SOURCE: ExamWorks Group, Inc.

March 03, 2011 08:12 ET

ExamWorks Announces Fourth Quarter 2010 Financial Results

ATLANTA, GA--(Marketwire - March 3, 2011) - ExamWorks Group, Inc. (NYSE: EXAM) a leading provider of independent medical examinations (IMEs), peer reviews, bill reviews and related services, today reported financial results for the fourth quarter of 2010.

Fourth Quarter 2010 Highlights

-- Revenues for the fourth quarter of 2010 were $54.3 million, an increase of $38.5 million, or 244%, over the year-ago quarter revenue of $15.8 million. Revenue related to acquisitions completed in 2009 and 2010 accounted for $36.8 million of this revenue growth.

-- Adjusted EBITDA for the fourth quarter of 2010 was $10.1 million, an increase of $8.3 million, or 461%, over the year-ago quarter adjusted EBITDA of $1.8 million. Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net loss below and is not a substitute for the GAAP equivalent.

-- In the fourth quarter of 2010, we completed the acquisitions of BME Gateway and Royal Medical Consultants. BME Gateway and Royal Medical Consultants contributed $3.1 million and $113,000 in revenues and $433,000 and $13,000 in adjusted EBITDA in the fourth quarter of 2010, respectively.

Financial Review

Revenues - For the three months ended December 31, 2010, revenues were $54.3 million, an increase of 244% over the $15.8 million in revenues in the fourth quarter of 2009. Excluding the impact of acquisitions completed in the fourth quarter of 2009 and in 2010, revenues increased $1.7 million, or 11%, during the fourth quarter of 2010.

Costs of revenues -- For the three months ended December 31, 2010, costs of revenues were $34.9 million, an increase of 236% over the $10.4 million in costs of revenues in the fourth quarter of 2009. Excluding the impact of acquisitions completed in the fourth quarter of 2009 and in 2010, costs of revenues increased $808,000, or 8%, during the fourth quarter of 2010. Costs of revenues as a percentage of revenues for the fourth quarter of 2010 was 64% compared to 66% in the fourth quarter of 2009.

Selling, general and administrative expenses - For the three months ended December 31, 2010, SGA expenses were $13.7 million, an increase of 132% over the $5.9 million in SGA expenses in the fourth quarter of 2009. Excluding the impact of acquisitions completed in the fourth quarter of 2009 and in 2010, SGA expenses decreased $191,000, or 3%, during the fourth quarter of 2010. Included in SGA expenses in the fourth quarter of 2010 are $1.3 million in share based compensation expenses, $3.0 million in acquisition-related transaction costs, and $188,000 in other non-recurring costs.

Depreciation and amortization expenses - For the three months ended December 31, 2010, D&A expenses were $7.1 million, an increase of 209% over the $2.3 million in D&A expenses in the fourth quarter of 2009. Excluding the impact of acquisitions completed in the fourth quarter of 2009 and in 2010, D&A expenses decreased $225,000, or 10%, during the fourth quarter of 2010.

Interest and other expenses, net - For the three months ended December 31, 2010, interest and other expenses, net were $5.9 million, an increase of 436% over the $1.1 million in interest and other expenses, net in the fourth quarter of 2009. Included in interest and other expenses, net in the fourth quarter of 2010 are $3.2 million in charges related to the early extinguishment of debt and $1.5 million in charges related to the mark to market provision of an earnout obligation.

Adjusted EBITDA - For the three months ended December 31, 2010, adjusted EBITDA was $10.1 million, an increase of 461% over the $1.8 million in adjusted EBITDA in the fourth quarter of 2009. Adjusted EBITDA is a non- GAAP measure that is described and reconciled to net loss below and is not a substitute for the GAAP equivalent.

Subsequent Event - On February 28, 2011, we completed the acquisition of MES Group (MES) for $215 million, consisting of $175 million in cash, 1,424,501 shares of ExamWorks common stock with a value of $30.0 million (using $21.07 per share, the closing stock price on February 28th), and the payoff of $10 million of indebtedness under MES' credit facilities.

