December 15, 2017

ExamWorks Reports Second Quarter 2015 Financial Results

Atlanta, GA – ExamWorks Group, Inc. (NYSE: EXAM), a leading provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, and other related services, recently reported financial results for the second quarter of 2015.

Second Quarter 2015 and Other Highlights

  • Revenues for the second quarter of 2015 were $208.7 million, an increase of $12.3 million, or 6.3%, over the year-ago quarter revenues of $196.4 million. On a constant currency basis, revenues increased 11.3%, with organically generated revenues increasing 6.5% during the second quarter of 2015. Currency headwinds negatively impacted reported revenues this quarter by approximately $10 million when compared to prior year quarter.
  • Adjusted EBITDA for the second quarter of 2015 was $36.4 million (17.4% of revenues), an increase of $1.8 million, or 5.2%, over the year-ago quarter adjusted EBITDA of $34.6 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income (loss) below and is not a substitute for the GAAP equivalent.
  • Announces two national account wins at ExamWorks Clinical Solutions (“ECS”) for the full suite of services, including Medicare Set Aside (“MSA”) and Field Case Management (“FCM”).
  • On July 13, 2015, completed the acquisition of substantially all of the assets of Karen Rucas & Associates Inc., an IME provider based in Ontario, Canada, with annual revenues of approximately $800,000.

Commentary
Commenting on the earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “Our talented management teams and employees in every country continue to successfully execute a global business strategy. In seven short years we have become the global industry leader and with a replenished war chest and many opportunities in front of us, we are enthusiastic about our ability to add and strengthen our business. We are especially pleased with our integration progress at ECS and with the success of our two national account wins.”

Richard E. Perlman, Executive Chairman of ExamWorks, said: “Once again, the successful execution of our strategy continues to reward us with solid financial results that are even better when viewed in light of currency headwinds and known challenges currently affecting our UK business. We are pleased to raise revenue guidance and are excited about the many opportunities we see for continued growth in 2015 and beyond.”

Financial Review
Revenues – For the three months ended June 30, 2015, revenues were $208.7 million, an increase of 6.3% over the $196.4 million of revenues generated in the second quarter of 2014.

For the six months ended June 30, 2015, revenues were $405.1 million, an increase of 9.6% over the $369.5 million of revenues generated in the comparable period in 2014.

Costs of revenues – For the three months ended June 30, 2015, costs of revenues were $136.4 million, an increase of 9.2% over the $124.9 million in costs of revenues in the second quarter of 2014. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the second quarter of 2015 were 65.4% compared to 63.6% in the prior year quarter and the result of changes in sales mix and the impact of the legislative change in the U.K. Included in costs of revenues in the second quarter of 2014 and 2015 are approximately $492,000 and $259,000 of share-based compensation expenses, respectively.

Selling, general and administrative expenses (“SGA”) – For the three months ended June 30, 2015, SGA expenses were $42.7 million, an increase of 0.2% over the $42.6 million in SGA expenses in the second quarter of 2014. The increase was due to acquisitions, offset by reduced acquisition-related transaction costs and other expenses. Included in SGA expenses in the second quarter of 2015 are $6.3 million in share-based compensation expenses and $200,000 in acquisition-related transaction costs and other expenses. Included in SGA expenses in the second quarter of 2014 are $4.1 million in share-based compensation expenses and $948,000 in acquisition-related transaction costs and other expenses.

Depreciation and amortization expenses (“D&A”) – For the three months ended June 30, 2015, D&A expenses were $13.7 million, a decrease of 8.1% from the $14.9 million in D&A expenses in the second quarter of 2014. The decrease was due to intangible assets becoming fully amortized in 2014 and 2015, offset by amortization of finite lived intangibles resulting from recent acquisitions. For the three months ended June 30, 2015, amortization expense was $12.1 million and depreciation expense was $1.6 million.

Interest and other expenses, net – For the three months ended June 30, 2015, interest and other expenses, net were $28.6 million, a 253.1% increase over the $8.1 million in interest and other expenses, net in the second quarter of 2014. In the second quarter of 2015, we recorded $18.6 million in costs related to the early extinguishment of debt.

Adjusted EBITDA – For the three months ended June 30, 2015, adjusted EBITDA was $36.4 million, an increase of 5.2% over the $34.6 million in adjusted EBITDA in the second quarter of 2014.

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

Other financial data – Adjusted for $7.8 million of incremental cash paid for interest this quarter related to the debt refinancing, we generated $21.9 million of cash flow from operations in the first six months of 2015 compared to $18.8 million in the comparable prior year period. We ended the quarter with $105.1 million of cash on hand and $300 million available under our senior secured revolving credit facility. Additionally, we ended the quarter with $541.7 million of total debt, consisting of $500 million of senior unsecured notes due April 2023 and $41.7 million outstanding under our UK discount facilities. Our total leverage as of the end of the second quarter, calculated in accordance with our senior secured credit facility, was approximately 3.7x, or approximately 3.15x on a net cash basis.

Business Outlook
ExamWorks is providing the following business outlook for the full year and third quarter of 2015 excluding any acquisitions that may be completed:

  • Increasing our prior guidance, we now expect our full year 2015 reported revenues to increase between 4.5% and 6.5% (compared to prior guidance of 4% – 6%) from our 2014 reported revenues of approximately $775 million. Based on recent currency rates, our reported revenue guidance includes approximately 5%, or $40 million, of currency headwinds when compared to the prior year. We now expect organically generated growth, on a constant currency basis, to range between 5.5% and 7.5% (compared to prior guidance of 5% – 7%).
  • We now expect our full year 2015 adjusted EBITDA margin to range between 17% and 17.5% of reported revenues (compared to 17% – 18%). This adjusted EBITDA margin range reflects, among other items, the impact from the legislative change in the U.K. and the integration costs at our ECS business.
  • Third quarter 2015 reported revenues are expected to range between $202 million and $208 million after the estimated $12 million unfavorable impact due to currency as compared to prior year reported revenues. This guidance implies a constant currency growth rate ranging between 5% and 7%. Organically generated growth, on a constant currency basis, is expected to range between 4% and 6%.
  • Third quarter 2015 reported adjusted EBITDA margin is expected to range between 16.5% and 17.5% of reported revenues. This adjusted EBITDA margin reflects, among other items, the expected continued impact from the legislative change in the U.K. and the integration costs associated with our ECS business.

The complete earnings release is available here: ExamWorks Second Quarter 2015 Financial Results

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