Exhibit 99.1

 

Transcend Services, Inc.

 

Press Release Dated January 25, 2006

 

               FOR IMMEDIATE RELEASE
          Contact:    Larry Gerdes, CEO, larry.gerdes@trcr.com
               404-364-8000

 

January 25, 2006

(BW) (TRANSCEND SERVICES, INC.)(TRCR)

 

TRANSCEND REPORTS AN 87% INCREASE IN REVENUE

AND A NET LOSS OF $0.06 PER SHARE INCLUDING UNUSUAL ITEMS

 

Atlanta, Georgia TRANSCEND SERVICES, INC. (TRCR/Nasdaq Market) today announced its results for the three months and year ended December 31, 2005.

 

For the three months ended December 31, 2005, Transcend reported revenue of $7,304,000, which represents an 87% increase over the comparable prior year quarter. Gross profit as a percentage of revenue decreased to 14% from 29%. The net loss for the fourth quarter of 2005 was $444,000, or $0.06 per share including three unusual items that totaled $276,000. This compares to net income of $82,000, or $0.01 per share, for the fourth quarter of 2004.

 

Most of the revenue increase of $3,403,000 between the fourth quarters of 2005 and 2004 is attributable to the acquisition of Medical Dictation, Inc. (“MDI”) on January 31, 2005. MDI contributed revenue of $2,933,000 to the fourth quarter of 2005. Excluding MDI, the Company’s revenue increased $470,000 or 12% in the fourth quarter of 2005 compared to the fourth quarter of 2004.

 

When compared to revenue of $6,654,000 in the third quarter of 2005, revenue increased $650,000 in the fourth quarter of 2005 for the following reasons: (1) an increase in transcription revenue of $597,000 related to new customers installed during 2005; (2) an increase in transcription revenue of $134,000 from existing customers; (3) a decrease in transcription revenue of $103,000 related to customers which have terminated their service contracts; and (4) an increase in other revenue of $22,000.

 

The Company has signed, but uninstalled, contracts that represent estimated first-year revenue of $920,000 as of December 31, 2005 as well as contracts which have either been acquired or awarded but not yet signed, representing estimated first-year revenue of $1,255,000 as of January 25, 2006. The Company expects to begin generating revenue from all of these during the next several months.

 

The deterioration in gross profit as a percentage of revenue from 29% in the fourth quarter of 2004 to 14% in the fourth quarter of 2005 is attributable to the following: (1) competitive pricing pressure from both new and existing customers; (2) the addition of MDI, which historically has had lower gross margins; (3) costs associated with the restructuring of operations to improve quality and customer retention; (4) the cost of recruiting and training new transcriptionists and transitioning existing transcriptionists to become speech recognition editors; and (5) a one-time reserve related to a judgment against the company for sales taxes on equipment used for transcription purchased in 2001–2003.


The following information was filed by Transcend Services Inc (TRCR) on Wednesday, January 25, 2006 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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