ExamWorks Reports Third Quarter 2015 Financial Results; Revenues of $206.0 Million; Adjusted EBITDA of $37.1 Million; Announces Acquisition; and Announces up to $75 Million Stock Repurchase Authorization

ATLANTA, GA--(Marketwired - Nov 4, 2015) -  ExamWorks Group, Inc. (NYSE: EXAM), a leading provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, and other related services ("IME services"), today reported financial results for the third quarter of 2015. 

Third Quarter 2015 and Other Highlights

• Revenues for the third quarter of 2015 were $206.0 million, an increase of $2.0 million, or 1.0%, over the year-ago quarter revenues of $204.1 million. On a constant currency basis, revenues increased 6.5%, with organically generated revenues increasing 6.0% during the third quarter of 2015. Currency headwinds negatively impacted reported revenues this quarter by approximately $11.3 million when compared to the prior year quarter. 

• Adjusted EBITDA for the third quarter of 2015 was $37.1 million (18.0% of revenues), an increase of $1.0 million, or 2.8%, over the year-ago quarter adjusted EBITDA of $36.1 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net income below and is not a substitute for the GAAP equivalent.

• On October 30, 2015, completed the acquisition of substantially all of the assets of First Choice Evaluations, an IME provider based in Buffalo, NY, with annual revenues of approximately $24 million.

• Generated $27.6 million in cash flow from operations in the third quarter and ended the quarter with $127.3 million of cash on hand and no amounts outstanding under our $300 million Senior Secured Revolving Credit Facility.

• The Board of Directors approved an increase to the previously authorized share repurchase program. The Company is now authorized to repurchase up to $75 million of outstanding shares of the Company's common stock, of which approximately $65 million is currently available. 

Commentary
Commenting on today's earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: "We continue to be pleased with the positive impact that our strategy and execution continues to have on the industry and our business. We continue to invest in the areas that differentiate us and set us apart from our competition such as our technology and security infrastructure. We are also extremely pleased to welcome First Choice into the ExamWorks family. First Choice is a major regional player that will strengthen our position in the Northeast region and contribute to our growth and profitability in the future. We are enthusiastically looking forward to an exciting 2016."

Richard E. Perlman, Executive Chairman of ExamWorks, said: "Once again, we are pleased that our results for the quarter exceeded revenue and adjusted EBITDA expectations. We are excited about the momentum we carry into 2016 resulting from our initiatives, wins and acquisitions in 2015 and the ability of our business to continue to deliver consistent and reliable long-term revenue and EBITDA growth well into the future."

Financial Review
Revenues - For the three months ended September 30, 2015, revenues were $206.0 million, an increase of 1.0% over the $204.1 million of revenues generated in the third quarter of 2014. 

For the nine months ended September 30, 2015, revenues were $611.1 million, an increase of 6.5% over the $573.6 million of revenues generated in the comparable period in 2014. 

Below is a table presenting our reported revenues and growth rates for each of the regions we serve.

Reported Revenues
(In thousands except %)
				Three Months Ended September 30,
				2014			2015		As Reported			Constant FX (a)			Organic Constant FX (a)
United States			$	123,112		$	128,768		4.6	%		4.6	%		2.3	%
United Kingdom				48,865			46,915		(4.0	)%		3.6	%		3.6	%
Australia				24,026			20,736		(13.7	)%		10.0	%		10.0	%
Canada				8,075			9,614		19.1	%		42.8	%		40.4	%
	Total		$	204,078		$	206,033		1.0	%		6.5	%		6.0	%
				Nine Months Ended September 30,
				2014			2015		As Reported			Constant FX (a)			Organic Constant FX (a)
United States			$	346,504		$	382,611		10.4	%		10.4	%		4.0	%
United Kingdom				139,583			140,371		0.6	%		9.7	%		9.6	%
Australia				63,304			60,870		(3.8	)%		16.2	%		12.6	%
Canada				24,160			27,235		12.7	%		29.8	%		28.9	%
	Total		$	573,551		$	611,087		6.5	%		11.6	%		7.3	%

(a) The constant FX columns represent growth rates excluding the effects of currency.

