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 fourth quarter and full year of 2013.
Fourth Quarter 2013 Highlights
- Revenues for the fourth quarter of 2013 were $158.8 million, an increase of $19.2 million, or 13.8%, over the year-ago quarter revenues of $139.6 million. The increase in revenues was primarily due to organic growth of 11.9% and, to a lesser extent, acquisition growth of 1.9%. Acquisitions completed in the fourth quarter of 2013 contributed approximately $300,000 of revenues during the quarter.
- On a pro forma basis, revenues of $160.1 million for the fourth quarter of 2013 represent an increase of $16.1 million, or 11.2%, over the year-ago quarter pro forma revenues of $144.0 million. Excluding the impact of currency, revenues would have grown by 12.7% over the prior year pro forma quarter. Pro forma revenues assume that acquisitions completed in 2012 and 2013 were completed on January 1, 2011 and 2012, respectively.
- Adjusted EBITDA for the fourth quarter of 2013 was $25.6 million (16.1% of revenues), an increase of $5.3 million, or 26.1%, over the year-ago quarter adjusted EBITDA of $20.3 million. Acquisitions completed in the fourth quarter of 2013 contributed approximately $30,000 of Adjusted EBITDA during the quarter. 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.
Full Year 2013 Highlights
- Revenues for the year ended 2013 were $616.0 million, an increase of $94.8 million, or 18.2%, over the year-ago revenues of $521.2 million. The increase in revenues was primarily due to acquisition growth of 10.9% and, to a lesser extent, organic growth of 7.3%. Acquisitions completed in 2013 contributed approximately $300,000 of revenues in 2013.
- On a pro forma basis, revenues of $622.3 million for the year ended 2013 represent an increase of $43.4 million, or 7.5%, over the year-ago pro forma revenues of $578.9 million. Excluding the impact of currency, revenues would have grown by 8.8% over the prior year pro forma revenue. Pro forma revenues assume that acquisitions completed in 2012 and 2013 were completed on January 1, 2011 and 2012, respectively.
- Adjusted EBITDA for the year ended 2013 was $97.5 million (15.8% of revenues), an increase of $17.7 million, or 22.2%, over the year-ago adjusted EBITDA of $79.8 million. Acquisitions completed in 2013 contributed approximately $30,000 of Adjusted EBITDA during 2013. 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 Highlights
- Generated $36.4 million of cash flow from operations in 2013.
- Repaid $51.8 million of debt in 2013 and ended the year with total leverage of 3.43x.
- Announced the acquisition of Assess Medical, an IME business based in Sydney, Australia. Below is a summary of acquisitions completed in December 2013, January 2014 and February 2014 for an aggregate purchase price of approximately $100.0 million with aggregate annual revenues and adjusted EBITDA of $53.0 million and $15.0 million, respectively.
- AGS Risk Limited (December 10, 2013) – United Kingdom
- Evaluation Resource Group (December 20, 2013) – United States
- Cheselden (January 13, 2014) – United Kingdom
- Newton Medical Group (January 16, 2014)- United States
- Gould & Lamb (February 3, 2014) – United States
- Assess Medical (February 14, 2014) – Australia
Commentary
Commenting on the earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “We are pleased to welcome into the ExamWorks family six acquired businesses that add to our services, scale and footprint. Acquisitions continue to be an important part of our growth strategy and we expect these and others in the future to also contribute nicely to our top line and EBITDA growth. As our momentum continues, we are extremely excited about our market position and the opportunities in the year ahead.”
Richard E. Perlman, Executive Chairman of ExamWorks, said: “Our 2013 results and expectations for 2014 speak of a vision and business model that is working, and working well. The success of our strategy continues to prove itself in market share gains and continuing and strong organic growth, particularly and most recently in the U.S. We will continue to build a solid business that uses its geographic presence and scale to meet its customers’ increasingly sophisticated needs and continues to create value through growth, profitability and predictable revenue and cash generating ability.”
Financial Review
Revenues – For the three months ended December 31, 2013, revenues were $158.8 million, an increase of 13.8% over the $139.6 million in revenues in the fourth quarter of 2012. The increase in revenues was primarily due to organic growth of 11.9% and, to a lesser extent, acquisition growth of 1.9%. Acquisitions completed in the fourth quarter of 2013 contributed approximately $300,000 to revenues during the quarter.
