Forward-looking Statements

Unless the context indicates otherwise, references in this Quarterly Report on Form 10-Q to "ExamWorks", "the Company," "we," "our," and "us" mean ExamWorks Group, Inc. and its consolidated subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve risks and uncertainties. Forward-looking statements convey current expectations or forecasts of future events for ExamWorks. All statements contained in this report other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans, and our objectives for future operations, are forward-looking. You can identify forward-looking statements by terminology such as "project," "believe," "anticipate," "plan," "expect," "estimate," "intend," "should," "would," "could," "will," "can," "continue," or "may," or the negative of these terms or other similar expressions that convey uncertainty of future events or outcomes. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled "Risk Factors," set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and elsewhere in this report, and in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this report. Subsequent events and developments may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this report.

Our Business

We are a leading provider of IMEs, peer and bill reviews, and related services, which include legal support services, administrative support services and medical record retrieval services. We were incorporated as a Delaware corporation on April 27, 2007. From July 14, 2008 through June 30, 2012, we have acquired 37 IME businesses, including a leading provider of software solutions to the IME industry. We currently operate out of 45 service centers servicing all 50 U.S. states, Canada and the United Kingdom.

We provide our services to property and casualty insurance carriers, law firms, third-party claim administrators, government agencies, and state funds that use independent services to confirm the veracity of claims by sick or injured individuals for workers' compensation, automotive, personal injury liability and disability insurance coverage. 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.

We provide our clients with the local presence, expertise and broad geographic coverage they increasingly require. Our size and geographic reach give our clients access to our medical panel of credentialed physicians and other medical providers and our proprietary information technology infrastructure that has been specifically designed to streamline the complex process of coordinating referrals, scheduling appointments, complying with regulations and client reporting. Our primary service is to provide IMEs that give our clients authoritative and accurate answers to questions regarding the nature and permanency of medical conditions or personal injury, their cause and appropriate treatment. Additionally, we provide peer and bill reviews, which consist of medical opinions by members of our medical panel without conducting physical exams, and the review of physician and hospital bills to examine medical care rendered and its conformity to accepted standards of care. Prior to the MES acquisition in February 2011, we marketed our services primarily under the ExamWorks brand. Initially with the MES acquisition and subsequently with the Premex acquisition, we began to market our services under several brands, including but not limited to, ExamWorks, MES and Premex.

We operate in a highly fragmented industry and have completed numerous acquisitions. A key component of our business strategy is growth through acquisitions that expand our geographic coverage, provide new or complementary lines of business, expand our portfolio of services, and increase our market share. Another central feature of our business strategy is to grow our business organically by selling additional services to existing clients, cross-selling into additional insurance lines of business and expanding our geographic footprint with existing clients. Through June 30, 2012, we have completed the following 37 acquisitions:

            Acquisition Date                      Name
           October 27, 2011     • Bronshvag
           October 24, 2011     • Matrix Health Management
           October 3, 2011      • Capital Vocational Specialist
                                • North York Rehabilitation Centre
           September 28, 2011   • MLS Group of Companies
                                • Medicolegal Services
           May 10, 2011         • Premex Group
           February 28, 2011    • MES Group
           February 18, 2011    • National IME Centres
           December 20, 2010    • Royal Medical Consultants
           October 1, 2010      • BMEGateway
           September 7, 2010    • UK Independent Medical Services
           September 1, 2010    • Health Cost Management
           August 6, 2010       • Verity Medical
                                • Exigere
           June 30, 2010        • SOMA Medical Assessments
                                • Direct IME
                                • Network Medical Review
                                • Independent Medical Services
                                • 401 Diagnostics
           March 26, 2010       • Metro Medical Services
           March 15, 2010       • American Medical Bill Review
                                • Medical Evaluations
           December 31, 2009    • Abeton
                                • Medical Assurance Group
                                • MedNet I.M.S.
                                • Qualmed
                                • IME Operations of Physicians' Practice
           August 14, 2009      • The Evaluation Group
           August 4, 2009       • Benchmark Medical Consultants
           July 7, 2009         • IME Software Solutions
           May 21, 2009         • Florida Medical Specialists
                                • Marquis Medical Administrators
           April 17, 2009       • Ricwel
           July 14, 2008        • CFO Medical Services
                                • Crossland Medical Review Services
                                • Southwest Medical

Sources of Revenues and Expenses

Revenues

We derive revenue primarily from fees charged for independent medical examinations, peer and bill reviews and other related services, which include litigation support services, administrative support services and medical record retrieval services. Revenues are recognized at the time services have been performed and, if applicable, at the time the report is shipped to the end user. We expect revenue to continue to increase through acquisition and organic growth. Our revenue is derived from services performed in different geographic areas.

