ScanSoft Announces Third Quarter Results
Revenue up 66% over prior year
PEABODY, Mass., - November 8, 2000 - - ScanSoft, Inc. (Nasdaq: SSFT), a leading provider of digital imaging software, today announced financial results for the third quarter ended September 30, 2000.
Third Quarter Results
ScanSoft's total revenues for the third quarter of 2000 increased 66% to $13.6 million, compared to revenues of $8.2 million in the same period of 1999. Year over year revenue growth for the third quarter resulted from the benefits of the broader product portfolio associated with the Caere acquisition in ScanSoft's North American and European channels. ScanSoft reported a net loss of $0.3 million, or $0.01 per share compared to net income of $1.1 million or $0.04 per share on a diluted basis, for the third quarter of 1999, before amortization of intangible assets. Including the effect of this item, ScanSoft reported a net loss of $7.1 million, or $0.15 per share, compared to net income of $0.5 million, or $0.01 per share on a diluted basis, for the third quarter of 1999.
For the nine months ended September 30, 2000, reported revenues increased 52% to $35.0 million compared to revenues of $23.0 million in the same period of 1999. ScanSoft reported a net loss (before acquired in-process R&D, amortization of intangible assets, restructuring and other charges, and unusual items) of $8.0 million, or $0.20 per share, compared to net income of $2.0 million or $0.07 per diluted share for the corresponding period a year ago. Including the effects of acquired in-process R&D, amortization of intangible assets, restructuring and other charges, and unusual items, the Company reported a net loss of $47.0 million, or $1.15 per share, for the nine months ended September 30, 2000, compared to a net loss of $2.7 million or $0.11 per share on a diluted basis, for the corresponding period a year ago.
"Post merger synergies and accelerated cost reductions delivered $4.0 million in expense savings in the third quarter and allowed ScanSoft to return to near break-even earlier than expected," said Richard Palmer, chief financial officer of ScanSoft. "In addition, the improvement in operating performance and positive cash flow enabled the Company to reduce bank borrowing and payables resulting in a $2.7 million improvement in working capital. The Company ended the quarter with $4.9 million in cash."
Recent Activity
During the quarter ScanSoft entered into a license agreement with Hewlett Packard to bundle OmniForm® electronic forms software program with the HP ScanJet 6300C Professional Series scanner. OmniForm offers business and corporate users a full-featured forms solution that provides powerful tools for paper-to-web conversion, editing, designing, defining fillable fields, saving in a variety of formats and other important features. OmniForm employs the same OCR engine as the award-winning OmniPage Pro® to accurately convert printed words into electronic text and recognize hyperlinks to URLs and e-mail addresses. As a result, OmniForm is able to create an editable, intelligent electronic form that maintains the look and feel of the original paper form. OmniForm's business-focused functionality is a key component for Hewlett Packard to provide the best professional scanning solution to corporate end-users.
ScanSoft also introduced eOmniForm.com, an Internet forms hosting service which features leading-edge technology that publishes forms on the web with a click of a button. Designed to seamlessly integrate with OmniForm 4.01, the eOmniForm.com forms hosting solution eliminates the expensive, time-consuming work necessary to develop and maintain a data collection web site. In only the short period since eOmniForm.com's September introduction, over 400 registered customers have already begun using the service. eOmniForm.com has also received a number of favorable industry reviews including PC Magazine's Five-Dot award for excellence. For more information on the PC Magazine award please go to: www.nuance.com/products/omniform/experts.asp
Additionally, as announced in October, ScanSoft expanded its strategic relationship with Microsoft and are working together to deliver electronic paper solutions, such as document imaging, to customers around the world. As part of the strategic relationship, Microsoft has licensed the image segmentation, compression and viewing technology from ScanSoft. ScanSoft's advanced image processing technology outputs to the emerging industry standard file format known as TIFF FX, which was designed to facilitate the storage and delivery of such documents. Microsoft chose ScanSoft's Image Processing Technology because of its unique ability to segment a scanned image and compress that image into a high-resolution format; and ScanSoft's technology offered the best of clean, crisp graphics and clear text on a scanned image. The licensing of ScanSoft's Image Processing Technology was Microsoft's next step toward delivering greater readability of electronic documents for their customers. The partnership with Microsoft provides the foundation for ScanSoft to extend TIFF FX to other devices such as PDA's, eBook applications and web-based services.
Comments on the Third Quarter
"I am encouraged by our success in accelerating cost savings," said Paul Ricci, chairman and CEO of ScanSoft. "As we look to the fourth quarter, the full measure of our cost reduction efforts will continue to improve our profitability. We anticipate that revenue increases will be driven by stronger North American channel revenue, recovery in our German market share and an aggressive rollout of PaperPort® 7.0 in the major Western European markets. The Company expects sequential revenue growth in the fourth quarter to be at least 10%, with an operating profit before amortization of intangible assets."
Investor Call
ScanSoft will hold an investor conference call tomorrow to discuss the Company's results at 11:00 a.m. Eastern Time. To listen to the call, please call (913) 981-5542 approximately five minutes prior to the start of the call. For those who are not available to listen to the live conference call, a replay will be available via telephone starting approximately at 2:00 p.m. Eastern Time on November 9th until 11:30 p.m. Eastern Time on November 14th. The access number for the replay is (888) 203-1112 or (719) 457-0820; confirmation number 417449.
About ScanSoft, Inc.
Headquartered in Peabody, MA, ScanSoft, Inc. (Nasdaq: SSFT) is a leading developer of digital imaging software that enables users to leverage the power of their scanners, digital cameras and other electronic devices. ScanSoft's award-winning product line Pagis Pro, TextBridge Pro, PaperPort Deluxe, Paper Converter, OmniPage Pro, OmniForm, eOmniForm, OmniPage Pro Scan Suite Plus, OmniPage Web, Developer's Kit 2000, Kai's PhotoSoap2, Kai's SuperGoo, Kai's PowerShow, and PhotoFactory - enables users to capture, recognize, edit, manage and share documents and photos electronically by taking advantage of ScanSoft's cutting-edge technology.
ScanSoft software is sold and marketed worldwide through retail, dealer and OEM channels and the Internet, capturing the consumer, small office/home office (SOHO) and corporate markets. For additional information, visit www.nuance.com.
Except for the historical information contained herein, this press release includes forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934. These statements include the Company's expectation that sequential revenue growth in the fourth quarter to be at least 10%, with an operating profit before amortization of intangible assets. These statements are based on ScanSoft's current expectations and estimates as to prospective events and circumstances which may or may not be in ScanSoft's control and as to which there can be no firm assurances given. These forward-looking statements are subject to risks and uncertainties and there can be no assurance that any of these forward-looking statements may prove to be correct and actual results may differ materially. These risks and uncertainties include, but are not limited to, our ability to effectively manage diverse and geographically dispersed operations, difficulties with integrating product plans, schedules and resources, difficulties in implementing the planned cost reductions, potential that the information and estimates used to predict the cost savings were not accurate, market acceptance of ScanSoft's products, competitive products, pricing pressures, maintenance of distribution channels, and other risks detailed from time to time in ScanSoft's SEC reports. ScanSoft disclaims any intent or obligation to update these forward-looking statements.
ScanSoft, TextBridge, Pagis Pro, PaperPort Deluxe, Paper Converter, OmniPage, OmniForm, eOmniForm, Developer's Kit 2000, PageKeeper, PhotoFactory, Kai's PhotoSoap2, Kai's Power Show, and Kai's SuperGoo are registered trademarks or trademarks of ScanSoft, Inc. All other trademarks and trade names are hereby recognized and may be registered to their respective holders.
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