Costs of revenues - For the three months ended September 30, 2015, costs of revenues were $134.4 million, an increase of 2.9% over the $130.6 million in costs of revenues in the third quarter of 2014. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the third quarter of 2015 were 65.3% compared to 64.0% in the prior year quarter due to changes in sales mix. Included in costs of revenues in the third quarter of 2014 and 2015 are approximately $444,000 and $259,000 of share-based compensation expenses, respectively.

Selling, general and administrative expenses ("SGA") - For the three months ended September 30, 2015, SGA expenses were $40.5 million, a decrease of 6.9% over the $43.5 million in SGA expenses in the third quarter of 2014. Adjusted SGA as a percentage of revenue was 16.9% in the third quarter of 2015 an improvement over the 18.5% in the comparable prior year period. This improvement was primarily due to lower cost structure in our UK and ECS businesses. Adjusted SGA excludes the impact of share based compensation and acquisition- related transaction costs and other expenses that are added back to arrive at adjusted EBITDA. Included in SGA expenses in the third quarter of 2015 are $5.1 million in share-based compensation expenses and $550,000 in acquisition-related transaction costs and other expenses. 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. 

Depreciation and amortization expenses ("D&A") - For the three months ended September 30, 2015, D&A expenses were $13.0 million, a decrease of 17.2% from the $15.7 million in D&A expenses in the third quarter of 2014. The decrease was due to intangible assets becoming fully amortized in 2014 and 2015, offset by amortization of finite lived intangibles resulting from recent acquisitions. For the three months ended September 30, 2015, amortization expense was $11.3 million and depreciation expense was $1.7 million.

Interest and other expenses, net - For the three months ended September 30, 2015, interest and other expenses, net were $8.0 million, a 4.8% decrease over the $8.4 million in interest and other expenses, net in the third quarter of 2014. 

Adjusted EBITDA - For the three months ended September 30, 2015, adjusted EBITDA was $37.1 million, an increase of 2.8% over the $36.1 million of adjusted EBITDA generated in the third quarter of 2014. 

For the nine months ended September 30, 2015, adjusted EBITDA was $105.4 million, an increase of 6.8% over the $98.7 million of adjusted EBITDA generated in the comparable prior year period. 

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 $27.6 million of cash flow from operations in the third quarter of 2015 compared to $6.2 million of cash flow from operations in the comparable prior year period. For the nine months ended September 30, 2015, we generated $41.6 million of cash flow from operations compared to $25.0 million for the comparable prior year period. We ended the quarter with $127.3 million of cash on hand and $300 million available under our senior secured revolving credit facility. Additionally, we ended the quarter with $538.8 million of total debt, consisting of $500 million of senior unsecured notes due April 2023 and $38.8 million outstanding under our UK discount facilities. Our total leverage to adjusted EBITDA as of the end of the third quarter, calculated in accordance with our senior secured credit facility, was approximately 3.67x, or approximately 2.95x on a net cash basis. 

Share Repurchase
The Board of Directors increased its previous share repurchase authorization, with the repurchase program now authorizing the purchase of up to $75 million of outstanding shares of the Company's common stock, of which approximately $65 million is currently available. Repurchases will be made in accordance with applicable securities laws, from time to time, in the open market, through privately negotiated transactions, or otherwise.

Business Outlook
ExamWorks is providing the following business outlook for the fourth quarter and for the full year of 2015:

• Fourth quarter 2015 reported revenues are expected to range between $198 million and $202 million after an estimated $9.0 million unfavorable impact due to currency as compared to the prior year quarter reported revenues. This guidance implies a constant currency growth rate ranging between 2% and 4%. Organically generated revenue, on a constant currency basis, is expected to be flat, ranging between -1% and 1%.

• Fourth 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 fourth quarter revenue and the seasonality of certain expenses.

• Updating our prior guidance, we now expect our full year 2015 reported revenues to increase between 4.5% and 5% (compared to prior guidance of 4.5% - 6.5%) from our 2014 reported revenues of approximately $775 million. Based on recent currency rates, our reported revenue guidance includes approximately 5%, or $38 million, of currency headwinds when compared to the prior year. We expect organically generated growth, on a constant currency basis, to range between 5.5% and 6%. 

