December 15, 2017

ExamWorks Reports Fourth Quarter 2015 Financial Results, Provides 2016 Guidance

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

Fourth Quarter 2015
Revenues for the fourth quarter of 2015 were $208.5 million, an increase of $6.4 million, or 3.2%, over the year-ago quarter revenues of $202.1 million. On a constant currency basis, revenues increased 6.9% with organically generated revenues increasing 2.4% during the fourth quarter of 2015. Currency headwinds negatively impacted reported revenues this quarter by approximately $7.6 million when compared to the prior year quarter.

Adjusted EBITDA for the fourth quarter of 2015 was $35.4 million (17.0% of revenues), an increase of $1.9 million, or 5.7%, over the year-ago quarter adjusted EBITDA of $33.5 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income below and is not a substitute for the GAAP equivalent.

Full Year 2015
Revenues for the year ended December 31, 2015 were $819.6 million, an increase of $44.0 million, or 5.7%, over 2014 full year revenues of $775.6 million. Excluding the impact of acquisitions, revenues increased $10.7 million, or 1.4%, in 2015 over the prior year period. On a constant currency basis and excluding the impact of acquisitions, revenues increased 6.0% in 2015 over the prior year period. Currency headwinds negatively impacted reported revenues this year by approximately $36.5 million when compared to the prior year period.

Adjusted EBITDA for the year ended December 31, 2015 was $140.7 million (17.2% of revenues), an increase of $8.6 million, or 6.5%, over 2014 adjusted EBITDA of $132.1 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income below and is not a substitute for the GAAP equivalent.

Other Highlights
Completed the following acquisitions in 2015 for total consideration of approximately $77 million and which generate aggregate annual revenues of approximately $63 million:

  • ReliableRS (January 2, 2015) – United States
  • Landmark/Maven (April 14, 2015) – United States
  • Karen Rucas and Associates (July 13, 2015) – Canada
  • First Choice (October 30, 2015) – United States
  • Argent Rehabilitation (November 23, 2015) – United Kingdom

On January 8, 2016, completed the acquisition of ABI Document Support Services (“ABI”), a document retrieval and document management services company based in California. ABI generates approximately $40 million of annual revenues.

On January 19, 2016, completed the acquisition of Advanced Medical Reviews (“AMR”), a provider of peer reviews based in California. AMR generates approximately $16 million of annual revenues.

Over the course of 2015, announced a new national account win in the United States and two in the United Kingdom. Additionally, today we are announcing another national account win in the United States, bringing the total IME national accounts in the United States to seven and the United Kingdom to six.

Refinanced debt in April 2015:

  • Completed a new eight-year $500 million senior unsecured note offering with an interest rate of 5.625%;
  • Extended the maturity of our senior secured revolving credit facility for five years and increased the committed availability to $300 million; and
  • Extended the maturity date of our working capital facilities in the U.K. for three years.

Starting in December 2015 through the date of this release, repurchased approximately 1.1 million shares of ExamWorks common stock for $29.3 million, or an average price of $26.35 per share. The Company has approximately $36 million remaining available under its current $75 million authorization.

Commentary
Commenting on today’s earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “During 2015 and into 2016 we have acquired 7 great companies that strengthen our product offering and market share and allow us to offer new services to our clients, further positioning us as a key partner to our target market. These acquisitions should add meaningfully to our 2016 results. We are proud of our achievements in 2015 and thankful for our worldwide employees who made them happen once again.”

Richard E. Perlman, Executive Chairman of ExamWorks, said: “2015 was another year of significant accomplishments for ExamWorks in which we continued to demonstrate the stability, consistency and capacity for growth of our business even in the face of challenges. We enter 2016 better positioned than ever and confident on the company’s ability to deliver solid results well into the future.”

Financial Review
Revenues – For the three months ended December 31, 2015, revenues were $208.5 million, an increase of 3.2% over the $202.1 million of revenues generated in the fourth quarter of 2014.

For the year ended December 31, 2015, revenues were $819.6 million, an increase of 5.7% over the $775.6 million of revenues generated in the comparable period in 2014.

Costs of revenues – For the three months ended December 31, 2015, costs of revenues were $137.4 million, an increase of 5.2% over the $130.6 million in costs of revenues in the fourth quarter of 2014. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the fourth quarter of 2015 were 65.9% compared to 64.6% in the prior year quarter due to changes in sales mix. Included in costs of revenues in the fourth quarter of 2014 and 2015 are approximately $421,000 and $239,000 of share-based compensation expenses, respectively.

