ExamWorks Reports Fourth Quarter 2015 Financial Results; Revenues of $208.5 Million; Adjusted EBITDA of $35.4 Million; Announces National Account Win; and Provides 2016 Guidance

ATLANTA, GA--(Marketwired - Feb 23, 2016) -  ExamWorks Group, Inc. (NYSE: EXAM), a leading provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, record retrieval services, document management services and other related services ("IME services") today reported financial results for the fourth quarter of 2015. 

Fourth Quarter 2015

• Revenues for the fourth quarter of 2015 were $208.5 million, an increase of $6.4 million, or 3.2%, over the year-ago quarter revenues of $202.1 million. On a constant currency basis, revenues increased 6.9% with organically generated revenues increasing 2.4% during the fourth quarter of 2015. Currency headwinds negatively impacted reported revenues this quarter by approximately $7.6 million when compared to the prior year quarter. 
  
  
• Adjusted EBITDA for the fourth quarter of 2015 was $35.4 million (17.0% of revenues), an increase of $1.9 million, or 5.7%, over the year-ago quarter adjusted EBITDA of $33.5 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.

Full Year 2015

• Revenues for the year ended December 31, 2015 were $819.6 million, an increase of $44.0 million, or 5.7%, over 2014 full year revenues of $775.6 million. Excluding the impact of acquisitions, revenues increased $10.7 million, or 1.4%, in 2015 over the prior year period. On a constant currency basis and excluding the impact of acquisitions, revenues increased 6.0% in 2015 over the prior year period. Currency headwinds negatively impacted reported revenues this year by approximately $36.5 million when compared to the prior year period. 
  
  
• Adjusted EBITDA for the year ended December 31, 2015 was $140.7 million (17.2% of revenues), an increase of $8.6 million, or 6.5%, over 2014 adjusted EBITDA of $132.1 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.

Other Highlights

• Completed the following acquisitions in 2015 for total consideration of approximately $77 million and which generate aggregate annual revenues of approximately $63 million:
  
  
  • ReliableRS (January 2, 2015) - United States
  • Landmark/Maven (April 14, 2015) - United States
  • Karen Rucas and Associates (July 13, 2015) - Canada
  • First Choice (October 30, 2015) - United States
  • Argent Rehabilitation (November 23, 2015) - United Kingdom
    
    
• On January 8, 2016, completed the acquisition of ABI Document Support Services ("ABI"), a document retrieval and document management services company based in California. ABI generates approximately $40 million of annual revenues.
  
  
• On January 19, 2016, completed the acquisition of Advanced Medical Reviews ("AMR"), a provider of peer reviews based in California. AMR generates approximately $16 million of annual revenues. 
  
  
• Over the course of 2015, announced a new national account win in the United States and two in the United Kingdom. Additionally, today we are announcing another national account win in the United States, bringing the total IME national accounts in the United States to seven and the United Kingdom to six. 
  
  
• Refinanced debt in 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; and
  • Extended the maturity date of our working capital facilities in the U.K. for three years.
    
    
• Starting in December 2015 through the date of this release, repurchased approximately 1.1 million shares of ExamWorks common stock for $29.3 million, or an average price of $26.35 per share. The Company has approximately $36 million remaining available under its current $75 million authorization.

Commentary

Commenting on today's earnings announcement, James K. Price, Chief Executive Officer of ExamWorks, said: "During 2015 and into 2016 we have acquired 7 great companies that strengthen our product offering and market share and allow us to offer new services to our clients, further positioning us as a key partner to our target market. These acquisitions should add meaningfully to our 2016 results. We are proud of our achievements in 2015 and thankful for our worldwide employees who made them happen once again."

Richard E. Perlman, Executive Chairman of ExamWorks, said: "2015 was another year of significant accomplishments for ExamWorks in which we continued to demonstrate the stability, consistency and capacity for growth of our business even in the face of challenges. We enter 2016 better positioned than ever and confident on the company's ability to deliver solid results well into the future."

Financial Review

Revenues - For the three months ended December 31, 2015, revenues were $208.5 million, an increase of 3.2% over the $202.1 million of revenues generated in the fourth quarter of 2014. 