• We continue to expect our full year 2015 adjusted EBITDA margin to range between 17% and 17.5% of reported revenues. This adjusted EBITDA margin range reflects the year to date results and the anticipated fourth quarter adjusted EBITDA margin.  

• We currently have a number of companies under letter of intent with aggregate revenues of $70 million and adjusted EBITDA of approximately $15 million, which we believe should close by the end of the year. We are in various stages of due diligence and there are no guarantees that these acquisitions will close on the expected timing or at all.

About ExamWorks Group
ExamWorks Group, Inc. is a leading provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, and related services ("IME services"). We help our clients manage costs and enhance their risk management processes by verifying the validity, nature, cause and extent of claims, identifying fraud and providing fast, efficient and quality IME services. ExamWorks is focused on providing clients a national presence while maintaining the local service and capabilities they need and expect.

Non-GAAP Financial Measures

In connection with the ongoing operation of our business, our management regularly reviews Adjusted EBITDA, a non-GAAP financial measure, to assess our performance. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, acquisition-related transaction costs, share-based compensation expenses, and other expenses. We believe that Adjusted EBITDA is an important measure of our operating performance because it allows management, lenders, investors and analysts to evaluate and assess our core operating results from period to period after removing the impact of changes to our capitalization structure, acquisition-related costs, income tax status, and other items of a non-operational nature that affect comparability.

We believe that various forms of the Adjusted EBITDA metric are often used by analysts, investors and other interested parties to evaluate companies such as ours for the reasons discussed above. Additionally, Adjusted EBITDA is used to measure certain financial covenants in our credit facility. Adjusted EBITDA is also used for planning purposes and in presentations to our Board of Directors as well as in our incentive compensation programs for our employees.

Non-GAAP information should not be construed as an alternative to GAAP information, as the items excluded from the non-GAAP measures often have a material impact on our financial results. Management uses, and investors should use, non-GAAP measures in conjunction with our GAAP results.

Below is a table presenting a reconciliation to Adjusted EBITDA from net income, the most comparable GAAP measure, for each of the periods indicated.

Forward Looking Statements
Statements made in this press release that express ExamWorks' or management's intentions, plans, beliefs, expectations or predictions of future events are forward-looking statements, which ExamWorks intends to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. These statements often include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate," or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes. Forward-looking statements may include information concerning ExamWorks' possible or assumed future results of operations, including descriptions of ExamWorks' revenues, profitability, outlook and overall business strategy. You should not place undue reliance on these statements because they are subject to numerous uncertainties and factors relating to ExamWorks' operations and business environment, all of which are difficult to predict and many of which are beyond ExamWorks' control. Although ExamWorks believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many uncertainties and factors could affect ExamWorks' actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements, including but not limited to: our ability to implement our growth strategy and acquisition program; our ability to integrate completed acquisitions; our expansion into international markets; our increasing reliance on national account clients; our ability to secure additional financing; regulation of our industry; our information technology systems and the risk of security and data breaches; our ability to protect our intellectual property rights and other information; our ability to compete successfully with our competitors; our ability to monitor and retain qualified physicians and other medical providers; our ability to obtain, retain and grow customer relationships; our ability to provide accurate health-related risk assessment analyses of data; our ability to comply with existing and future regulation; our ability to retain key management personnel; and restrictions in our credit facility, senior notes indenture and future indebtedness. In addition, the risks discussed in our periodic reports, registration statements and other filings with the Securities and Exchange Commission could cause actual results to differ materially from the results anticipated by forward-looking statements.

You should keep in mind that any forward-looking statement made by ExamWorks herein, or elsewhere, speaks only as of the date on which made. ExamWorks expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in ExamWorks' expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.