Selling, general and administrative expenses (“SGA”) – For the three months ended December 31, 2015, SGA expenses were $41.3 million, a decrease of 7.2% over the $44.5 million in SGA expenses in the fourth quarter of 2014. Adjusted SGA as a percentage of revenue was 17.2% in the fourth quarter of 2015 an improvement over the 19.1% in the comparable prior year period. This improvement was due to organic growth and improved cost structures in our U.K. and ECS businesses. Adjusted SGA excludes the impact of share based compensation and acquisition-related transaction costs and other expenses that are added back to arrive at adjusted EBITDA. Included in SGA expenses in the fourth quarter of 2015 are $4.0 million in share-based compensation expenses and $1.4 million in acquisition-related transaction costs and other expenses. Included in SGA expenses in the fourth quarter of 2014 are $4.9 million in share-based compensation expenses and $1.1 million in acquisition-related transaction costs and other expenses.

Depreciation and amortization expenses (“D&A”) – For the three months ended December 31, 2015, D&A expenses were $14.1 million, a decrease of 8.4% from the $15.4 million in D&A expenses in the fourth 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 December 31, 2015, amortization expense was $12.1 million and depreciation expense was $2.0 million.

Interest and other expenses, net – For the three months ended December 31, 2015, interest and other expenses, net, were $8.0 million, a 1.2% decrease over the $8.1 million in interest and other expenses, net in the fourth quarter of 2014.

Adjusted EBITDA – For the three months ended December 31, 2015, adjusted EBITDA was $35.4 million, an increase of 5.7% over the $33.5 million of adjusted EBITDA generated in the fourth quarter of 2014.

For the year ended December 31, 2015, adjusted EBITDA was $140.7 million, an increase of 6.5% over the $132.1 million of adjusted EBITDA generated in the prior year.

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

Other financial data – For the year ended December 31, 2015, we generated $50.0 million of cash flow from operations compared to $45.2 million for the prior year. We ended the quarter with $47.9 million of cash on hand and $300 million available under our senior secured revolving credit facility. Additionally, we ended the quarter with $535.2 million of total debt, consisting of $500.0 million of senior unsecured notes due April 2023 and $35.2 million outstanding under our UK discount facilities. Our total leverage to adjusted EBITDA as of the end of the fourth quarter, calculated in accordance with our senior secured credit facility, was approximately 3.4x.

Share Repurchase
The Board of Directors increased its previous share repurchase authorization, with the repurchase program authorizing the purchase of up to $75 million of outstanding shares of the Company’s common stock. Starting in December 2015 and through the date of this release, the Company repurchased approximately 1.1 million shares at an average price of $26.35 per share. The Company has approximately $36 million remaining available under its current $75 million authorization. Repurchases will be made in accordance with applicable securities laws, from time to time, in the open market, through privately negotiated transactions, or otherwise.

Business Outlook
ExamWorks is providing the following business outlook for the full year and for the first quarter of 2016 excluding any acquisitions that may be completed:

Our full year 2016 reported revenues are expected to increase between 14% and 16% from our 2015 reported revenues of approximately $820 million. Based on recent currency rates, our reported revenue guidance includes approximately 3%, or $26 million, of currency headwinds when compared to the prior year. Organic growth, on a constant currency basis, is expected to range between 5% and 7%.

Our full year 2016 adjusted EBITDA margin is expected to range between 17.2% and 18.0% of reported revenues. On a quarterly basis, our adjusted EBITDA margins as a percentage of reported revenue may fluctuate between 16.5% and 19.0%.

First quarter 2016 reported revenues are expected to range between $216 million and $222 million after an estimated $7.0 million unfavorable impact due to currency as compared to the prior year quarter reported revenues. This guidance implies a constant currency growth rate ranging between 14% and 17%. Organic growth, on a constant currency basis, is expected to range between 3% and 5%.

First quarter 2016 reported adjusted EBITDA margin is expected to range between 16.5% and 17.0% of reported revenues. This adjusted EBITDA margin reflects, among other items, the expected first quarter revenue and the seasonality of certain expenses, such as employer taxes.

The complete results release is available here: ExamWorks Fourth Quarter 2015 Financial Results

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