"ExamWorks had a fantastic quarter and year," said Richard Perlman, Chairman of ExamWorks. "We had strong top line growth, increased profitability and strong cash flow. Our entire organization performed well during 2010 to execute and achieve our strategic and operating objectives and we are extremely pleased with the performance culture that we have built across the company.

Jim Price, CEO of ExamWorks, said: "We are excited to start the year with our latest major achievement, the acquisition of MES. With this acquisition, we have increased the depth of our senior management team and added substantially to our ability to service the industry. We are now a company of 1,600 dedicated employees, 41 offices in the U.S., Canada and the UK with a large and highly credentialed panel of physicians and other medical providers. We look forward to continuing our growth both from our existing business and our strong pipeline of attractive potential acquisitions."

Business Outlook

ExamWorks is providing the following business outlook for fiscal year 2011:

-- Fiscal year 2011 revenue is expected to be $350.0 million to $360.0 million, including the expected results for acquisitions completed through March 1, 2011, but excluding the effect of expected future acquisitions during 2011.

-- Fiscal year 2011 Adjusted EBITDA is expected to be $66.0 million to $72.0 million, including the expected results for acquisitions completed through March 1, 2011, but excluding the effect of expected future acquisitions during 2011. Adjusted EBITDA is a non-GAAP measure, the use of which by ExamWorks is described below. The reconciliation to GAAP measures of actual 2011 Adjusted EBITDA is expected to be calculated and presented in a manner consistent with the reconciliation set forth below with respect to the three months ended December 31, 2010.

-- The Company expects to acquire a minimum of $40.0 million of annual revenue during the balance of 2011. This will result in acquired revenues of at least $175.0 million since the IPO, reaching the Company's goal of $175.0 million of acquired revenues in 2011 and 2012 well ahead of the original timeline. Including the $40.0 million of additional acquired revenue, we expect to end 2011 with pro forma revenues in excess of $410 million.

About ExamWorks Group

ExamWorks Group, Inc. is a leading provider of independent medical examinations, (IMEs), peer and bill reviews and related 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 carriers 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 non-recurring costs. 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, excluding our senior management.

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.

A reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP measure, for each of the periods indicated, is attached at the end of this release.

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 limited operating history; our ability to implement our growth strategy and acquisition program; our ability to integrate completed acquisitions; our expansion into international markets; our ability to secure additional financing; regulation of our industry; our information technology systems; our ability to protect our intellectual property rights and other information; our ability to compete successfully with our competitors; our ability to retain qualified physicians and other medical providers for our medical panel; our ability to retain our clients; our ability to provide accurate health-related risk assessment analyses of data; our ability to retain key management personnel; and restrictions in our credit facility and future indebtedness. In addition, the risks discussed in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our registration statement on form S-1 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 GROUP, INC. AND SUBSIDIARIES
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                              Three Months Ended           Year Ended
                                 December 31,              December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
Revenues:                   $   54,269  $   15,838  $  163,511  $   49,634

Costs and expenses:
   Costs of revenues            34,913      10,445     103,606      32,026
   Selling, general and
    administrative expenses     13,719       5,877      37,689      15,811
   Depreciation and
    amortization                 7,053       2,259      19,505       6,889
                            ----------  ----------  ----------  ----------

      Total costs and
       expenses                 55,685      18,581     160,800      54,726
                            ----------  ----------  ----------  ----------

      Income (loss) from
       operations               (1,416)     (2,743)      2,711      (5,092)

Interest and other
 expenses, net:
   Interest expense, net         2,755         712       8,178       1,807
   Loss on early
    extinguishment of debt       3,169         461       3,169         461
   (Gain) loss on interest
    rate swap                      (29)        (89)         42        (343)
   Realized foreign
    currency gain                   (6)          -        (156)          -
                            ----------  ----------  ----------  ----------