ExamWorks will host a conference call to discuss the results and other matters at 5:00 p.m. Eastern Time. Please log in at least 10 minutes prior to the conference call in order to download the applicable audio software. Interested parties may participate live via telephone by dialing (888) 455-1227 in the U.S. or (773) 799-3336 internationally with access code 1941106. A live webcast of the call is also accessible through the Investor Relations section of the company's web site at http://investorrelations.examworks.com/.

Following the conclusion of the call, a replay of the webcast will be available at the Company's web site within two hours. Alternatively, a telephonic replay of the call will be available at 7:00 p.m. Eastern Time, and can be accessed until November 11th, 2015 at midnight Eastern Time, by calling (888) 293-8936 in the U.S. or (402) 998-0528 internationally, with access code 562014.

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
					For the three months ended September 30,						For the nine months ended September 30,
					2014			2015			2014			2015
Revenues				$	204,078		$	206,033		$	573,551		$	611,087
Costs and expenses:
	Costs of revenues				130,597			134,446			366,483			399,047
	Selling, general and administrative expenses				43,534			40,455			126,652			125,328
	Depreciation and amortization				15,705			12,997			44,905			41,574
		Total costs and expenses			189,836			187,898			538,040			565,949
		Income from operations			14,242			18,135			35,511			45,138
Interest and other expenses, net:
	Interest expense, net				8,361			8,000			23,842			25,952
	Loss on early extinguishment of debt				--			--			--			18,619
	Other (income) expense, net				(6)			--			185			--
		Total interest and other expenses, net			8,355			8,000			24,027			44,571
		Income before income taxes			5,887			10,135			11,484			567
Provision (benefit) for income taxes					2,472			2,980			4,826			(749)
		Net income		$	3,415		$	7,155		$	6,658		$	1,316
Per share data:
Net income per share:
	Basic			$	0.09		$	0.17		$	0.17		$	0.03
	Diluted			$	0.08		$	0.17		$	0.16		$	0.03
Weighted average number of common shares outstanding:
	Basic				39,251			41,384			38,259			40,936
	Diluted				41,647			43,158			40,897			42,981
Adjusted EBITDA				$	36,083		$	37,075		$	98,672		$	105,384

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
								December 31,				September 30,
Assets								2014				2015
Current assets:
	Cash and cash equivalents						$	9,751			$	127,338
	Accounts receivable, net							203,189				225,509
	Prepaid expenses							13,805				14,900
	Deferred tax assets							3,776				5,072
	Other current assets							1,437				3,488
					Total current assets			231,958				376,307
Property, equipment and leasehold improvements, net								15,726				17,078
Goodwill								495,679				489,532
Intangible assets, net								102,583				71,496
Long-term accounts receivable, less current portion								46,401				52,497
Deferred tax assets, noncurrent								29,682				49,658
Deferred financing costs, net								6,169				9,753
Other assets								1,946				2,100
					Total assets		$	930,144			$	1,068,421
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable						$	57,033			$	59,240
	Accrued expenses							53,978				54,274
	Accrued interest expense							10,667				12,892
	Deferred revenue							6,402				4,158
	Current portion of contingent earnout obligation							4,473				--
	Current portion of working capital facilities							40,396				--
	Other current liabilities							6,950				5,841
					Total current liabilities			179,899				136,405
Senior unsecured notes payable								250,000				500,000
Senior secured revolving credit facility and working capital facilities, less current portion								143,853				38,838
Long-term contingent earnout obligation, less current portion								2,114				--
Deferred tax liability, noncurrent								--				5,587
Other long-term liabilities								9,403				12,727
					Total liabilities			585,269				693,557
Commitments and contingencies
Stockholders' equity:
	Preferred stock, $0.0001 par value; Authorized 50,000 shares; no shares issued and outstanding at December 31, 2014 and September 30, 2015							--				--
	Common stock, $0.0001 par value; Authorized 250,000 shares; issued and outstanding 40,371 and 41,945 shares at December 31, 2014 and September 30, 2015, respectively							4				4
	Additional paid-in capital							403,945				441,288
	Accumulated other comprehensive loss							(14,376	)			(23,046	)
	Accumulated deficit							(36,210	)			(34,894	)
	Treasury stock, at cost; Outstanding 905 shares at December 31, 2014 and September 30, 2015							(8,488	)			(8,488	)
					Total stockholders' equity			344,875				374,864
					Total liabilities and stockholders' equity		$	930,144			$	1,068,421