Certain agreements with customers in the U.K. include provisions whereby collection of the amounts billed are contingent on the favorable outcome of the claim. We have deemed these provisions to preclude revenue recognition at the time of sale, as collectability is not reasonably assured and the sales are contingent, and are deferring these revenues, net of estimated costs, until the case has been settled and the contingency has been resolved.

Costs of revenues

Costs of revenues are comprised of fees paid to members of our medical panel; other direct costs including transcription, film and medical record obtainment and transportation; and indirect costs including labor and overhead related to the generation of revenue. We expect these operationally driven costs to increase to support future revenue growth and as we continue to grow through acquisitions.

Selling, general and administrative expenses

Selling, general and administrative ("SGA") expenses consist primarily of expenses for administrative, human resource related, corporate information technology support, legal (primarily from transaction costs related to acquisitions), finance and accounting personnel, professional fees (primarily from transaction costs related to acquisitions), insurance and other corporate expenses. We expect that SGA expenses will increase as we continue to add personnel to support the growth of our business and pursue acquisition growth. In addition, we anticipate that we will incur additional personnel expenses, professional service fees, including audit and legal, investor relations, costs of compliance with securities laws and regulations, and higher director and officer insurance costs related to operating as a public company. As a result, we expect that our SGA expenses will continue to increase in the future but decrease as a percentage of revenue over time as our revenue increases.

Depreciation and amortization

Depreciation and amortization ("D&A") expense consists primarily of amortization of our finite lived intangible assets obtained through acquisitions completed to date and, to a lesser extent, depreciation of equipment and leasehold improvements. We expect that depreciation and amortization expense will increase as we continue our acquisition strategy.

                     EXAMWORKS GROUP, INC. AND SUBSIDIARIES
Results of Operations

The following table sets forth our consolidated statements of operations data
for each of the periods indicated (in thousands):

                                               For the three months ended June 30,             For the six months ended June 30,
                                                  2011                     2012                  2011                    2012
Revenues                                   $          106,742       $          127,777     $         173,330       $         251,515
Costs and expenses:
Costs of revenues                                      70,508                   84,223               114,077                 165,396
Selling, general and administrative
expenses                                               21,654                   27,729                35,982                  56,361
Depreciation and amortization                          11,475                   13,762                20,084                  27,787
Total costs and expenses                              103,637                  125,714               170,143                 249,544
Income from operations                                  3,105                    2,063                 3,187                   1,971
Interest and other expenses, net                        3,214                    6,174                 4,226                  12,747
Loss before income tax benefit                           (109 )                 (4,111 )              (1,039 )               (10,776 )
Income tax benefit                                        (37 )                   (804 )                (408 )                (3,146 )
Net loss                                   $              (72 )     $           (3,307 )   $            (631 )     $          (7,630 )

Net loss per share attributable to
common stockholders

Basic and diluted                          $                -       $            (0.10 )   $           (0.02 )     $           (0.22 )

Weighted average shares outstanding -
common stock - basic and diluted                   34,222,475               34,074,137            33,489,308              34,080,121

Other Financial Data:
Adjusted EBITDA (1)                        $           18,465       $           20,446     $          29,367       $          39,275

(1) Adjusted EBITDA is a non-GAAP measure that is described and reconciled to net loss in the next section and is not a substitute for the GAAP equivalent.

Adjusted EBITDA

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 Senior Secured Revolving 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.

                     EXAMWORKS GROUP, INC. AND SUBSIDIARIES

The following table presents a reconciliation of Adjusted EBITDA to net loss,
the most comparable GAAP measure, for each of the periods indicated (in
thousands):

                                          For the three months          For the six months
                                             ended June 30,               ended June 30,
Reconciliation of Adjusted EBITDA          2011            2012          2011          2012
Net loss                                $       (72 )    $ (3,307 )   $     (631 )   $ (7,630 )
Share-based compensation expense (i)          2,045         4,849          3,022        9,545
Depreciation and amortization expense        11,475        13,762         20,084       27,787
Acquisition-related transaction costs         1,460          (254 )        2,227         (109 )
Other non-recurring costs(ii)                   380            26            847           81
Interest and other expenses, net              3,214         6,174          4,226       12,747
Benefit for income taxes                        (37 )        (804 )         (408 )     (3,146 )
Adjusted EBITDA:                        $    18,465      $ 20,446     $   29,367     $ 39,275

(i) For the three and six months ended June 30, 2012, share-based compensation expense of $750,000 and $1.5 million is included in costs of revenues, respectively, and the remainder is included in SGA expenses. For the three and six months ended June 30, 2011, share-based compensation expense of $650,000 is included in costs of revenues and the remainder is included in SGA expenses.
(ii) Other non-recurring costs consist of severance and facility termination costs.

