Atlanta, GA – ExamWorks Group, Inc. (NYSE: EXAM), a leading provider of independent medical examinations (“IMEs”), peer reviews, bill reviews and related services, recently reported financial results for the third quarter of 2013.
Third Quarter 2013 Highlights
- Revenues for the third quarter of 2013 were $152.4 million, an increase of $22.3 million, or 17.1%, over the year-ago quarter revenues of $130.1 million.
- On a pro forma basis, revenues of $152.4 million for the third quarter of 2013 represent an increase of $7.2 million, or 4.9%, over the year-ago quarter pro forma revenues of $145.2 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 2012 were completed on January 1, 2011. We did not complete any acquisitions in the first three quarters of 2013, thus pro forma revenues equal actual revenues.
- Adjusted EBITDA for the third quarter of 2013 was $23.9 million (15.7% of revenues), an increase of $3.7 million, or 18.3%, over the year-ago quarter adjusted EBITDA of $20.2 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.
- Generated $5.1 million of cash flow from operations in the third quarter of 2013, after the impact of the $11.3 million bond interest payment made during the quarter. We also repaid $8.2 million of debt.
- Reaffirming our full year 2013 revenue guidance at the high end of our previously announced range, we now expect revenues to grow organically by approximately 7.0% from our 2012 pro forma revenues of approximately $574 million, on a constant currency basis. Adjusted EBITDA margin for the full year is expected to range between 15.7% and 15.9% of reported revenues.
Commentary
Commenting on the recent earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “We are proud of our results and of our employees worldwide who worked hard to make them possible. Our momentum and focus on organic growth continues and we are enthusiastically looking forward to 2014.”
Richard E. Perlman, Executive Chairman of ExamWorks, said: “We are once again delighted with our financial and operating results. We continue to execute our strategy and deliver on the promise of a redefined service and product experience for our customers, as we build a business with predictable revenue, cash generating ability and steady growth. We see more of the same for the foreseeable future.”
Financial Review
Revenues – For the three months ended September 30, 2013, revenues were $152.4 million, an increase of 17.1% over the $130.1 million in revenues in the third quarter of 2012. The increase in revenues was primarily due to acquisitions completed in 2012 and, to a lesser extent, growth across all of our existing businesses. The company did not complete any acquisitions in the three months ended September 30, 2013.
On a pro forma basis, for the three months ended September 30, 2013, revenues were $152.4 million, an increase of 4.9% over the $145.2 million in pro forma revenues in the third quarter of 2012. The increase in pro forma revenues was driven by growth across all of our geographies.
Costs of revenues – For the three months ended September 30, 2013, costs of revenues were $100.8 million, an increase of 17.1% over the $86.1 million in costs of revenues in the third quarter of 2012. The change was primarily due to the acquired costs of revenues for acquisitions completed in 2012. Costs of revenues as a percentage of revenues for the third quarter of 2013 were 66.2%, consistent with the comparable metric in the third quarter of 2012. Included in costs of revenues in the third quarter of 2012 and 2013 are approximately $750,000 of share-based compensation expenses, respectively.
Selling, general and administrative expenses (“SGA”) – For the three months ended September 30, 2013, SGA expenses were $31.6 million, an increase of 11.7% over the $28.3 million in SGA expenses in the third quarter of 2012. The increase was primarily due to the acquired SGA expenses for acquisitions completed in 2012. Included in SGA expenses in the third quarter of 2013 are $3.1 million in share-based compensation expenses and $162,000 in acquisition-related transaction costs and other non-recurring costs. Included in SGA expenses in the third quarter of 2012 were $2.3 million in share-based compensation expenses and $1.4 million in acquisition-related transaction costs and other non-recurring costs.
Depreciation and amortization expenses (“D&A”) – For the three months ended September 30, 2013, D&A expenses were $15.9 million, an increase of 9.7% over the $14.5 million in D&A expenses in the third quarter of 2012. The increase was primarily due to acquisitions completed in 2012. For the three months ended September 30, 2013, depreciation expense was $1.4 million and amortization expense was $14.5 million.
Interest and other expenses, net – For the three months ended September 30, 2013, interest and other expenses, net were $7.3 million, a decrease of (2.7%) over the $7.5 million in interest and other expenses, net in the third quarter of 2012. The decrease was due to a realized foreign currency loss in the third quarter of 2012 of $534,000, offset by higher average debt balances this quarter compared to the prior year quarter resulting from the acquisition of Australia based MedHealth completed in August 2012.
Adjusted EBITDA – For the three months ended September 30, 2013, adjusted EBITDA was $23.9 million, an increase of 18.3% over the $20.2 million in adjusted EBITDA in the third quarter of 2012.
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 $5.1 million of cash flow from operations in the third quarter of 2013 and $22.7 million of cash flow from operations in the first nine months of 2013, after the $22.5 million bond interest payments made in January and July 2013. We repaid $8.2 million of debt during the third quarter of 2013 and repaid $32.8 million in the first nine months of 2013. We ended the quarter with $12.0 million of cash on hand, $351.5 million of total debt and total leverage as calculated under our credit facility of approximately 3.79x. Our total debt consisted of $250.0 million of senior unsecured notes due July 2019, $66.6 million outstanding under the senior secured revolving credit facility, $34.6 million outstanding under the working capital facilities in the U.K., and $314,000 in seller subordinated notes. As of the end of the quarter, our committed availability under our credit facilities was approximately $210 million, of which approximately $90 million was immediately available and the balance of approximately $120 million was available to fund future acquisitions.
Business Outlook
ExamWorks is providing the following business outlook for the fourth quarter and full year of 2013:
- Fourth quarter 2013 reported revenues are expected to range between $150 million and $154 million and include an estimated $2 million unfavorable impact due to currency as compared to prior year reported revenues.
- Fourth quarter 2013 reported adjusted EBITDA margins are expected to range between 15.5% and 16.5% of reported revenues.
- Full year 2013 reported revenues are expected to range between $607 million and $611 million and include approximately a $7 million unfavorable impact due to currency as compared to prior year pro forma revenues of $574 million. Our growth rate, on a constant currency basis, is expected to be approximately 7.0%.
- Full year 2013 adjusted EBITDA margins are expected to range between 15.7% and 15.9% of reported revenues. Currency headwinds during 2013 negatively impacted our full year adjusted EBITDA margins by approximately 20bps.
The complete earnings release is available here: ExamWorks Third Quarter 2013 Financial Results
Source: ExamWorks