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Exam Group IPO -- rollup, 149x annualized earnings. Some think it's 'hot"

|Includes: CorVel Corp. (CRVL)

ExamWorks Group (NYSE:EXAM) $175mm IPO
$517mm market cap at price mid-point of $17, Scheduled for Thurs, Oct 28, 2010

EXAM Valuation Metrics

. Rollup by acquisition, now has 4% of the Independent Medical Exam market
. Rolling out software system acquired in June 2009, designed to cut costs & expand services
. Internal growth of 17% and 14% respectively for the year ended Dec 31, 2009 and the 9 months ended Sept 30
. At 149 times annualized earnings for the 9 months ended Sept 30, 2010 seems expensive based on internal growth rates

. Provides independent medical exam (IME’s) and related services which include, litigation support services, administrative support services and medical record retrieval services
. Through a medical panel of 13,500 independently contracted, credentialed physicians and other medical providers.
. Currently operates out of 26 locations servicing all 50 U.S. states, Canada and the United Kingdom.

. Are primarily insurance companies, law firms, TPAs (Third-Party Claim Administrators), government agencies and state funds
. Clients include property and casualty insurance carriers, law firms, third-party claim administrators, and government agencies 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.

EXAM believes the IME industry represented sales volumes in 2009 of $4 billion in the U.S., $0.6 billion in Canada and $0.5 billion in the United Kingdom
. EXAM estimates that its revenues represent only 4% of the markets serves, and believes that the remainder of the market is serviced by local and regional companies
EXAM believes that it is the largest provider of IME services in the U.S. based on revenues, and the only provider with operations in both Canada and the United Kingdom.
. As a result, EXAM believes this fragmented industry provides many opportunities for acquisitions

In the year ended December 31, 2009 and the nine months ended September 30, 2010, EXAM’s revenues from existing businesses grew by 17% and 14%, respectively.

. In July 2009, EXAM acquired the leading platform software solution for the IME industry and are in the process of deploying this technology throughout the entire company.
. EXA is now able to customize specific software initiatives to meet clients’ needs and to support our strategic objectives.
. With IME*Centric, EXAM provides clients with access to EXAM’s HIPAA-compliant web portal and computing network that automates a host of tasks that can otherwise consume a significant amount of time for both staff and clients.

. From July 2008 through October 1, 2010 acquired 27 IME businesses
. On June 30, 2010, acquired substantially all of the assets of SOMA Medical Assessments Inc. and Direct IME, which provide IME and certain medical review services in Canada.
. On September 7, 2010, acquired the entire issued capital of UK Independent Medical Services Limited, which provides IME services in the United Kingdom.
. Intends to continue to expand internationally and operate in select foreign markets.

The IME industry is highly fragmented and competitive.
. Primary competitors in the IME industry include companies and individual physicians that specialize in one or more services similar to those offered by EXAM on a local or regional basis as well as insurance companies and other organizations which have established an in-house capability of performing such services.
. It is also possible that EXAM clients may establish the in-house capability of performing certain services offered by EXAM.
. Also compete with national, regional and local firms specializing in case management, medical records reviews and other services EXAM provides.

ExamWorks was formed on April 27, 2007 for the purpose of acquiring companies in the IME industry and is the successor company.

$119mm from sale of 7.8mm shares.  Shareholders intend on sellling 2.5mm shares
. $100mm to repay debt
. $19mm to fund an acquisition program and for working capital and other general corporate purposes.

EXAM Valuation Metrics

Disclosure: none