Atlanta, GA – ExamWorks Group, Inc. (NYSE: EXAM), a provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, and other related services, recently reported financial results for the first quarter of 2015.
First Quarter 2015 Highlights
- Revenues for the first quarter of 2015 were $196.3 million, an increase of $23.3 million, or 13.5%, over the year-ago quarter revenues of $173.0 million. On a constant currency basis, revenues increased 18.1% and organic revenues increased 11.5% during the first quarter of 2015.
- Adjusted EBITDA for the first quarter of 2015 was $32.0 million (16.3% of revenues), an increase of $4.0 million, or 14.3%, over the year-ago quarter adjusted EBITDA of $28.0 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
- As previously announced, on January 2, 2015, completed the acquisition of substantially all of the assets of ReliableRS, LLC (“Reliable Review”), a Florida-based peer review provider. Reliable Review generates approximately $3 million of annual revenues.
- On April 14, 2015, completed the acquisition of substantially all of the assets of Landmark Exams, Inc. and Maven Exams, both Texas-based IME providers. These businesses in the aggregate generate approximately $8 million of annual revenues.
Debt restructuring April 2015:
- Completed a new eight-year $500 million senior unsecured note offering with an interest rate of 5.625%;
- Extended the maturity of our senior secured revolving credit facility for five years and increased the committed availability to $300 million;
- Extended the maturity date of our working capital facilities in the U.K. for three years; and
- As of the end of April, we have approximately $95 million of cash on hand and $300 million of committed availability under the senior secured revolving credit facility.
Commentary
Commenting on the earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: “Our customers continue to reward our superior service and platform with their business, and for that we are appreciative of them and our employees around the world who make it possible. We are excited about what we believe are plentiful opportunities for organic and acquisition growth and the expanded resources to pursue them.”
Richard E. Perlman, Executive Chairman of ExamWorks, said: “We are proud of our first quarter results. Our strategy and execution continue to deliver strong growth and predictable results, even after currency headwinds and weather challenges in the U.S. Our recent $500 million note offering and refinancing of our credit facilities have strengthened our balance sheet with lower cost capital and give us the flexibility to take advantage of attractive opportunities as they present themselves. We are enthusiastic about 2015 and beyond.”
Financial Review
Revenues – For the three months ended March 31, 2015, revenues were $196.3 million, an increase of 13.5% over the $173.0 million of revenues generated in the first quarter of 2014. The increase in revenues was due to organic growth of 6.9% and acquisition growth of 6.6%.
Costs of revenues – For the three months ended March 31, 2015, costs of revenues were $128.2 million, an increase of 15.5% over the $111.0 million in costs of revenues in the first quarter of 2014. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the first quarter of 2015 were 65.3% compared to 64.2% in the prior year quarter and the result of changes in sales mix and the impact of the legislative change in the U.K. Included in costs of revenues in the first quarter of 2014 and 2015 are approximately $694,000 and $469,000 of share-based compensation expenses, respectively.
Selling, general and administrative expenses (“SGA”) – For the three months ended March 31, 2015, SGA expenses were $42.2 million, an increase of 4.2% over the $40.5 million in SGA expenses in the first quarter of 2014. The increase was primarily due to acquisitions. Included in SGA expenses in the first quarter of 2015 are $5.7 million in share-based compensation expenses and ($172,000) in acquisition-related transaction costs and other expenses. Included in SGA expenses in the first quarter of 2014 are $4.7 million in share-based compensation expenses and $1.2 million in acquisition-related transaction costs and other expenses.
Depreciation and amortization expenses (“D&A”) – For the three months ended March 31, 2015, D&A expenses were $14.8 million, an increase of 3.5% from the $14.3 million in D&A expenses in the first quarter of 2014. The increase was due to amortization of finite lived intangibles resulting from recent acquisitions, offset by other intangible assets becoming fully amortized in 2014 and 2015. For the three months ended March 31, 2015, amortization expense was $13.1 million and depreciation expense was $1.7 million.
Interest and other expenses, net – For the three months ended March 31, 2015, interest and other expenses, net were $8.0 million, a 5.3% increase over the $7.6 million in interest and other expenses, net in the first quarter of 2014.
Adjusted EBITDA – For the three months ended March 31, 2015, adjusted EBITDA was $32.0 million, an increase of 14.3% over the $28.0 million in adjusted EBITDA in the first quarter of 2014.
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 $6.2 million of cash flow from operations in the first quarter of 2015 compared to $3.2 million in the comparable prior year period. We ended the quarter with $20.3 million of cash on hand, $428.4 million of total debt and total leverage as calculated under our credit facility of approximately 3.1x.
In April 2015, we completed an offering of $500.0 million in aggregate principal amount of 5.625% senior notes due 2023 (the “Notes”). Additionally, we amended our Senior Secured Revolving Credit Facility to, among other things, extend the facility through April 2020 and increase the committed availability to $300 million. We also amended our working capital facilities in the U.K., extending those facilities through April 2018. The net proceeds from the offering of the Notes were used to redeem all of the $250.0 million in aggregate principal amount of our outstanding 9.0% senior notes due 2019, to repay all outstanding borrowings under our existing credit facility, to pay related fees and expenses and for general corporate purposes, including acquisitions. As of the end of April, we have approximately $95 million of cash on hand and $300 million of committed availability under the Senior Secured Revolving Credit Facility.
Business Outlook
ExamWorks is providing the following business outlook for the full year and second quarter of 2015 excluding any acquisitions that may be completed:
- Increasing our prior guidance, our full year 2015 constant currency reported revenues are now expected to increase between 9% and 11% (compared to prior guidance of 8% – 10%) from our 2014 reported revenues of approximately $775 million. Based on recent currency rates, we continue to expect the reported revenue growth rates to be negatively impacted by approximately 5%, or $40 million. We continue to expect organic growth, on a constant currency basis, to range between 5% and 7%.
- We continue to expect our full year 2015 adjusted EBITDA margin 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%.
- Second quarter 2015 constant currency revenues are expected to range between $211 million and $217 million before the estimated $11 million unfavorable impact due to currency as compared to prior year reported revenues. This guidance implies a constant currency growth rate ranging between 7.5% and 10.5%. Organic growth on a constant currency basis is expected to range between 4% and 6%.
- Second quarter 2015 reported adjusted EBITDA margin is expected to range between 16.5% and 17.5% of reported revenues. This adjusted EBITDA margin reflects, among other items, the expected continued impact from the legislative change in the U.K.
The complete results release is available here: ExamWorks First Quarter 2015 Financial Results
Source: ExamWorks