On a pro forma basis, for the three months ended December 31, 2013, revenues were $160.1 million, an increase of 11.2% over the $144.0 million in pro forma revenues in the fourth quarter of 2012. The increase in pro forma revenues was driven by growth in the United States, the United Kingdom and Canada.
Costs of revenues – For the three months ended December 31, 2013, costs of revenues were $105.0 million, an increase of 13.4% over the $92.6 million in costs of revenues in the fourth quarter of 2012. The increase was primarily due to increased medical panel fees resulting from higher revenues. Costs of revenues as a percentage of revenues for the fourth quarter of 2013 were 66.1%, a slight improvement over the prior year quarter and the result of increased revenues and positive operating leverage. Included in costs of revenues in the fourth quarter of 2012 and 2013 are approximately $750,000 and $700,000 of share-based compensation expenses, respectively.
Selling, general and administrative expenses (“SGA”) – For the three months ended December 31, 2013, SGA expenses were $34.9 million, an increase of 20.8% over the $28.9 million in SGA expenses in the fourth quarter of 2012. The increase was primarily due to higher share based compensation expenses in the fourth quarter of 2013 when compared to the prior year quarter. Included in SGA expenses in the fourth quarter of 2013 are $4.2 million in share-based compensation expenses and $1.7 million in acquisition-related transaction costs and other expenses. Included in SGA expenses in the fourth quarter of 2012 are $439,000 in share-based compensation expenses and $944,000 in acquisition-related transaction costs and other expenses.
Depreciation and amortization expenses (“D&A”) – For the three months ended December 31, 2013, D&A expenses were $14.7 million, a decrease of 9.8% over the $16.3 million in D&A expenses in the fourth quarter of 2012. The decrease was primarily due to intangible assets becoming fully amortized in 2013. For the three months ended December 31, 2013, depreciation expense was $1.5 million and amortization expense was $13.2 million.
Interest and other expenses, net – For the three months ended December 31, 2013, interest and other expenses, net were $7.1 million, a decrease of 9.0% over the $7.8 million in interest and other expenses, net in the fourth quarter of 2012. The Company repaid $51.8 million of debt in 2013 resulting in lower interest costs when compared to prior year.
Adjusted EBITDA – For the three months ended December 31, 2013, adjusted EBITDA was $25.6 million, an increase of 26.1% over the $20.3 million in adjusted EBITDA in the fourth 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 $13.6 million of cash flow from operations in the fourth quarter of 2013 and $36.4 million of cash flow from operations during 2013, after the $22.5 million bond interest payments made in January and July 2013. We repaid $19.0 million of debt during the fourth quarter of 2013 and repaid $51.8 million in 2013. We ended the quarter with $12.8 million of cash on hand, $333.3 million of total debt and total leverage as calculated under our credit facility of approximately 3.43x. As of the end of the quarter, our committed availability under our credit facilities was approximately $230 million, of which approximately $130 million was immediately available and the balance of approximately $100 million was available to fund future acquisitions.
Business Outlook
ExamWorks is providing the following business outlook for the first quarter and full year of 2014:
- First quarter 2014 reported revenues are expected to range between $165 million and $170 million and include an estimated $1.0 million unfavorable impact due to currency as compared to prior year reported revenues. This guidance implies a growth rate on an as reported basis ranging between 11% and 14%. Organic growth is expected to range between 5% and 7% and includes the impact of severe weather on our US business, primarily in the Northeast.
- First quarter 2014 reported adjusted EBITDA margins are expected to be approximately 16% of reported revenues. This adjusted EBITDA margin reflects the seasonal impact of certain expenses, such as employer taxes.
- Full year 2014 reported revenues are expected to increase between 13.5% and 15.5% from our 2013 reported revenues of approximately $616.0 million. Organic growth, on a constant currency basis, is expected to range between 6.5% and 8.5%, with the balance being growth from acquisitions completed in December 2013, January 2014 and February 2014.
- Full year 2014 adjusted EBITDA margins are expected to range between 16.5% and 17.5% of reported revenues. On a quarterly basis, adjusted EBITDA margins as a percentage of revenue may fluctuate between 16% and 18%.
The complete earnings release is available here: ExamWorks Q4 2013 Results