INNOSERV TECHNOLOGIES, INC. Reports Third Quarter Results

Business Wire, March 17, 1998

ARLINGTON, Texas--(BW HealthWire)--March 17, 1998--INNOSERV TECHNOLOGIES, INC.(R) (Nasdaq:ISER) today reported financial results for the third quarter ended January 31, 1998.

The net loss for the quarter was $845,000, or $.26 per share of common stock, on revenues of $9,210,000 compared with net income of $36,000, or $.01 per share of common stock, on revenues of $10,231,000 in the third quarter of fiscal 1997. For the first nine months of fiscal 1998 the net loss was $1,564,000, or $.35 per share of common stock, on revenues of $27,561,000 compared with a net loss of $1,047,000, or $.21 per share of common stock, on revenues of $32,703,000 for the first nine months of fiscal 1997.

Included in the third quarter of fiscal 1997 were revenues of $1,260,000 from Advanced Imaging Technologies, Inc. ("AIT"), a wholly-owned subsidiary of INNOSERV. Substantially all of the revenue producing assets of AIT were sold to a third party in March 1997. Excluding the revenues of AIT, revenues from on-going operations increased $239,000, or three percent, due primarily to gains in revenues from asset management and multivendor services, partially offset by the continued decline in revenues from single-site maintenance services.

The gross profit margin on the on-going revenues declined from 21 percent in the third quarter of fiscal 1997 to 10 percent in the same period of fiscal 1998. The decline was attributed to a higher failure rate of equipment under service agreements than previously experienced, an increasing utilization of other service providers to supplement INNOSERV's own staff of field engineers to service equipment, a greater need to source repair parts from third parties rather than utilizing INNOSERV's existing inventory of spare parts, and lower gross margins generally on asset management contracts awarded to INNOSERV during the last year due to competitive pricing in the marketplace.

Michael Puls, president and chief executive officer of INNOSERV Technologies, Inc., commented, "In order to address the decline in gross margin experienced in the quarter, we continue to implement plans to reorganize our operations and to develop means to more cost effectively provide the services required by our customers, particularly as it concerns the use of other service providers and the sourcing of spare parts and other material to repair customers' equipment, and to expand our revenue base in instances where we can do so profitably. At the same time, we are investigating alternative strategies to deliver maintenance and repair services while capitalizing on our core competencies."

Some of the statements in this press release are not based on historical fact and are forward-looking statements, which involve numerous risks and uncertainties. INNOSERV's future results of operations and financial condition may differ materially from these expectations due to many factors including INNOSERV's ability to attract and retain maintenance service contracts, INNOSERV's ability to implement its operating plans to reduce costs while providing an increasing array of services to its customers, competitive and regulatory conditions in the healthcare industry generally, and other factors, many of which are beyond the control of INNOSERV.

INNOSERV, through its various subsidiaries, provides comprehensive asset management systems and services, multi-vendor maintenance and repair services and other specialized services to radiology, cardiology, biomedical and laboratory departments of hospitals and other healthcare providers. Additional information about INNOSERV is available on its web site at www.innoserv.com. -0-

FINANCIAL HIGHLIGHTS

                                              Three Months Ended
                                           01/31/98        01/31/97
                                           ------------------------

Revenues                               $  9,210,000    $ 10,231,000
Income (loss) before taxes                 (845,000)         36,000
Provision for income taxes                       --              --
Net income (loss)                      $   (845,000)   $     36,000
Net income (loss) per share -- basic
 and diluted                           $       (.26)   $        .01

Weighted average shares -- basic and
 diluted                                  3,274,000       5,036,000


                                              Nine Months Ended
                                           01/31/98        01/31/97
                                           ------------------------


Revenues                               $ 27,561,000    $ 32,703,000
Income (loss) before taxes               (1,564,000)     (1,047,000)
Provision for income taxes                       --              --
Net income (loss)                      $ (1,564,000)   $ (1,047,000)
Net income (loss) per share -- basic
 and diluted                           $       (.35)   $       (.21)

Weighted average shares -- basic and
 diluted                                  4,448,000       5,036,000