Comparison of the Three Months Ended June 30, 2012 and 2011

Revenues. Revenues were $127.8 million for the three months ended June 30, 2012 compared to $106.7 million for the three months ended June 30, 2011, an increase of $21.1 million, or 20%. The change in revenues over the 2011 period was due primarily to acquisitions completed in 2011.

Actual revenues were $127.8 million for the three months ended June 30, 2012 compared to pro forma revenues of $126.9 million for the three months ended June 30, 2011, an increase of 0.7%. The increase is due in part to volume growth in our U.K. businesses, offset by volume declines in our Canadian businesses. Pro forma revenues for the three months ended June 30, 2011 assumes that the 2011 acquisitions were completed on January 1, 2010.

Costs of revenues. Costs of revenues were $84.2 million for the three months ended June 30, 2012 compared to $70.5 million for the three months ended June 30, 2011, an increase of $13.7 million, or 19%. The change in cost of revenues over the 2011 period was due to acquisitions completed in 2011. Costs of revenues as a percentage of revenues improved slightly from 66.1% for the three months ended June 30, 2011 to 65.9% for the three months ended June 30, 2012.

Selling, general and administrative. SGA expenses were $27.7 million for the three months ended June 30, 2012 compared to $21.7 million for the three months ended June 30, 2011, an increase of $6.0 million, or 28%. The change in SGA expenses over 2011 was due primarily to acquisitions completed in 2011, with personnel expenses accounting for $3.7 million of this increase and the remainder resulting primarily from increases in rent, travel, phone, legal, insurance, sales and marketing, and other professional expenses, offset by a decrease in acquisition related transaction costs.

Depreciation and amortization. D&A expenses were $13.8 million for the three months ended June 30, 2012 compared to $11.5 million for the three months ended June 30, 2011, an increase of $2.3 million, or 20%. The increase in D&A expenses over the 2011 period was due primarily to additional amortization of finite-lived intangible and tangible assets related to acquisitions completed during 2011.

Interest and other expenses, net. Interest and other expenses, net were $6.2 million for the three months ended June 30, 2012 compared to $3.2 million for the three months ended June 30, 2011, an increase of approximately $3.0 million, or 92%. Interest and other expenses, net increased primarily due to interest expenses and deferred loan costs amortization associated with the $250.0 million Senior Unsecured Notes completed in July 2011.

Income tax benefit. Income tax benefit was $804,000 for the three months ended June 30, 2012 compared with $37,000 for the three months ended June 30, 2011, an increased benefit of $767,000 or 2,073%. Our effective income tax rate was 19.6% and 33.9% for the three months ended June 30, 2012 and 2011, respectively. The 2012 tax rate is impacted by limitations on foreign tax credits generated by our operations in the U.K.

Net loss. For the foregoing reasons, net loss was $3.3 million for the three months ended June 30, 2012 compared to $72,000 for the three months ended June 30, 2011, an increase of $3.2 million or 4,493%.

Comparison of the Six Months Ended June 30, 2012 and 2011

Revenues. Revenues were $251.5 million for the six months ended June 30, 2012 compared to $173.3 million for the six months ended June 30, 2011, an increase of $78.2 million, or 45%. The change in revenues over the 2011 period was due primarily to acquisitions completed in 2011, offset by slight declines in the IME service volume in our ExamWorks brand.

Actual revenues were $251.5 million for the six months ended June 30, 2012 compared to pro forma revenues of $248.1 million for the six months ended June 30, 2011, an increase of 1.4%. The increase is due in part to volume growth in our U.S. and U.K. businesses, offset by volume declines in our Canadian businesses. Pro forma revenues for the six months ended June 30, 2011 assumes that the 2011 acquisitions were completed on January 1, 2010.

Costs of revenues. Costs of revenues were $165.4 million for the six months ended June 30, 2012 compared to $114.1 million for the six months ended June 30, 2011, an increase of $51.3 million, or 45%. The change in cost of revenues over the 2011 period was due to acquisitions completed in 2011. Costs of revenues as a percentage of revenues remained consistent at 65.8% for the six months ended June 30, 2011 and 2012.

Selling, general and administrative. SGA expenses were $56.4 million for the six months ended June 30, 2012 compared to $36.0 million for the six months ended June 30, 2011, an increase of $20.4 million, or 57%. The change in SGA expenses over 2011 was due primarily to acquisitions completed in 2011, with personnel expenses accounting for $11.8 million of this increase and the remainder resulting primarily from increases in rent, travel, phone, legal, insurance, sales and marketing, and other professional expenses, offset by a decrease in acquisition related transaction costs.

