-depth investment thesis on PRGX Global (Nasdaq: PRGX) at Best Ideas 2018.

PRGX Global is the largest provider of recovery audit services to the retail industry in the world. The company serves 75% of the top 20 global retailers, 32% of Fortune 50 companies, and has a 99% customer retention rate. The company recovers over-payments and under-deductions from a customer’s suppliers through data analytics and audit across millions of customer/supplier interactions.

Ben began tracking the company over five years ago when the prior CEO began his tenure. At the time, Ben was intrigued by the company’s long-term customer relationships and access to massive amounts of purchasing data that could be monetized through incremental services and analytics. In addition, there was a large opportunity to lower costs by accelerating the offshoring of more of the recovery process to India, which was already underway.

Under the leadership of a new CEO, the company has exited the healthcare business and focused on automating and accelerating audit cycle times to differentiate itself in an increasingly commoditized business. As a result, it has been able to grow organically by adding new clients and increasing customer retention.

A combination of heavy technology investment in the core platform and the buildout of the adjacent services business has masked earning power. Adjust for those non-recurring items, the enterprise recently traded for less than 7x 2017 EBITDA or ~50% less than the peer group.

About the instructor:

Ben Terk serves as a Portfolio Manager at Active Owners Fund. Mr. Terk co-founded Active Owners Fund in 2010. He brings over a decade of direct venture and growth capital investment experience to evaluate and add strategic value to small cap companies. In addition to counseling his companies on capital formation, M&A and business development, Mr. Terk has recruited dozens of proven senior managers, Chief Executive Officers and fellow Board Members to improve the operational efficiency of his companies. His network of relationships within the private equity community, from fellow investors and Board Members to Chief Executive Officers, senior managers and technical experts enables AOF to source and develop proprietary investment ideas, while actively contributing to the success of The Fund’s portfolio companies. Mr. Terk was a Partner of Rho Capital Partners, Inc., where he performed in depth due diligence on and closed numerous transactions in both up and down cycles. Mr. Terk served on 8 boards and was a trusted Advisor for an additional 14 companies. Prior to joining Rho in 1998, Mr. Terk served with Morgan Stanley & Co. for three years in its Mergers and Acquisitions Department and Venture Partners Group. He serves as Chairman Emeritus of Wharton Private Equity Partners. He was a Director of the Wharton Alumni Board and the Children’s Aid Society’s Rhinelander Center. Mr. Terk graduated from the Duke University with a B.A. degree in Economics, Phi Beta Kappa, Magna Cum Laude. He graduated from the Wharton School of Business on the Director’s List as a Palmer’s Scholar with an M.B.A. in Finance and Information Strategy.

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