ATLANTA, GA, (MARKETWIRE via COMTEX) — ExamWorks Group, Inc. (NYSE: EXAM), a leading provider of independent medical examinations (IMEs), peer reviews, bill reviews and related services, today reported financial results for the third quarter of 2011.
Third Quarter 2011 and Acquisition Highlights
- Revenues for the third quarter of 2011 were $109.2 million, an increase of $60.6 million, or 125%, over the year-ago quarter revenue of $48.6 million.
- Adjusted EBITDA for the third quarter of 2011 was $17.1 million, an increase of $7.2 million, or 73%, over the year-ago quarter adjusted EBITDA of $9.9 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.
- Since our second quarter report, we completed six acquisitions. Due to the timing of these acquisitions, there was no revenue or adjusted EBITDA contribution in the third quarter of 2011. We acquired approximately $41 million in revenue and $9.7 million in adjusted EBITDA for an aggregate contractual purchase price of approximately $45.5 million, or a blended multiple of 4.7x of adjusted EBITDA. The purchase price includes the issuance of 203,000 shares of common stock.
- On August 8, 2011, the company announced that its Board of Directors authorized the implementation of a share repurchase program to repurchase up to $20.0 million of outstanding shares of the company’s common stock. Through October 2011, the company repurchased 723,000 shares of its common stock for $7.3 million, of which 317,000 shares were repurchased in the third quarter of 2011 for $3.5 million. As of today, $12.7 million remains authorized under this plan.
Business Highlights
- ExamWorks remains the market leader in the United States and the United Kingdom, and holds a major and growing position in Canada, for the provision of IMEs, peer reviews, bill reviews and related services
- We currently perform approximately 900,000 IME and related service transactions per year, utilizing our panel of over 29,000 doctors and medical providers. We service our customers out of 45 operating centers in three countries with approximately 1,850 full time employees
- We more than doubled our revenues since our IPO in October 2010 and we now operate under several leading brands including, but not limited to, ExamWorks, MES and Premex
- We expect fiscal year 2011 pro forma revenues to be approximately $480 million, with pro forma adjusted EBITDA and operating cash flow of approximately $80 million and $50 million, respectively
- We have successfully validated our robust technology infrastructure and processes by completing an SSAE 16, SOC 1, Type 2 audit (formerly known as SAS 70) for all of the ExamWorks companies in the United States and Canada
Financial Review
Revenues — For the three months ended September 30, 2011, revenues were $109.2 million, an increase of 125% over the $48.6 million in revenues in the third quarter of 2010. In the three months ended September 30, 2011, the MES and Premex acquisitions contributed $35.8 million and $22.3 million of revenue, respectively, and ExamWorks contributed $51.1 million. For the three months ended September 30, 2011, pro forma revenues were $119.0 million compared to $123.5 million of pro forma revenues in the third quarter of 2010, representing a pro forma decline of approximately 4%. Pro forma revenues for the three months ended September 30, 2011 and September 30, 2010 assumes that the 2010 and 2011 acquisitions, including the acquisitions announced today, were completed on January 1, 2010.
The 4% decline was primarily due to (1) restrictions associated with performing examinations in the state of Washington and (2) legislative impacts in the province of Ontario. The restrictions in the state of Washington were lifted in late October with meaningful revenue recognition expected to resume in January 2012. The legislative impact in the province of Ontario we expect will continue through the first half of 2012 and improve thereafter.
Costs of revenues — For the three months ended September 30, 2011, costs of revenues were $72.1 million, an increase of 137% over the $30.4 million in costs of revenues in the third quarter of 2010. The change was primarily due to the acquired costs of revenues for acquisitions completed in 2010 and 2011. Costs of revenues as a percentage of revenues for the third quarter of 2011 were 66% compared to 66% in the second quarter of 2011 and 63% in the third quarter of 2010.
Selling, general and administrative expenses (“SGA”) — For the three months ended September 30, 2011, SGA expenses were $22.8 million, an increase of 138% over the $9.6 million in SGA expenses in the third quarter of 2010. The change was primarily due to the acquired SGA for acquisitions completed in 2010 and 2011. Included in SGA expenses in the third quarter of 2011 are $1.7 million in share-based compensation expenses, $477,000 in acquisition-related transaction costs, and $21,000 in other non-recurring costs. Included in SGA expenses in the third quarter of 2010 are $261,000 in share-based compensation expenses and $1.1 million in acquisition-related transaction costs.
