Atlanta, GA – ExamWorks Group, Inc. (NYSE: EXAM), a provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance, case management, and other related services (“IME services”), recently reported financial results for the fourth quarter of 2014.
Fourth Quarter 2014 Highlights
- Revenues for the fourth quarter of 2014 were $202.1 million, an increase of $43.3 million, or 27.3%, over the year-ago quarter revenues of $158.8 million. Excluding the impact of acquisitions, revenues increased $22.0 million, or 13.9% during the fourth quarter of 2014 over the prior year period. On a constant currency basis and excluding the impact of acquisitions, revenues increased 16.0% during the fourth quarter of 2014.
- Adjusted EBITDA for the fourth quarter of 2014 was $33.5 million (16.6% of revenues), an increase of $7.9 million, or 30.9%, over the year-ago quarter adjusted EBITDA of $25.6 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.
Full Year 2014 Highlights
- Revenues for the year ended 2014 were $775.6 million, an increase of $159.6 million, or 25.9%, over 2013 full year revenues. Excluding the impact of acquisitions, revenues increased $88.5 million, or 14.4% in 2014 over the prior year period. On a constant currency basis and excluding the impact of acquisitions, revenues increased 14.1% in 2014 over the prior year period.
- Adjusted EBITDA for the year ended 2014 was $132.1 million (17.0% of revenues), an increase of $34.6 million, or 35.5%, over 2013 adjusted EBITDA of $97.5 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.
Other Highlights
- Generated $45.2 million of cash flow from operations in 2014 compared to $36.4 million in 2013.
- Ended the year with total leverage of 3.2x, an improvement over 2013 year end total leverage of 3.4x, after using $187.4 million of cash for our 2014 acquisitions. As of the end of the quarter, our committed availability under our credit facilities was approximately $125 million, all of which was immediately available.
- Completed the following acquisitions in 2014 for total consideration of $187.4 million:
- 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
- Solomon Associates (May 30, 2014) – United States
- ASN/ MedAllocators (June 6, 2014) – United States
- Expert Medical Opinions (August 22, 2014) – United States
- On January 2, 2015, completed the acquisition of substantially all of the assets of ReliableRS, LLC (“Reliable Review”), a provider of peer reviews based in Florida. Reliable Review generates approximately $3.0 million of annual revenues.
- Announces a national account win in the United States. This brings the total national accounts to six in the United States.
Commentary
Commenting on the earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “During 2014 we were excited to welcome seven new acquisitions that expanded our geographic footprint in the IME space and added two market leaders creating our new clinical solutions business. We are also excited to have started 2015 with a new national account win, which builds on our 2014 success and further solidifies our leadership position in the industry. We are very proud of our achievements in 2014 and appreciative of our exceptional employees around the world that made it happen.”
Richard E. Perlman, Executive Chairman of ExamWorks, said: “2014 was an extraordinary year for ExamWorks during which our strategy and execution coalesced perfectly to create results that consistently exceeded our expectations. We enter 2015 with continuing momentum across all of our geographies and are looking forward to another year of growth.”
Financial Review
Revenues – For the three months ended December 31, 2014, revenues were $202.1 million, an increase of 27.3% over the $158.8 million of revenues generated in the fourth quarter of 2013. The increase in revenues was due to organic growth of 13.9% and acquisition growth of 13.4%.
For the year ended December 31, 2014, revenues were $775.6 million, an increase of 25.9% over the $616.0 million of revenues generated in the comparable period in 2013. The increase in revenues was due to organic growth of 14.4% and acquisition growth of 11.5%.
On a pro forma basis, for the three months ended December 31, 2014, pro forma revenues were $202.1 million, an increase of 11.4% over the $181.4 million in pro forma revenues in the fourth quarter of 2013. On a constant currency basis, our pro forma growth was 13.4% and was driven by growth across all of our geographies.
On a pro forma basis, for the year ended December 31, 2014, pro forma revenues were $798.3 million, an increase of 12.9% over the $707.1 million in pro forma revenues in the comparable period in 2013. On a constant currency basis, our pro forma growth was 12.8% and was driven by growth across all of our geographies. The amounts presented below are pro forma for the effect of acquisitions completed in 2013 and 2014.
Costs of revenues – For the three months ended December 31, 2014, costs of revenues were $130.6 million, an increase of 24.4% over the $105.0 million in costs of revenues in the fourth quarter of 2013. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the fourth quarter of 2014 were 64.6% compared to 66.1% 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 fourth quarter of 2013 and 2014 are approximately $692,000 and $421,000 of share-based compensation expenses, respectively.
Selling, general and administrative expenses (“SGA”) – For the three months ended December 31, 2014, SGA expenses were $44.5 million, an increase of 27.5% over the $34.9 million in SGA expenses in the fourth quarter of 2013. The increase was primarily due to acquisitions. 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. 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.
Depreciation and amortization expenses (“D&A”) – For the three months ended December 31, 2014, D&A expenses were $15.4 million, an increase of 4.8% from the $14.7 million in D&A expenses in the fourth quarter of 2013. The increase was due to amortization of finite lived intangibles resulting from the Recent Acquisitions, offset by other intangible assets becoming fully amortized in 2013 and 2014. For the three months ended December 31, 2014, amortization expense was $13.6 million and depreciation expense was $1.8 million.
Interest and other expenses, net – For the three months ended December 31, 2014, interest and other expenses, net were $8.1 million, a 14.1% increase over the $7.1 million in interest and other expenses, net in the fourth quarter of 2013.
Adjusted EBITDA – For the three months ended December 31, 2014, adjusted EBITDA was $33.5 million, an increase of 30.9% over the $25.6 million in adjusted EBITDA in the fourth quarter of 2013.
For the year ended December 31, 2014, adjusted EBITDA was $132.1 million, an increase of 35.5% over the $97.5 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 $45.2 million of cash flow from operations in 2014 compared to $36.4 million in the comparable prior year period. We ended the quarter with $9.8 million of cash on hand, $434.2 million of total debt and total leverage as calculated under our credit facility of approximately 3.2x. As of the end of the quarter, our committed availability under our credit facilities was approximately $125 million, all of which was immediately available.
Business Outlook
ExamWorks is providing the following business outlook for the full year and first quarter of 2015 and excludes any acquisitions that may be completed:
- Our full year 2015 constant currency reported revenues are expected to increase between 8% and 10% from our 2014 reported revenues of approximately $775 million. Based on recent currency rates, the reported revenue growth rates would be negatively impacted by approximately 5%, or $40 million. Organic growth, on a constant currency basis, is expected to range between 5% and 7%.
- Our full year 2015 adjusted EBITDA margin is expected to range between 17% and 18% of reported revenues. On a quarterly basis, our adjusted EBITDA margins as a percentage of reported revenue may fluctuate between 16% and 19%.
- First quarter 2015 constant currency revenues are expected to range between $198 million and $204 million before the estimated $8 million unfavorable impact due to currency as compared to prior year reported revenues. This guidance implies a constant currency growth rate ranging between 14% and 18%. Organic growth on a constant currency basis is expected to range between 8% and 10%.
- First quarter 2015 reported adjusted EBITDA margin is expected to range between 16% and 17% of reported revenues. This adjusted EBITDA margin reflects the seasonal impact of certain expenses, such as employer taxes.
The complete earnings release is available here: ExamWorks Fourth Quarter 2014 Financial Results
Source: ExamWorks