For the year ended December 31, 2015, revenues were $819.6 million, an increase of 5.7% over the $775.6 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 December 31,
		2014			2015			As Reported			Constant FX (a)			Organic Constant FX (a)
United States		$	121,916		$	128,713		5.6	%		5.6	%		0.7	%
United Kingdom			50,171			49,834		(0.7	)%		3.6	%		(2.3	)%
Australia			21,248			19,695		(7.3	)%		10.0	%		10.0	%
Canada			8,729			10,238		17.3	%		37.8	%		34.8	%
	Total	$	202,064		$	208,480		3.2	%		6.9	%		2.4	%
		Year Ended December 31,
		2014			2015			As Reported			Constant FX (a)			Organic Constant FX (a)
United States		$	468,419		$	511,324		9.2	%		9.2	%		3.1	%
United Kingdom			189,755			190,204		0.2	%		8.0	%		6.4	%
Australia			84,552			80,566		(4.7	)%		14.3	%		11.9	%
Canada			32,889			37,473		13.9	%		31.9	%		30.5	%
	Total	$	775,615		$	819,567		5.7	%		10.4	%		6.0	%

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

Costs of revenues - For the three months ended December 31, 2015, costs of revenues were $137.4 million, an increase of 5.2% over the $130.6 million in costs of revenues in the fourth quarter of 2014. The increase was primarily due to increased revenues. Costs of revenues as a percentage of revenues for the fourth quarter of 2015 were 65.9% compared to 64.6% in the prior year quarter due to changes in sales mix. Included in costs of revenues in the fourth quarter of 2014 and 2015 are approximately $421,000 and $239,000 of share-based compensation expenses, respectively.

Selling, general and administrative expenses ("SGA") - For the three months ended December 31, 2015, SGA expenses were $41.3 million, a decrease of 7.2% over the $44.5 million in SGA expenses in the fourth quarter of 2014. Adjusted SGA as a percentage of revenue was 17.2% in the fourth quarter of 2015 an improvement over the 19.1% in the comparable prior year period. This improvement was due to organic growth and improved cost structures in our U.K. 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 fourth quarter of 2015 are $4.0 million in share-based compensation expenses and $1.4 million in acquisition-related transaction costs and other expenses. 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. 

Depreciation and amortization expenses ("D&A") - For the three months ended December 31, 2015, D&A expenses were $14.1 million, a decrease of 8.4% from the $15.4 million in D&A expenses in the fourth 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 December 31, 2015, amortization expense was $12.1 million and depreciation expense was $2.0 million.

Interest and other expenses, net - For the three months ended December 31, 2015, interest and other expenses, net, were $8.0 million, a 1.2% decrease over the $8.1 million in interest and other expenses, net in the fourth quarter of 2014. 

Adjusted EBITDA - For the three months ended December 31, 2015, adjusted EBITDA was $35.4 million, an increase of 5.7% over the $33.5 million of adjusted EBITDA generated in the fourth quarter of 2014. 

For the year ended December 31, 2015, adjusted EBITDA was $140.7 million, an increase of 6.5% over the $132.1 million of adjusted EBITDA generated in the prior year. 

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. 

Other financial data - For the year ended December 31, 2015, we generated $50.0 million of cash flow from operations compared to $45.2 million for the prior year. We ended the quarter with $47.9 million of cash on hand and $300 million available under our senior secured revolving credit facility. Additionally, we ended the quarter with $535.2 million of total debt, consisting of $500.0 million of senior unsecured notes due April 2023 and $35.2 million outstanding under our UK discount facilities. Our total leverage to adjusted EBITDA as of the end of the fourth quarter, calculated in accordance with our senior secured credit facility, was approximately 3.4x. 

Share Repurchase

The Board of Directors increased its previous share repurchase authorization, with the repurchase program authorizing the purchase of up to $75 million of outstanding shares of the Company's common stock. Starting in December 2015 and through the date of this release, the Company repurchased approximately 1.1 million shares at an average price of $26.35 per share. The Company has approximately $36 million remaining available under its current $75 million authorization. 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 full year and for the first quarter of 2016 excluding any acquisitions that may be completed:

• Our full year 2016 reported revenues are expected to increase between 14% and 16% from our 2015 reported revenues of approximately $820 million. Based on recent currency rates, our reported revenue guidance includes approximately 3%, or $26 million, of currency headwinds when compared to the prior year. Organic growth, on a constant currency basis, is expected to range between 5% and 7%. 
  
