Transcend Services (TRCR)

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Revenue increased $3.2 million, or 27%, to $14.9 million in the quarter ended March 31, 2009 compared to revenue of $11.7 million in the same period in 2008. The $3.2 million increase in revenue is attributable to revenue from new customers of $1.5 million, revenue contributed by the acquisition of Deventure of $1.2 million and increased revenue from existing customers of $0.7 million, offset by a decrease in revenue of $0.2 million from customers who terminated their contracts since the first quarter of 2008.

Direct costs increased $2.0 million, or 27%, to $9.6 million in the quarter ended March 31, 2009 compared to $7.6 million in the same period in 2008. Direct costs include costs attributable to compensation for transcriptionists, recruiting, management, customer service, technical support for operations, fees paid for speech recognition processing, telephone expenses and

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implementation of transcription services. Transcription compensation is a variable cost based on lines transcribed or edited multiplied by specified per-line pay rates that vary by individual as well as type of work. Speech recognition processing is a variable cost based on the minutes of dictation processed. All other direct costs referred to above are semi-variable production infrastructure costs that periodically change in anticipation of or in response to the overall level of production activity.

As a percentage of revenue, direct costs decreased to 64% in the quarter ended March 31, 2009 from 65% in the same period of 2007. The decrease in costs as a percentage of revenue was due primarily to the cost savings that resulted from the increased use of speech recognition technology integrated into the Company’s BeyondTXT platform and the use of offshore transcription resources, partially offset by higher direct costs as a percentage of revenue for DeVenture in the first quarter of 2009.

Gross profit increased $1.2 million or 29%, to $5.3 million in the quarter ended March 31, 2009 compared to $4.2 million in the same period in 2008. Gross profit as a percentage of revenue increased to 36% in the quarter ended March 31, 2009 compared to 35% in the same period in 2008 (see direct costs discussion).

Sales and marketing expenses increased $219,000, or 116%, to $407,000 in the quarter ended March 31, 2009 compared to $188,000 in the same period of 2008. Sales and marketing expenses as a percentage of revenue were 3% and 2% in the quarters ended March 31, 2009 and 2008, respectively. The increase in sales and marketing expense was primarily due to a strategic decision to increase the size of the sales force in 2008, resulting in the hiring of additional sales resources.

Research and development expenses increased $102,000, or 38%, to $369,000 in the quarter ended March 31, 2009 compared to $267,000 in the same period in 2008. Research and development expenses as a percentage of revenue were 2% in both the quarters ended March 31, 2009 and 2008, respectively. The increase was primarily due to an increase in consulting services and compensation-related expenses.

General and administrative expenses increased $429,000, or 32%, to $1,766,000 in the quarter ended March 31, 2009 compared to $1,337,000 in the same period in 2008. General and administrative expenses for DeVenture contributed $118,000 of the increase. Transcend incurred $65,000 of transaction costs related to acquisitions in the first quarter of 2009. The balance of the increase was due primarily to increased audit fees, employee benefits costs, and stock-based compensation expense. General and administrative expenses as a percentage of revenue were 12% and 11% in the quarters ended March 31, 2009 and March 31, 2008, respectively.

Depreciation and amortization expense was $255,000 in the quarter ended March 31, 2009 compared to $196,000 in the same period in 2008. Amortization of intangible assets resulting from the acquisition of DeVenture contributed $28,000 of the increase.

Interest and other expenses increased $24,000 to $31,000 in the quarter ended March 31, 2009 compared to $7,000 in the same period in 2008. The increase is due primarily to lower interest income on cash, related to the recent changes in the credit environment.

The income tax provision increased $138,000 to $937,000 for the three months ended March 31, 2009 compared to $799,000 in the same period in 2008. The provision increased primarily due to higher pre-tax income.