Depreciation and amortization. D&A expenses were $27.8 million for the six months ended June 30, 2012 compared to $20.1 million for the six months ended June 30, 2011, an increase of $7.7 million, or 38%. The increase in D&A expenses over the 2011 period was due primarily to additional amortization of finite-lived intangible and tangible assets related to acquisitions completed during 2011.

Interest and other expenses, net. Interest and other expenses, net were $12.7 million for the six months ended June 30, 2012 compared to $4.2 million for the six months ended June 30, 2011, an increase of approximately $8.5 million, or 202%. Interest and other expenses, net increased primarily due to interest expenses and deferred loan costs amortization associated with the $250.0 million Senior Unsecured Notes completed in July 2011.

Income tax benefit. Income tax benefit was $3.1 million for the six months ended June 30, 2012 compared with $408,000 for the six months ended June 30, 2011 an increase of $2.7 million or 671%. Our effective income tax rate was 29.2% and 39.3% for the six months ended June 30, 2012 and 2011, respectively. The 2012 tax rate is impacted by limitations on foreign tax credits generated by our operations in the U.K.

Net loss. For the foregoing reasons, net loss was $7.6 million for the six months ended June 30, 2012 compared to $631,000 for the six months ended June 30, 2011, an increase of $7.0 million or 1,109%.

Liquidity and Capital Resources

Our principal capital requirements are to fund operations and acquisitions. To date, we have funded our capital needs from cash flow generated from operations, private placements of our common and preferred stock, our initial public offering ("IPO"), borrowings under the Senior Secured Revolving Credit Facility and the private offering of the Senior Unsecured Notes, as defined below. We have also funded our acquisition program with equity issuances to sellers and with seller debt financing. We expect that cash and cash equivalents, availability under our existing Senior Secured Revolving Credit Facility, and cash flow from operations will be sufficient to support our operations, planned capital expenditures and acquisitions for at least the next 12 months.

Although we believe that our current cash and cash equivalents and funds available under our Senior Secured Revolving Credit Facility will be sufficient to meet our working capital and acquisition plans for at least the next 12 months, we may need to raise additional funds through the issuance of equity or convertible debt securities or increase borrowings to fund acquisitions. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our existing stockholders will be reduced and these securities might have rights, preferences and privileges senior to those of our current stockholders. Additional financing may not be available or, if available, such financing may not be obtained on terms favorable to our stockholders and us.

Credit Facilities

Credit Facility

We entered into a credit agreement dated November 2, 2010 with Bank of America, N.A. (the "Senior Secured Revolving Credit Facility"). The Senior Secured Revolving Credit Facility initially consisted of a $180.0 million revolving credit facility. The Senior Secured Revolving Credit Facility is available to finance our acquisition program and working capital needs. On February 9, 2011, we exercised the accordion feature of the Senior Secured Revolving Credit Facility, increasing the facility from $180.0 million to $245.0 million.

On May 6, 2011, we increased and fully exercised the accordion features of the Senior Secured Revolving Credit Facility. The increase and exercise of the accordion feature increased the committed capacity of the credit facility by $55.0 million, from a total of $245.0 million to a total of $300.0 million.

On July 7, 2011, we entered into a second amendment to our Senior Secured Revolving Credit Facility (the "Second Amendment") which became effective simultaneously with the consummation of our private offering of the Senior Unsecured Notes. The Second Amendment amended the Senior Secured Revolving Credit Facility to, among other things, (i) extend the maturity date of the Senior Secured Revolving Credit Facility from November 2013 to July 2016; (ii) permit the issuance and sale of the Senior Unsecured Notes; (iii) replace the consolidated senior leverage ratio with a consolidated senior secured leverage ratio while permitting the maximum consolidated senior secured leverage ratio to be 3.00 to 1; (iv) permit our maximum consolidated leverage ratio to increase from 3.5 to 1 to 4.75 to 1; (v) reduce the borrowing cost; and (vi) allow us to complete acquisitions with a purchase price of up to $75.0 million (previously $50.0 million) without prior lender consent. The Second Amendment also reduced the aggregate revolving commitments under the Senior Secured Revolving Credit Facility by $37.5 million for a maximum commitment of $262.5 million, subject to our right to increase the aggregate revolving commitments by $37.5 million for a maximum commitment of $300.0 million, so long as we are not in default and the we satisfies certain other customary conditions.

On February 27, 2012, we entered into a third amendment to its Senior Secured Revolving Credit Facility (the "Third Amendment"). The Third Amendment amended the Senior Secured Revolving Credit Facility as to the definitions of consolidated fixed charges and consolidated fixed charge coverage ratio and does not permit the consolidated fixed charge coverage ratio as of the end of any . . .