July 25, 2014

ExamWorks Reports Third Quarter 2012 Financial Results

ExamWorks Group, Inc. (NYSE: EXAM), a provider of independent medical examinations (“IMEs”), peer reviews, bill reviews and related services, recently reported financial results for the third quarter of 2012.

Q3 2012 Highlights

  • Revenues for the third quarter of 2012 were $130.1 million, an increase of $20.9 million, or 19.1%, over the year-ago quarter revenues of $109.2 million. Excluding the impact of acquisitions completed within the past twelve months, organic revenue growth was 6.4% over the prior year quarter.
  • Pro forma revenues for the third quarter of 2012 were $141.4 million, an increase of $8.5 million, or 6.4%, over the year-ago quarter pro forma revenues of $132.9 million. Excluding the impact of currency, revenues would have grown by 7.1% over the prior year pro forma quarter. Pro forma revenues assume that acquisitions completed in 2011 and 2012 were completed on January 1, 2010 and 2011, respectively.
  • Adjusted EBITDA for the third quarter of 2012 was $20.2 million (15.5% of revenues), an increase of $3.1 million, or 18.1%, over the year-ago quarter adjusted EBITDA of $17.1 million. Excluding the impact of acquisitions completed in the third quarter of 2012, adjusted EBITDA was $18.9 million (15.2% of revenues), an increase of $1.8 million, or 10.5%, over the year-ago quarter adjusted EBITDA of $17.1 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net loss below and is not a substitute for the GAAP equivalent.
  • On August 31, 2012, we completed the acquisition of MedHealth Holdings Pty Ltd (“MedHealth”), gaining a leadership position in the Australian IME services market, continuing our global expansion into high-growth markets, and further diversifying our business. Additionally, on July 12, 2012, we completed the acquisition of Makos Health, a small Ontario based company that was immediately integrated into one of our existing business units, providing us with new customer relationships. During the twelve months ended June 30, 2012, these acquired businesses generated aggregate annual revenues and adjusted EBITDA of $56.5 million and $12.8 million, respectively. In the third quarter of 2012, these two acquisitions contributed revenues and adjusted EBITDA of $5.5 million and $1.3 million, respectively.
  • We ended the quarter with $6.4 million of cash on hand, approximately $381.9 million of total debt and total consolidated leverage of approximately 4.28x, pro forma for the effect of the MedHealth acquisition. As of the end of the quarter, we had available liquidity in excess of $45 million, including cash on hand and availability under our senior secured revolving credit facility.

Commentary
Commenting on the recent earnings announcement, Richard E. Perlman, Executive Chairman of ExamWorks, said: “We are delighted that during the third quarter all of our geographies experienced meaningful improvement. The positive trend continued as anticipated in our US business, our U.K. business continued to experience substantial growth, and our Canadian business delivered significantly improved performance. Finally, our newest geography, Australia, is experiencing significant growth that we also expect to continue, and we are pleased to have entered this exciting market. We are satisfied with both our operational and financial performance year to date, and notwithstanding the anticipated impact that our business in the northeastern United States will suffer from Hurricane Sandy during the fourth quarter, our improvements in 2012 have been significant and we are enthusiastically looking forward to 2013.”

James K. Price, Chief Executive Officer of ExamWorks, said: “We have been extremely selective and disciplined in the execution of our acquisition strategy in 2012. Our MedHealth acquisition in Australia is illustrative of that as we have acquired a rapidly growing and market-leading business that diversifies our revenue base in an attractive Australian market that is estimated to be approximately $500 million in annual revenues. We are pleased to welcome into our family MedHealth’s exceptionally well managed business, its talented and experienced team, and its nine service centers in six states and two territories. We look forward to continuing to raise the innovation, technology and quality bar in the IME industry in all of our markets.”

Financial Review
Revenues – For the three months ended September 30, 2012, revenues were $130.1 million, an increase of 19.1% over the $109.2 million in revenues in the third quarter of 2011. Excluding the impact of acquisitions completed within the past twelve months, organic revenue growth was 6.4% over the prior year quarter.

For the nine months ended September 30, 2012, revenues were $381.6 million, an increase of 35.1% over the $282.5 million in revenues in the comparable period of 2011. The increase in revenues was primarily due to acquisitions completed in 2011 and 2012. Excluding the impact of acquisitions completed in 2011 and 2012, organic revenue growth was 2.2% over the comparable prior year period.

Consistent with our presentation in prior quarters, below is a table presenting our pro forma revenues and growth rates for each of the regions that we serve. In the third quarter of 2012, we added Australia as a region through the acquisition of MedHealth and we added the Makos acquisition into the Canadian region. The numbers presented below are pro forma for the effect of acquisitions completed in 2011 and 2012.

In the third quarter of 2012, our US businesses generated revenues of $84.8 million, a 1.6% increase over the $83.5 million of pro forma revenues generated in the third quarter of 2011. For the nine month period ended September 30, 2012, our US businesses generated revenues of $260.4 million, a 2.0% increase over the $255.3 million of pro forma revenues generated in the nine month period ended September 30, 2011. The growth was largely due to increased volumes resulting from market share gains.

In the third quarter of 2012, our UK businesses generated revenues of $33.5 million, a 23.6% increase over the $27.1 million of revenues generated in the third quarter of 2011. For the nine month period ended September 30, 2012, our UK businesses generated revenues of $95.5 million, a 14.9% increase over the $83.1 million of pro forma revenues generated in the nine month period ended September 30, 2011. The growth was largely due to increased volumes resulting from market share gains.