      Total interest and
       other expenses, net       5,889       1,084      11,233       1,925
                            ----------  ----------  ----------  ----------

      Loss before income
       taxes                    (7,305)     (3,827)     (8,522)     (7,017)

Income tax benefit              (1,857)     (1,425)     (2,484)     (2,613)
                            ----------  ----------  ----------  ----------

      Net loss              $   (5,448) $   (2,402) $   (6,038) $   (4,404)
                            ==========  ==========  ==========  ==========

Per Share Data:

   Net loss per share:
      Basic and diluted:    $    (0.20) $    (0.22) $    (0.33) $    (0.42)
                            ==========  ==========  ==========  ==========

   Weighted average number
    of common shares
    outstanding:
      Basic and diluted:    27,168,890  10,986,551  18,500,859  10,479,155
                            ==========  ==========  ==========  ==========

Adjusted EBITDA             $   10,057  $    1,827  $   30,321  $    6,496
                            ==========  ==========  ==========  ==========



                  EXAMWORKS GROUP, INC. AND SUBSIDIARIES
                  UNAUDITED CONSOLIDATED BALANCE SHEETS
            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)


                                                December 31,  December 31,
                            ASSETS                  2010          2009
                                                ------------  ------------
Current assets:
  Cash and cash equivalents                     $     33,624  $      1,499
  Accounts receivable, net                            38,638         8,506
  Other receivables                                       33            57
  Prepaid expenses                                     2,175           793
  Deferred tax assets                                     68           642
  Other current assets                                    42             -
                                                ------------  ------------
      Total current assets                            74,580        11,497

Equipment and leasehold improvements, net              4,870         1,972
Goodwill                                              90,582        32,395
Intangible assets, net                                66,914        26,902
Deferred tax assets, noncurrent                        7,669         1,948
Deferred financing costs, net                          4,176         1,680
Other assets                                             271           153
                                                ------------  ------------

      Total assets                              $    249,062  $     76,547
                                                ============  ============

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                              $     19,999  $      6,819
  Accrued expenses                                     9,414         2,057
  Deferred revenue                                       272            64
  Due to related parties                                   -         4,936
  Current portion of long-term debt                        -         3,263
  Current portion of subordinated unsecured
   notes payable                                       2,312         1,565
  Current portion of contingent earnout
   obligation                                          2,478           442
  Other current liabilities                            3,105         1,725
                                                ------------  ------------
      Total current liabilities                       37,580        20,871

Revolving line of credit and discount facility         4,998           600
Long-term debt, less current portion                       -        29,371
Long-term subordinated unsecured notes payable,
 less current portion                                  2,546         3,552
Long-term contingent earnout obligation, less
 current portion                                       2,032           500
Other long-term liabilities                            1,666         1,253
                                                ------------  ------------
      Total liabilities                               48,822        56,147
                                                ------------  ------------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $0.0001 par value;
   Authorized 50,000,000 shares; no shares issued
   and outstanding at December 31, 2010 and 2009           -             -
  Common stock, $0.0001 par value; Authorized
   250,000,000 shares; issued and outstanding
   12,356,942 and 32,216,104 shares at
   December 31, 2010 and 2009, respectively                3             -
  Additional paid-in capital                         211,861        27,202
  Accumulated other comprehensive income               1,216             -
  Accumulated deficit                                (12,840)       (6,802)
                                                ------------  ------------
      Total stockholders' equity                     200,240        20,400
                                                ------------  ------------

      Total liabilities and stockholders'
       equity                                   $    249,062  $     76,547
                                                ============  ============



                  EXAMWORKS GROUP, INC. AND SUBSIDIARIES
              UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (IN THOUSANDS)

