MERGE TECHNOLOGIES INCORPORATED ANNOUNCES RECORD SECOND QUARTER EARNINGS - Revenues grow 54%; Company completes strategic acquisition

Milwaukee, WI, July 30, 2003 - Merge Technologies Incorporated (NASDAQ:MRGE), d.b.a Merge eFilm, today announced financial results for the quarter and six months ended June 30, 2003.

Revenues for the quarter ended June 30, 2003 were $6,434,000, an increase of 54% over revenues of $4,183,000 for the quarter ended June 30, 2002. Revenues were $12,552,000 for the six months ended June 30, 2003, an increase of 44% over revenues of $8,718,000 for the six months ended June 30, 2002.

Net income for the quarter ended June 30, 2003, was $1,400,000, an increase of 133% over net income of $600,000 for the quarter ended June 30, 2002. Basic EPS was $0.13 and diluted EPS was $0.12 for the quarter ended June 30, 2003 compared to basic EPS of $0.07 and diluted EPS of $0.06 for the quarter ended June 30, 2002.

Net income for the six months ended June 30, 2003 was $2,716,000, an increase of 108% over net income of $1,304,000 for the six months ended June 30, 2002. Basic EPS was $0.25 and diluted EPS was $0.23 for the six months ended June 30, 2003 compared to basic EPS of $0.16 and diluted EPS of $0.12 for the six months ended June 30, 2002.

Gross margins increased to 75% for the quarter ended June 30, 2003, from 61% for the quarter ended June 30, 2002. Gross margins for the six months ended June 30, 2003 increased to 71% compared to 61% for the six months ended June 30, 2002. Cash at June 30, 2003 increased 107% to $9,150,000 from $4,411,000 at December 31, 2002.

Analysis of Results:
"I am pleased to report that we successfully completed several strategic, financial and operational objectives during the second quarter," said Richard A. Linden, President and CEO. "Our performance continues to demonstrate the market's acceptance of our product and service offering and our ability to successfully execute our strategy. We demonstrated a strong focus on operational execution and a continued alignment of our strategy within our target market, where the value of our expanded RIS/PACS product and service offering is evident.

"Operationally, we strengthened our direct sales pipeline and VAR partnerships through a steady combination of additional trade show exposure, adding sales and pre-sales resources and growing our VAR partnership presence. We continue to be pleased with the steady growth in our full FUSION Solution PACS customer base, along with the market presence of our eFilm workstation product, which has now reached over 34,000 users. We are a market leader in installations of desktop diagnostic imaging software, and continue to see that leadership position translate into full FUSION solution sales.

"We continued to make steady progress with respect to the innovation of our FUSION and eFilm Workstation software products. New releases of our FUSION Server and eFilm Workstation entered clinical trials at several customer sites during the second quarter. These new releases bring added functionality and performance that is expected to enhance our competitive position in the marketplace. We continue to meet our product innovation goal of releasing new products or upgrades every three to four months and accelerating the cycle time from new product design to commercialization," said Linden.

"In addition to strong financial and operational performance, we successfully planned and closed two important transactions consistent with our strategy for growth. Our acquisition of RIS Logic, which closed in early July, has positioned us to accelerate our previously stated strategy as a global healthcare software and services company focused on providing our customers an integrated RIS/PACS solution. Combining RIS Logic's Radiology Information System (RIS) with our FUSION PACS (Picture Archiving Communication System) solution fully automates the operation of imaging services, achieving a filmless and paperless workflow environment. This customer-driven solution allows Merge eFilm to be the single source provider for our customers' mission-critical workflow needs, supported by comprehensive professional services. The integration plan is in progress, with an initial focus on marketing, sales and RIS/PACS product integration. Through our combined direct sales force of fifteen, we anticipate incremental sales through cross selling and joint RIS/PACS opportunities as demonstrated with CDI, a national outpatient imaging center company, which is now a joint Merge eFilm and RIS Logic customer. Beyond the strategy, target market and product synergies shared by the two companies, the combined organization will benefit from the addition of several experienced RIS Logic executives, including Dan Quigg, President RIS Logic Division, who brings extensive experience in developing and leading software and professional service companies.

"In addition, we successfully moved to NASDAQ's National Market and completed a common stock private placement in July, to add approximately $8 million in cash to our strong balance sheet. These accomplishments continue to expand our institutional investor base and provide the Company with the financial strength and flexibility to continue our strategic growth initiatives," said Linden.

Guidance:
The Company anticipates market conditions to remain supportive of its software-centric product and service offerings, which are focused primarily on small to medium sized hospitals and imaging centers. The target market's receptiveness to the expanded RIS/PACS offering with the acquisition of RIS Logic reinforces the Company's belief regarding continued healthcare IT expenditures on integrated RIS/PACS solutions. The Company's year-to-date performance combined with the recent acquisition of RIS Logic positions the Company to increase its guidance for 2003 revenues to the range of $29 million to $30 million, with year-over-year growth of approximately 38% to 40%. Furthermore, the Company is increasing its estimate for diluted EPS on an after-tax basis to a range of $0.49 to $0.52, excluding charges associated with the acquisition. The Company expects the RIS Logic acquisition to be earnings neutral, excluding charges associated with the acquisition, for the remainder of 2003 and accretive in 2004 and beyond.

Click Here for Q2-2003 Financials

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Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based on a number of factors, including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, changing economic conditions and other risk factors detailed in filings with the Securities and Exchange Commission.

Press Contact
Attn: Beth Frost-Johnson Merge Healthcare 6737 West Washington St. Suite 2250 Milwaukee, WI 53214		Phone: 1-(414) 977-4254
Email Address: marketing@merge.com
Except for the historical information herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. When used in this press release, the words “will,” “believes,” “intends,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those expressed in, or implied by, the forward-looking statements based on a number of factors, including, but not limited to, the uncertainty created by, the adverse impact on relationships with customers, potential customers, suppliers and investors potentially resulting from, and other risks associated with, the changes in the Company’s senior management; costs, risks and effects of the investigation by the Audit Committee of the Board of Directors; the impact of the restatement of financial statements of the Company and other actions that may be taken or required as a result of such restatement; the Company's inability to timely file reports with the Securities and Exchange Commission; risks associated with the Company's inability to meet the requirements of The NASDAQ Stock Market for continued listing, including possible delisting; costs, risks and effects of legal proceedings and investigations, including the informal, non-public inquiry being conducted by the Securities and Exchange Commission and class action, derivative, and other lawsuits; risks in product and technology development, market acceptance of new products and continuing product demand, the impact of competitive products and pricing, ability to integrate acquisitions, changing economic conditions, credit and payment risks associated with end-user sales, dependence on major customers, dependence on key personnel, and other risk factors detailed in the Company’s filings with the Securities and Exchange Commission. Except as expressly required by the federal securities laws, the Company undertakes no obligation to update such factors or to publicly announce the results of any of the forward-looking statements contained herein to reflect future events, developments, or changed circumstances, or for any other reason.