  
• Our full year 2016 adjusted EBITDA margin is expected to range between 17.2% and 18.0% of reported revenues. On a quarterly basis, our adjusted EBITDA margins as a percentage of reported revenue may fluctuate between 16.5% and 19.0%. 
  
  
• First quarter 2016 reported revenues are expected to range between $216 million and $222 million after an estimated $7.0 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 14% and 17%. Organic growth, on a constant currency basis, is expected to range between 3% and 5%. 
  
  
• First quarter 2016 reported adjusted EBITDA margin is expected to range between 16.5% and 17.0% of reported revenues. This adjusted EBITDA margin reflects, among other items, the expected first quarter revenue and the seasonality of certain expenses, such as employer taxes.

About ExamWorks Group

ExamWorks Group, Inc. is a leading provider of independent medical examinations, peer reviews, bill reviews, Medicare compliance services, case management services, record retrieval services, document management services and other 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 March 4, 2016 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 December 31,							For the years ended December 31,
				2014				2015			2014			2015
Revenues				$	202,064			$	208,480		$	775,615		$	819,567
Costs and expenses:
	Costs of revenues				130,555				137,447			497,038			536,494
	Selling, general and administrative expenses				44,545				41,322			171,197			166,650
	Depreciation and amortization				15,375				14,117			60,280			55,691
		Total costs and expenses			190,475				192,886			728,515			758,835
		Income from operations			11,589				15,594			47,100			60,732
Interest and other expenses, net:
	Interest expense, net				8,135				7,966			31,977			33,918
	Loss on early extinguishment of debt				--				--			--			18,619
	Other expense, net				9				--			194			--
		Total interest and other expenses, net			8,144				7,966			32,171			52,537
		Income before income taxes			3,445				7,628			14,929			8,195
Provision (benefit) for income taxes					(391	)			3,353			4,435			2,604
		Net income		$	3,836			$	4,275		$	10,494		$	5,591
Per share data:
Net income per share:
	Basic			$	0.10			$	0.10		$	0.27		$	0.14
	Diluted			$	0.09			$	0.10		$	0.25		$	0.13
Weighted average number of common shares outstanding:
	Basic				39,827				41,619			38,656			41,111
	Diluted				42,216				43,216			41,232			43,044
Adjusted EBITDA				$	33,468			$	35,361		$	132,140		$	140,745

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
				December 31,
Assets				2014				2015
Current assets:
	Cash and cash equivalents			$	9,751			$	47,865
	Accounts receivable, net				203,189				245,449
	Prepaid expenses				13,805				16,809
	Deferred tax assets				3,776				--
	Other current assets				1,437				1,958
		Total current assets			231,958				312,081
Property, equipment and leasehold improvements, net					15,726				20,145
Goodwill					495,679				508,297
Intangible assets, net					102,583				84,673
Long-term accounts receivable, less current portion					46,401				62,717
Deferred tax assets, noncurrent					29,682				50,405
Deferred financing costs, net					6,169				9,394
Other assets					1,946				3,969
		Total assets		$	930,144			$	1,051,681
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable				$	57,033			$	60,599
	Accrued expenses				53,978				60,748
	Accrued interest expense				10,667				6,245
	Deferred revenue				6,402				3,684
	Current portion of contingent earnout obligation				4,473				--
	Current portion of working capital facilities				40,396				--
	Other current liabilities				6,950				9,056
		Total current liabilities			179,899				140,332
Senior unsecured notes payable					250,000				500,000
Senior secured revolving credit facility and working capital facilities, less current portion					143,853				35,243
Long-term contingent earnout obligation, less current portion					2,114				--
Deferred tax liability, noncurrent					--				3,333
Other long-term liabilities					9,403				12,738
		Total liabilities			585,269				691,646
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 December 31, 2015				--				--
	Common stock, $0.0001 par value; Authorized 250,000 shares; issued 41,276 and 42,983 shares at December 31, 2014 and December 31, 2015, respectively				4				4
	Additional paid-in capital				403,945				446,409
	Accumulated other comprehensive loss				(14,376	)			(26,003	)
	Accumulated deficit				(36,210	)			(30,619	)
	Treasury stock, at cost; Outstanding 905 and 1,705 shares at December 31, 2014 and December 31, 2015, respectively				(8,488	)			(29,756	)
		Total stockholders' equity			344,875				360,035
		Total liabilities and stockholders' equity		$	930,144			$	1,051,681