In the third quarter of 2012, our Canadian businesses generated pro forma revenues of $6.6 million, a (25.8)% decline from the $8.9 million of pro forma revenues generated in the third quarter of 2011. In the nine months ended September 30, 2012, our Canadian businesses generated pro forma revenues of $21.0 million, a (29.5)% decline from the $29.8 million of pro forma revenues generated in the nine months ended September 30, 2011. Our Canadian businesses, which generate less than 5% of our total revenues, continue to be negatively impacted by the legislative changes in the province of Ontario.

In the third quarter of 2012, our Australian business generated pro forma revenues of $16.5 million, a 22.2% increase over the $13.5 million of pro forma revenues generated in the third quarter of 2011. In the nine months ended September 30, 2012, our Australian business generated pro forma revenues of $44.5 million, a 21.9% increase over the $36.5 million of pro forma revenues generated in the nine months ended September 30, 2011. The growth was primarily due to increased volumes resulting from market share gains and a change in sales mix.

Costs of revenues – For the three months ended September 30, 2012, costs of revenues were $86.1 million, an increase of 19.4% over the $72.1 million in costs of revenues in the third quarter of 2011. The change was primarily due to the acquired costs of revenues for acquisitions completed in 2011 and 2012. Costs of revenues as a percentage of revenues for the third quarter of 2012 were 66.2% compared to 66.0% in the third quarter of 2011. Included in costs of revenues in the third quarter of 2011 and 2012 are $650,000 and $750,000 of share-based compensation expenses, respectively.

Selling, general and administrative expenses (“SGA”) – For the three months ended September 30, 2012, SGA expenses were $28.3 million, an increase of 24.1% over the $22.8 million in SGA expenses in the third quarter of 2011. The change was primarily due to the acquired SGA expenses for acquisitions completed in 2011 and 2012. Included in SGA expenses in the third quarter of 2012 are $2.3 million in share-based compensation expenses and $1.4 million in acquisition-related transaction and other non-recurring costs. Included in SGA expenses in the third quarter of 2011 are $1.7 million in share-based compensation expenses and $498,000 in acquisition-related transaction costs and other non-recurring costs.

Depreciation and amortization expenses (“D&A”) – For the three months ended September 30, 2012, D&A expenses were $14.5 million, an increase of 10.7% over the $13.1 million in D&A expenses in the third quarter of 2011. The change was primarily due to acquisitions completed in 2011 and 2012. For the three months ended September 30, 2012, depreciation expense was $1.4 million and amortization expense was $13.1 million.

Interest and other expenses, net – For the three months ended September 30, 2012, interest and other expenses, net were $7.5 million, an increase of 41.5% over the $5.3 million in interest and other expenses, net in the three months ended September 30, 2011. Included in interest and other expenses, net in the third quarter of 2012 are $7.1 million of interest expenses and deferred loan cost amortization.

Adjusted EBITDA – For the three months ended September 30, 2012, adjusted EBITDA was $20.2 million, an increase of 18.1% over the $17.1 million in adjusted EBITDA in the third quarter of 2011.

Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net loss below and is not a substitute for the GAAP equivalent.

Other financial data – We generated $15.1 million of cash flow from operations in the first nine months of 2012, after the $22.5 million of bond interest payments made in 2012. We ended the quarter with $6.4 million of cash on hand and approximately $381.9 million of total debt, consisting of $250.0 million of senior unsecured notes due July 2019, $94.9 million outstanding under the senior secured revolving credit facility, $35.2 million outstanding under the working capital facilities in the U.K., and $1.8 million in seller subordinated notes. As of the end of the quarter, we had available liquidity in excess of $45 million, including cash on hand and availability under our senior secured revolving credit facility.

Business Outlook
ExamWorks is providing the following business outlook:

  • Full year reported revenue is expected to range between $520 million and $524 million, excluding the impact of any acquisitions that may be completed in the fourth quarter of 2012. Additionally, this outlook does not include the estimated $5 million to $10 million negative impact that Hurricane Sandy could have on our US operations.
  • Full year pro forma revenue is expected to range between $575 million and $579 million, assuming the closing of approximately $15 million of revenue from acquisitions currently in process. Additionally, this outlook does not include the estimated $5 million to $10 million negative impact that Hurricane Sandy could have on our US operations.
  • For 2012, we expect adjusted EBITDA margins between 15-16% of reported revenues. The adjusted EBITDA margin range does not include the estimated negative impact that Hurricane Sandy could have on our US operations.
  • Fourth quarter 2012 reported revenue is expected to range between $138 million and $142 million, excluding the impact of any acquisitions that may be completed in the fourth quarter of 2012. Additionally, this outlook does not include the estimated $5 million to $10 million negative impact that Hurricane Sandy could have on our US operations.
  • Fourth quarter 2012 adjusted EBITDA margin is expected to range between 15-16% of reported revenue. The adjusted EBITDA margin range does not include the estimated negative impact that Hurricane Sandy could have on our US operations. Adjusted EBITDA is a non-GAAP measure, the use of which by ExamWorks is described below. The reconciliation to GAAP measures of reported 2012 Adjusted EBITDA is expected to be calculated and presented in a manner consistent with the reconciliation set forth below with respect to the three and nine months ended September 30, 2012.
  • For 2013, we expect organic revenue growth to increase to between 5-7% based upon our expected 2012 pro forma revenue and we expect adjusted EBITDA margins between 16-17% of reported revenues.
  • For 2013, we will no longer provide acquisition guidance. Acquisitions remain an important part of our strategy and the opportunities are plentiful. Starting in 2013, we intend to announce acquisitions as they close rather than guiding to an annual number. We believe that this will allow analysts and shareholders to more accurately and consistently model our expected results going forward.

The complete earnings release is available here: ExamWorks Third Quarter 2012 Results

Source: ExamWorks

  • RSS
  • Twitter
  • LinkedIn