                                                  Year Ended December 31,
                                                --------------------------
                                                    2010          2009
                                                ------------  ------------
Operating activities:
  Net loss                                      $     (6,038) $     (4,404)
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Loss (gain) on interest rate swap                     42          (343)
    Depreciation and amortization                     19,505         6,889
    Amortization of deferred rent                        (61)           71
    Share-based compensation                           1,816           218
    Provision for doubtful accounts                      173           226
    Amortization of deferred financing costs             872           132
    Loss on early extinguishment of debt               3,169           461
    Deferred income taxes                             (5,419)       (2,723)
    Other                                                  -            10
    Changes in operating assets and
     liabilities, net of effect of acquisitions:
      Accounts receivable                             (2,098)       (1,100)
      Prepaid expenses and other current assets          560           141
      Accounts payable and accrued expenses            4,972         2,982
      Deferred revenue and customer deposits            (917)         (270)
      Due to related parties and other current
       liabilities                                     1,727         1,887
                                                ------------  ------------
        Net cash provided by operating
         activities                                   18,303         4,177
                                                ------------  ------------

Investing activities:
    Cash paid for acquisitions, net                 (115,225)      (25,707)
    Working capital and other settlements for
     acquisitions                                        418         1,482
    Purchases of equipment and leasehold
     improvements, net                                (1,730)       (1,559)
    Other                                                  -             9
                                                ------------  ------------
        Net cash used in investing activities       (116,537)      (25,775)
                                                ------------  ------------

Financing activities:
    Issuance of common stock, net                    136,660           560
    Issuance of preferred stock, net                  32,421             -
    Proceeds from the exercise of options and
     warrants                                            703             -
    Excess tax benefit related to share-based
     compensation                                        974             -
    Borrowings (repayments) under revolving
     line of credit and discount facility              4,397          (900)
    Borrowings under credit facility                  67,315        40,134
    Payments under credit facility                   (99,950)      (19,238)
    Repayment of subordinated unsecured notes
     payable                                          (2,167)         (345)
    Payment of deferred financing costs               (6,534)       (1,817)
    (Repayment) advances of related party
     obligations                                      (3,500)        3,500
                                                ------------  ------------
        Net cash provided by financing
         activities                                  130,319        21,894
                                                ------------  ------------

Exchange rate impact on cash and cash
 equivalents                                              40             -

Net increase in cash and cash equivalents             32,125           296
Cash and cash equivalents, beginning of year           1,499         1,203
                                                ------------  ------------
Cash and cash equivalents, end of year          $     33,624  $      1,499
                                                ============  ============


NON CASH INVESTING AND FINANCING ACTIVITIES:
  Issuance of common stock for acquisitions     $     10,075  $      3,503
                                                ============  ============
  Issuance of subordinated unsecured notes
   payable for acquisitions                            1,747         5,512
                                                ============  ============
  Issuance of deferred payments for
   acquisitions                                            -           389
                                                ============  ============
  Issuance of common stock to settle earnout
   obligations                                           576             -
                                                ============  ============
  Isssuance of common stock for termination of
   agreement                                    $      1,434  $          -
                                                ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:
  Cash paid for interest                        $      4,994  $      1,332
                                                ============  ============
  Cash paid for income taxes                    $        231  $        207
                                                ============  ============



                    RECONCILIATION TO ADJUSTED EBITDA

                                    Three Months Ended      Year Ended
                                       December 31,        December 31,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Reconciliation to Adjusted EBITDA:

Net loss                            $ (5,448) $ (2,402) $ (6,038) $ (4,404)
   Share-based compensation expense    1,257         7     1,816       218
   Depreciation and amortization       7,053     2,259    19,505     6,889
   Acquisition-related transaction
    costs                              2,975       801     6,101     2,109
   Monitoring fee                          -     1,468         -     1,738
   Other non-recurring costs             188        35       188       634
   Interest and other expenses, net    5,889     1,084    11,233     1,925
   Benefit for income taxes           (1,857)   (1,425)   (2,484)   (2,613)
                                    --------  --------  --------  --------
Adjusted EBIDTA                     $ 10,057  $  1,827  $ 30,321  $  6,496
                                    ========  ========  ========  ========

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