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
									For the nine months ended September 30,
									2014				2015
Operating activities:
	Net income							$	6,658			$	1,316
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization						44,905				41,574
			Amortization of deferred rent						(153	)			350
			Share-based compensation						14,660				18,094
			Excess tax benefit related to share-based compensation						(12,700	)			(3,111	)
			Provision for doubtful accounts						4,833				5,505
			Amortization of deferred financing costs						1,735				1,411
			Deferred income taxes						(9,806	)			(7,757	)
			Loss on early extinguishment of debt						--				18,619
			Changes in operating assets and liabilities, net of effects of acquisitions:
					Accounts receivable				(37,512	)			(39,559	)
					Prepaid expenses and other current assets				(4,121	)			(954	)
					Accounts payable and accrued expenses				22,137				6,875
					Accrued interest expense				(5,356	)			2,225
					Deferred revenue and customer deposits				(48	)			(1,458	)
					Other liabilities				(271	)			(1,502	)
						Net cash provided by operating activities			24,961				41,628
Investing activities:
	Cash paid for acquisitions, net								(187,402	)			(11,770	)
	Purchases of building, equipment and leasehold improvements, net								(6,192	)			(7,337	)
	Working capital and other settlements for acquisitions								(2,366	)			(181	)
	Proceeds from (cash paid for) foreign currency net investment hedges								(362	)			4,122
	Other								(939	)			(1,427	)
						Net cash used in investing activities			(197,261	)			(16,593	)
Financing activities:
	Borrowings under senior unsecured notes								--				500,000
	Proceeds from the exercise of options and warrants								35,394				13,737
	Excess tax benefit related to share-based compensation								12,700				3,111
	Net borrowings (repayments) under working capital facilities								7,506				(607	)
	Repayment of subordinated unsecured notes payable								(333	)			--
	Payment of contingent earnout obligation								(4,362	)			(5,064	)
	Payment of deferred financing costs								(251	)			(8,706	)
	Payment for early redemption of debt								--				(14,618	)
	Net borrowings (repayments) under senior secured revolving credit facility								118,331				(143,853	)
	Repayment of senior unsecured notes								--				(250,000	)
	Other								(53	)			--
						Net cash provided by financing activities			168,932				94,000
Exchange rate impact on cash and cash equivalents									(350	)			(1,448	)
						Net increase (decrease) in cash and cash equivalents			(3,718	)			117,587
Cash and cash equivalents, beginning of period									12,829				9,751
Cash and cash equivalents, end of period								$	9,111			$	127,338

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Reconciliation to Adjusted EBITDA
(In thousands)
(Unaudited)
				For the three months ended September 30,							For the nine months ended September 30,
				2014			2015				2014			2015
Reconciliation to Adjusted EBITDA:
Net income			$	3,415		$	7,155			$	6,658		$	1,316
	Share-based compensation expense (1)			4,680			5,393				14,660			18,094
	Depreciation and amortization			15,705			12,997				44,905			41,574
	Acquisition-related transaction costs			871			634				2,825			1,327
	Other (income) expenses (2)			585			(84	)			771			(749	)
	Interest and other expenses, net			8,355			8,000				24,027			44,571
	Provision (benefit) for income taxes			2,472			2,980				4,826			(749	)
Adjusted EBITDA				36,083			37,075				98,672			105,384

(1)	Share-based compensation expense of $444,000 and $1.6 million is included in costs of revenues for the three and nine months ended September 30, 2014, respectively, and the remainder is included in SGA expenses. Share-based compensation expense of $259,000 and $987,000 is included in costs of revenues for the three and nine months ended September 30, 2015, respectively, and the remainder is included in SGA expenses.
(2)	Other (income) expenses consist principally of integration related expenses, such as facility termination, severance, relocation costs and gains or losses on earnout settlements associated with our acquisition strategy.