ExamWorks Group, Inc. (NYSE: EXAM), a provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance, case management, and other related services, recently reported financial results for the third quarter of 2014.
Third Quarter 2014 Highlights
- Revenues for the third quarter of 2014 were $204.1 million, an increase of $51.7 million, or 33.9%, over the year-ago quarter revenues of $152.4 million. Excluding the impact of acquisitions, revenues increased $27.7 million, or 18.2% during the third quarter of 2014. On a constant currency basis and excluding the impact of acquisitions, revenues increased 16.1% during the third quarter of 2014.
- On a pro forma basis, revenues of $204.7 million for the third quarter of 2014 represent an increase of $29.1 million or 16.6%, over the year-ago quarter pro forma revenues of $175.6 million. Excluding the impact of currency, revenues would have grown by 14.6% over the prior year pro forma quarter. Pro forma revenues assume that acquisitions completed in 2013 and 2014 were completed on January 1, 2012 and 2013, respectively.
- Adjusted EBITDA for the third quarter of 2014 was $36.1 million (17.7% of revenues), an increase of $12.2 million, or 51.0%, over the year-ago quarter adjusted EBITDA of $23.9 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 another national account win in the United States. This is the second national account win in the United States this year.
- On August 22, 2014, completed the acquisition of substantially all of the assets of Expert Medical Opinions (“EMO”), an IME provider based in Maryland. EMO generated $3.6 million and $470,000 of annual revenues and adjusted EBITDA, respectively. EMO contributed approximately $450,000 and $85,000 of reported revenues and adjusted EBITDA in the third quarter of 2014, respectively.
- Raising our full year 2014 guidance, we now expect our full year reported revenues to increase between 24% and 25% from our 2013 full year reported revenues of approximately $616.0 million as compared to our prior guidance of 22.5% to 24.5%. Organic growth, on a constant currency basis, is now expected to range between 11.5% and 12.5% as compared to our prior guidance of 9% to 11%. Our full year adjusted EBITDA margin is now expected to range between 16.75% and 17.25% of reported revenues.
Commentary
Commenting on the earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “These record results are a reflection of our worldwide employees’ commitment to providing superior service to our customers on a daily basis. We continue to be excited about the opportunities for continued organic and acquisition growth in the future. ”
Richard E. Perlman, Executive Chairman of ExamWorks, said: “The record results we announced today are the natural byproduct of the continued successful execution of our strategy, and our increased guidance a reflection of our confidence on our ability to continue to grow our business. We are as excited about the future as we have ever been.”
Financial Review
Revenues – For the three months ended September 30, 2014, revenues were $204.1 million, an increase of 33.9% over the $152.4 million of revenues generated in the third quarter of 2013. The increase in revenues was primarily due to organic growth of 18.2% and, to a lesser extent, acquisition growth of 15.8%.
For the nine months ended September 30, 2014, revenues were $573.6 million, an increase of 25.5% over the $457.2 million of revenues generated in the comparable period in 2013. The increase in revenues was primarily due to organic growth of 14.5% and, to a lesser extent, acquisition growth of 10.9%.
On a pro forma basis, for the three months ended September 30, 2014, pro forma revenues were $204.7 million, an increase of 16.6% over the $175.6 million in pro forma revenues in the third quarter of 2013. On a constant currency basis, our pro forma growth was 14.6% and was driven by growth across all of our geographies.
On a pro forma basis, for the nine months ended September 30, 2014, pro forma revenues were $596.3 million, an increase of 13.4% over the $525.6 million in pro forma revenues in the comparable period in 2013. On a constant currency basis, our pro forma growth was 12.6% and was driven by growth across all of our geographies.
Costs of revenues – For the three months ended September 30, 2014, costs of revenues were $130.6 million, an increase of 29.6% over the $100.8 million in costs of revenues in the third quarter of 2013. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the third quarter of 2014 were 64.0% compared to 66.2% in the prior year quarter and the result of positive operating leverage from acquisitions and organic revenue growth. Included in costs of revenues in the third quarter of 2013 and 2014 are approximately $748,000 and $444,000 of share-based compensation expenses, respectively.
Selling, general and administrative expenses (“SGA”) – For the three months ended September 30, 2014, SGA expenses were $43.5 million, an increase of 37.7% over the $31.6 million in SGA expenses in the third quarter of 2013. The increase was primarily due to acquisitions and higher share-based compensation expenses and transaction costs and other expenses in the third quarter of 2014 when compared to the prior year quarter. Included in SGA expenses in the third quarter of 2014 are $4.2 million in share-based compensation expenses and $1.5 million in acquisition-related transaction costs and other expenses. 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 expenses.
Depreciation and amortization expenses (“D&A”) – For the three months ended September 30, 2014, D&A expenses were $15.7 million, a decrease of 1.3% from the $15.9 million in D&A expenses in the third quarter of 2013. The decrease was primarily due to intangible assets becoming fully amortized in 2013. For the three months ended September 30, 2014, depreciation expense was $14.0 million and amortization expense was $1.7 million.
Interest and other expenses, net – For the three months ended September 30, 2014, interest and other expenses, net were $8.4 million, a 15.1% increase over the $7.3 million in interest and other expenses, net in the third quarter of 2013.
Adjusted EBITDA – For the three months ended September 30, 2014, adjusted EBITDA was $36.1 million, an increase of 51.0% over the $23.9 million in adjusted EBITDA in the third quarter of 2013.
For the nine months ended September 30, 2014, adjusted EBITDA was $98.7 million, an increase of 37.3% over the $71.9 million in adjusted EBITDA in the comparable period in 2013.
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 – We generated $25.0 million of cash flow from operations in the first nine months of 2014 compared to $22.7 million in the comparable prior year period. We ended the quarter with $9.1 million of cash on hand, $458.0 million of total debt and total leverage as calculated under our credit facility of approximately 3.4x. As of the end of the quarter, our committed availability under our credit facilities was approximately $105 million, all of which was immediately available.
Business Outlook
ExamWorks is providing the following business outlook for the fourth quarter and full year of 2014 and excludes any acquisitions that may be completed in the fourth quarter of 2014:
- Fourth quarter 2014 reported revenues are expected to range between $192 million and $198 million and include an estimated $2 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 approximately 21% and 25%. Organic growth on a constant currency basis is expected to range between 10.5% and 12.5%.
- Fourth quarter 2014 reported adjusted EBITDA margin is expected to range between 15.75% and 16.75% of reported revenues.
- Raising our guidance, our full year 2014 reported revenues are now expected to increase between 24% and 25% from our 2013 reported revenues of approximately $616.0 million as compared to our prior guidance of 22.5% to 24.5%. Organic growth, on a constant currency basis, is now expected to range between 11.5% and 12.5% as compared to our prior guidance of 9% to 11%.
- Our full year 2014 adjusted EBITDA margin is now expected to range between 16.75% and 17.25% of reported revenues.
The complete earnings release is available here: ExamWorks Third Quarter 2014 Financial Results
Source: ExamWorks