Conmed Healthcare Management, Inc. Announces 41% Revenue Increase To Record $7.8 Million for First Quarter 2008

Business Wire,  May 14, 2008  

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HANOVER, Md. -- Conmed Healthcare Management, Inc. (OTCBB:CMHM), a leading full service provider of correctional facility healthcare services to county detention centers, today announced financial results for its first quarter ended March 31, 2008.

Highlights*

* First quarter 2008 revenues increased 41% to $7.8 million from $5.5 million in the year-ago period.

* Announced new multi-year contract valued at $18.5 million with Chesapeake, Virginia, Sheriff's Office Jail. The contract became effective April 16, 2008.

* Announced a three-year, full-service contract including the juvenile detention center with Douglas County, Oregon for an approximate $2.4 million total value in April 2008. The contract became effective May 1, 2008.

* The 12 month revenue run rate, based on the current contracts, now exceeds $36 million

Financial Results*

Pro forma net revenue for the three months ended March 31, 2008 increased $2.3 million, or 41%, to $7.8 million from $5.5 million in last year's comparable period, based on the proforma operating statement provided below, was 3% higher compared to the fiscal fourth quarter of 2007. The higher revenue resulted from the addition of new contracts with Jackson County, Oregon; Henrico County, Virginia; Kitsap County, Washington and Wicomico County, Maryland in 2007 plus the revenue generated from the contracts purchased from EMDC in February, 2008. Together, these contracts accounted for approximately $1.6 million, or 68.3%, of the increase in revenue for the period. Additional revenue improvement resulted from expansion of services with existing contacts and certain contractual price increases.

"We continued to make investments in our infrastructure that will enable us to sustain our current growth trajectory," said Richard Turner, President and Chief Executive Officer of Conmed Healthcare Management. "Our business fundamentals are intact and we are satisfied with the traction we've achieved to date. We increased quarterly revenues 41% year-over-year and significantly increased our bookings. Our business continues to perform in down markets, as inmate populations in the facilities we serve do not correspond with the macro economy. We believe our current pipeline for new business is as promising as ever."

Dr. Turner concluded, "We are actively pursuing expansion to correctional facilities in other states that fit our profile and are confident that the infrastructure and resources we are adding will allow us to drive additional revenue going forward and will position us well as we implement our strategies. We believe our financial model can support significant revenue growth without significant investment in additional infrastructure. We look forward to an exciting future of continued execution of our business plan and building long-term shareholder value."

Total healthcare expenses for the period ending March 31, 2008 were $6.4 million compared to $4.6 million in the year-ago period. The increase in spending for salaries and employee benefits is due to the addition of new healthcare employees required to support the increased staffing requirements resulting primarily from new medical service contracts and expansions in some existing agreements. The increased spending for medical expenses in absolute dollars reflects increases for medical services both in and out of the facility plus increased expenditures for pharmacy and radiology services. The reduction in spending as a percentage of revenue results from the favorable mix factor generated from the new staffing-only contracts in 2007 and was partially offset by increased spending for hospitalization and other out-of-facility inmate medical services. In addition, the Jackson County, Oregon contract, which started in May 2007 and provides for full medical services, plus the addition of pharmacy services in Yakima County, Washington in September 2007, increased the spending in absolute dollars.

Gross profit for the first quarter of 2008 was $1.5 million, representing an 18.8% gross margin, compared to $982,000 and 17.7%, respectively, in last year's same period.

Total operating expenses were $2.1 million for the quarter ended March 31, 2008 compared to $1.5 million for the year-ago period. Selling, general and administrative expenses for the first quarter were $1.6 million or 20.3% of revenue compared to $1.0 million or 17.6% of revenue for the year-ago quarter. The increased expenditures of $0.6 million reflects key new management hire, as well as expenses associated with the relocation and expansion of the Company's corporate office from La Plata, Maryland to Hanover, Maryland in February 2008. The increased spending also reflects higher professional service fees, business development, and accounting fees related to the year-end audit that were not incurred in 2007.

Conmed's operating loss was $616,000 in the first quarter compared to an operating loss of $479,000 in the first quarter last year. The net loss was $552,000 or $(0.05) per basic and fully diluted share (based on approximately 12.0 million shares) compared to a pro-forma loss of $296,000 last year. Conmed was a private Company prior to the acquisition in January last year, and as such, earnings per share information is unavailable.