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
						For the year ended December 31,
						2014				2015
Operating activities:
	Net income					$	10,494			$	5,591
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization					60,280				55,691
		Amortization of deferred rent					(112	)			577
		Share-based compensation					20,024				22,289
		Excess tax benefit related to share-based compensation					(9,287	)			(2,591	)
		Provision for doubtful accounts					5,727				7,059
		Amortization of deferred financing costs					2,317				1,793
		Deferred income taxes					(19,546	)			(7,027	)
		Loss on early extinguishment of debt					--				18,619
		Changes in operating assets and liabilities, net of effects of acquisitions:
			Accounts receivable				(49,437	)			(51,481	)
			Prepaid expenses and other current assets				(7,505	)			(2,145	)
			Accounts payable and accrued expenses				31,642				10,623
			Accrued interest expense				236				(4,422	)
			Deferred revenue and customer deposits				226				(2,069	)
			Other liabilities				140				(2,477	)
				Net cash provided by operating activities			45,199				50,030
Investing activities:
	Cash paid for acquisitions, net						(187,402	)			(75,235	)
	Purchases of building, equipment and leasehold improvements, net						(10,894	)			(11,190	)
	Working capital and other settlements for acquisitions						(2,331	)			(212	)
	Proceeds from foreign currency net investment hedges						4,006				7,698
	Other						(1,542	)			(1,499	)
				Net cash used in investing activities			(198,163	)			(80,438	)
Financing activities:
	Borrowings under senior unsecured notes						--				500,000
	Proceeds from the exercise of options and warrants						42,437				14,423
	Excess tax benefit related to share-based compensation						9,287				2,591
	Repayment of subordinated unsecured notes payable						(333	)			--
	Net borrowings (repayments) under working capital facilities						4,939				(3,362	)
	Payment of contingent earnout obligation						(4,362	)			(5,064	)
	Payment of deferred financing costs						(263	)			(9,035	)
	Payment for early redemption of debt						--				(14,618	)
	Purchases of stock for treasury						--				(21,268	)
	Net borrowings (repayments) under senior secured revolving credit facility						98,826				(143,852	)
	Repayment of senior unsecured notes						--				(250,000	)
	Other						(53	)			--
				Net cash provided by financing activities			150,478				69,815
Exchange rate impact on cash and cash equivalents							(592	)			(1,293	)
				Net increase (decrease) in cash and cash equivalents			(3,078	)			38,114
Cash and cash equivalents, beginning of year							12,829				9,751
Cash and cash equivalents, end of year						$	9,751			$	47,865

EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Reconciliation to Adjusted EBITDA
(In thousands)
(Unaudited)
			For the three months ended December 31,							For the year ended December 31,
			2014				2015			2014			2015
Reconciliation to Adjusted EBITDA:
Net income			$	3,836			$	4,275		$	10,494		$	5,591
	Share-based compensation expense (1)			5,364				4,195			20,024			22,289
	Depreciation and amortization			15,375				14,117			60,280			55,691
	Acquisition-related transaction costs			710				1,094			3,535			2,421
	Other (income) expenses (2)			430				361			1,201			(388	)
	Interest and other expenses, net			8,144				7,966			32,171			52,537
	Provision (benefit) for income taxes			(391	)			3,353			4,435			2,604
Adjusted EBITDA				33,468				35,361			132,140			140,745

(1)	Share-based compensation expense of $421,000 and $239,000 is included in costs of revenues for the three months ended December 31, 2014 and 2015, respectively, and the remainder is included in SGA expenses. Share-based compensation expense of $2.0 million and $1.2 million is included in costs of revenues for the year ended December 31, 2014 and 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.