Trading Update – 10 January 2012

10 January 2012 – Craneware plc (AIM: CRW.L), the market leader in automated revenue integrity solutions for the US healthcare market provides an update on trading for the six month period ended 31 December 2011 and confirms the opportunity pipeline supports full year market expectations. The Company also announces a new channel partner agreement.

Trading Update

Overall the Group expects to report an increase in revenues in the first half of the year of over 12% (H1 FY11:$16.6m) and adjusted EBITDA¹ in line with the corresponding period last year (H1 FY11:$4.6m). These results include, for the first time, a full six months contribution from Craneware InSight, Inc. Excluding Craneware InSight, adjusted EBITDA for the period would have increased by over 15%.

Despite continued development of opportunities and growth in the sales pipeline during the period, we have seen sales cycles extend for all the Group’s product families. The Board believes this is due to an unexpectedly high percentage of healthcare providers choosing to focus on achieving the 31 December 2011 deadline for the first Electronic Health Records Incentive Payments. With this first deadline now having passed, and far fewer US hospitals remaining to apply in 2012, the Board expects sales cycles to return to normal lengths. As pressure mounts on all US hospitals to rectify the underlying causes of the Recovery Audit Contractors’ findings, thereby avoiding further fines and penalties, the Board further believes the focus of hospitals will once again return to Revenue Integrity Solutions which provide the underlying return on Invested Capital for the Electronic Health Records.

Craneware InSight

Craneware InSight, the wholly owned subsidiary of Craneware plc acquired on 17 February 2011 has had mixed results during the six months to 31 December 2011. Despite achieving initial new sales including cross selling into the existing Craneware customer base, revenue and adjusted EBITDA¹ are behind the Board’s expectations. A significant factor to this is the cessation of a contract administered through a third party, resulting from that third party losing its contract with the end hospital network. The Company is currently in discussions with the new administering agents of the hospital network to replace these contracts. However, this has negatively impacted Group adjusted EBITDA1 by approximately $0.7m during the period and is currently subject to legal review by Craneware as it examines its options to enforce its contractual rights and remedies.

The integration of Craneware InSight is well advanced with consistent branding across the organisation, new amalgamated products in development and significant sales pipeline opportunities for both product sets into the respective customer bases.

Contract win

The Group has continued to progress a number of large channel partner agreements during the period, with one signed at the end of the period. This agreement includes a significant minimum payment for software licenses to be paid to Craneware for each of the next three years. The channel partner will be re-packaging and re-selling Craneware proprietary technology and data to hospitals in a non-competitive parallel segment to that in which Craneware operates. Due to the nature of this specific agreement it has not impacted these reported results, with all associated revenues being recognised in the second half of this fiscal year and beyond.

First in KLAS

In December 2011, in the “2011 Best in KLAS Awards: Software & Services” report from the prestigious U.S. IT healthcare industry research group, KLAS, Craneware’s Bill Analyzer was named as a new KLAS revenue cycle market category leader and Chargemaster Toolkit® was named in its category, number 1 for the sixth consecutive year . This research is based entirely on user feedback and demonstrates the continued high quality of Craneware’s core product offerings.

Outlook

Looking ahead to the second half, in addition to our substantial sales pipeline, we are making significant progress with a number of large channel partner opportunities. With these channel partner opportunities we are able, where appropriate, to substantially complete the associated implementation and professional services engagements in advance, as proof of concept. This results in the recognition of the associated revenues on contract signing, in line with our normal policy of recognising professional services revenues based on their percentage completion. This combined with the overall size of the individual agreements themselves, provides the Board with confidence in its ability to meet market expectations for both revenue and adjusted EBITDA for the full year.

Craneware will be announcing its Interim Results on Tuesday 28 February 2012.

Keith Neilson, CEO of Craneware plc commented:

“Whilst this has been a challenging trading period for the Group, the strength of our product suite, as demonstrated by our number 1 positioning in the KLAS reports, means we are well placed to help our customers deal with their increasing fiscal and regulatory pressures as fines and recoveries from the Recovery Audit Contractors appear on their public financial statements for the first time. This combined with the size of our opportunity pipeline means we continue to look to the future with confidence.”

1. Adjusted EBITDA is profit before share based payments, depreciation, amortization and acquisition related costs.

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About Craneware

Founded in 1999, Craneware has headquarters in Edinburgh, Scotland with offices in Atlanta and Arizona, employing over 200 staff. Craneware is the leader in automated revenue integrity solutions that improve financial performance and mitigate risk for healthcare organisations. Craneware’s market-driven, annuity SaaS solutions help hospitals and other healthcare providers more effectively price, charge and code for services and supplies associated with patient care. These optimise reimbursement, increase operational efficiency and minimize compliance risk. By partnering with Craneware, clients achieve the visibility required to identify, address and prevent revenue leakage. To learn more, visit craneware.com.