Depreciation and amortization expenses (“D&A”) — For the three months ended September 30, 2011, D&A expenses were $13.1 million, an increase of 122% over the $5.9 million in D&A expenses in the third quarter of 2010. The change was primarily due to acquisitions completed in 2010 and 2011. For the three months ended September 30, 2011, depreciation expense was $1.0 million and amortization expense was $12.1 million.
Interest and other expenses, net — For the three months ended September 30, 2011, interest and other expenses, net were $5.3 million, an increase of 112% over the $2.5 million in interest and other expenses, net in the third quarter of 2010. Included in interest and other expenses, net in the third quarter of 2011 are $5.4 million of interest expenses and deferred loan cost amortization. Additionally, in the third quarter of 2011, ExamWorks recorded a loss on early extinguishment of debt of $621,000 as a result of the July 2011 amendment to the senior revolving credit facility.
Adjusted EBITDA — For the three months ended September 30, 2011, adjusted EBITDA was $17.1 million, an increase of 73% over the $9.9 million in adjusted EBITDA in the third quarter of 2010. 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 — In the third quarter 2011, we generated $10.4 million of cash flow from operations compared to $7.4 million in the prior year quarter. We ended the quarter with $29.9 million of cash on hand and approximately $293 million of total debt, consisting of $250 million of senior unsecured notes due in July 2019, $40 million outstanding under the working capital facility in the UK and $3 million in seller subordinated notes. We ended the quarter with no amounts outstanding under our senior revolving credit facility. As of the end of the quarter, we had available liquidity in excess of $108 million, consisting of $29.9 million of cash on hand and $78 million available under our senior secured revolving credit facility. Net of cash on hand, our total leverage ratio is 3.35x.
Commentary
Commenting on today’s earnings announcement, Richard E. Perlman, Executive Chairman of ExamWorks, said: “The industry continues to validate our vision for its future and to recognize us as the choice national provider of IME services. Today we are participating in more new national client opportunities than ever before and continue to be seen as the preferred acquirer, having completed six attractive acquisitions since our last report. Last quarter we continued to make progress in the assimilation of our acquired businesses to prepare the company for 2012 and beyond. As a result, we enter the fourth quarter and 2012 with a strong corporate infrastructure and culture, an increasing industry reputation for quality, service and technology and an enviable financial position that will allow us to continue to grow the company well into the future.”
James K. Price, Chief Executive Officer of ExamWorks, said: “Consistent with managing our impressive post-IPO growth, we have invested in infrastructure and technology designed to provide unparalleled client service and support. We have also repositioned our sales organization to reflect the growing international company that we are today and allow us to better take advantage of opportunities. We also continue to identify acquisition candidates to enhance our business and product offering. In short, we have been busy both growing the company and positioning it for continued future success.”
Business Outlook
ExamWorks is providing the following updated business outlook for fiscal year 2011:
- Fiscal year 2011 reported revenue is expected to be $390 million to $395 million, including the expected results of all of our acquisitions completed through October 31, 2011. Fiscal year 2011 pro forma revenues are expected to be $476 million to $481 million. Pro forma revenues assume that all 2011 acquisitions were completed as of January 1, 2011.
- Fiscal year 2011 reported adjusted EBITDA is expected to be approximately 16% of reported revenues and approximately 17% of pro forma revenues. Adjusted EBITDA is a non-GAAP measure, the use of which by ExamWorks is described below. The reconciliation to GAAP measures of reported 2011 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, 2011.
- For 2012, we expect pro forma revenues of approximately $570 million to $585 million, consisting of approximately 4-6% organic growth and a minimum of $75 million of acquired annual revenue. For 2012, and consistent with 2011, we also expect adjusted EBITDA margins between 16-18%. Although acquisitions will occur during the course of the year, pro forma revenues assume that all 2012 acquisitions will be completed effective January 1, 2012.
The complete earnings release is available here: ExamWorks Third Quarter 2011 Results
Source: ExamWorks