ScanSoft Announces Record Quarterly Revenue and Earnings
Revenue Up 68% Year-Over-Year; Company Confirms Full-Year Earnings Guidance
PEABODY, Mass., October 30, 2002 - ScanSoft, Inc. (Nasdaq: SSFT), a leading supplier of digital imaging, speech and language solutions, today announced financial results for the third quarter ended September 30, 2002.
ScanSoft reported third quarter 2002 revenue of $28.2 million, a 68 percent increase over third quarter 2001 revenue of $16.8 million. Income from operations before amortization of acquisition-related intangibles for the third quarter of 2002 was $5.4 million, a $2.3 million increase from $3.1 million reported for the third quarter of 2001. Net income before amortization of acquisition-related intangibles was $5.0 million, or $0.07 per diluted share, compared to $3.6 million, or $0.06 per diluted share, in the third quarter of 2001. After including amortization of acquisition-related intangibles, ScanSoft reported net income of $2.8 million, or $0.04 per diluted share, in the third quarter of 2002, compared with a net loss of $3.2 million, or $0.06 per share, for the third quarter of 2001.
For the first nine months of 2002, ScanSoft reported total revenue of $78.2 million, up 77 percent from revenue of $44.1 million in the first nine months of 2001. Income from operations before amortization of acquisition-related intangibles was $11.9 million for the first nine months of 2002, compared with $6.0 million in the same period of 2001. Net income before amortization of acquisition-related intangibles and restructuring charges was $11.9 million, or $0.16 per diluted share, versus $6.0 million, or $0.11 per diluted share, for the nine months ended September 30, 2001. After including amortization of acquisition-related intangibles and restructuring charges, ScanSoft reported net income of $1.9 million, or $0.03 per share, in the first nine months of 2002 compared with a net loss of $14.5 million, or $0.30 per share, in the same period of 2001.
Comments on the Third Quarter
"ScanSoft's revenue and earnings in the third quarter, the strongest in the company's history, are the result of robust and diverse product lines and channels," said Paul Ricci, chairman and CEO of ScanSoft. "During the quarter, we continued to gain market share in our core product categories. The introduction of OmniPage Pro 12 generated quarter-over-quarter growth in digital imaging. Within our speech solutions, we saw sustained demand for Dragon NaturallySpeaking, particularly in healthcare, and continued to gain market share with RealSpeak, our text-to-speech solution, especially in North America."
ScanSoft benefited in the third quarter from significant digital imaging product introductions, including English, French and German versions of OmniPage Pro® 12; a new release of the Capture Development System; and the launch of PaperPort® Pro Suite for Oracle. The success of the OmniPage Pro 12 introduction came as a result of the most comprehensive set of launch and channel support activities in the history of the company. New features, including XML support, enhanced PDF conversion and network scanning, expand the value of the product for government and enterprise organizations, and have resulted in an increase in volume license agreements for the company. In the short time since its release, OmniPage Pro 12 has received a number of prestigious awards from leading publications in the U.S. and Europe. Within digital imaging, ScanSoft signed new or extended agreements with partners and customers including AutoZone, Canon, the Federal Reserve Bank of New York, Lockheed Martin and Panasonic.
Also in the third quarter, ScanSoft continued to experience solid demand for its speech solutions, leading to market share gains in geographic and vertical markets. Dragon NaturallySpeaking® increased its market share, led by continued adoption in healthcare. Independent third-party sources such as PC Data showed that market share for Dragon NaturallySpeaking increased by more than 10 percentage points in the third quarter from earlier this year. ScanSoft's RealSpeak™ text-to-speech solution gained additional market share, especially in North America, as evidenced by a number of new, expanded or pre-commercial agreements for current and future RealSpeak deployments. During the quarter, ScanSoft signed agreements with companies such as Alcatel, CMG Wireless, Ericsson, ESNA, Intervoice and Siemens. In addition, the company's voice control solutions were included in several high-profile applications, including Sony's latest PlayStation2 interactive title, SOCOM: U.S. Navy SEALs.
ScanSoft's gross margin for the quarter was a record 85 percent, an increase of six points over the comparable quarter in 2001, reflecting both continued success on productivity initiatives and a product mix shift to higher margin licensing revenue. Cash flow from operations of $4.4 million for the quarter was also a record. ScanSoft ended the third quarter of 2002 with cash balances of $14.4 million, after using $7.0 million to repurchase shares of its common stock from Lernout & Hauspie. International sales accounted for approximately 30 percent of revenue.
Comments on the Philips Acquisition
On October 7, 2002, ScanSoft announced that it had signed a definitive agreement to acquire the Philips Speech Processing Voice Control and Telephony business units and related intellectual property from Royal Philips Electronics. The acquisition will bring advanced speech engines to ScanSoft for the telecommunications, automotive and consumer electronics industries. Consideration for the transaction will be approximately $35.4 million, comprising $3.0 million in cash, a $4.9 million 5% note due December 31, 2003, and a $27.5 million three-year, zero-interest debenture, convertible to ScanSoft common stock at $6.00 per share. The boards of directors of both companies have approved the transaction, which is expected to close during the first quarter of 2003.
"The acquisition of these two business units from Philips will broaden ScanSoft's portfolio of award- winning speech technologies and add to our roster of high-profile customers and partners," said Ricci. "In addition, the relationship we forged with Philips through the acquisition will be instrumental in furthering the development of innovative solutions for the global speech and language market."
Business Outlook
Despite the challenging economic climate, ScanSoft expects to achieve revenue for the full-year 2002 of $107 million to $108 million, representing approximately 70 percent growth over the full-year 2001. The company maintains its focus on productivity initiatives and cost controls, and affirms its previous guidance for full-year earnings of $0.26 per diluted share before amortization of acquisition-related intangibles.
Investor Call
In conjunction with this announcement, the company will conduct its quarterly conference call at 8:30 a.m. (ET) today, October 30, 2002. To listen to the call, please telephone (800) 406-5345 or (913) 981-5571 five minutes prior to the call. A replay of the call will be available from 11:30 a.m. (ET) on Wednesday, October 30 through 11:30 p.m. (ET) Tuesday, November 5. To access the replay, dial (888) 203-1112 or (719) 457-0820 and refer to confirmation code 348011.
The conference call will also be broadcast live over the Internet. Investors interested in listening to the call should log onto the company's Web site at www.nuance.com at least 10 minutes prior to the broadcast. Investors will also have access to an archived version of the call on the company's Web site.
About ScanSoft, Inc.
ScanSoft, Inc. (Nasdaq: SSFT) is a leading supplier of imaging, speech and language solutions that are used to automate a wide range of manual processes - saving time, increasing worker productivity and improving customer service. For more information regarding ScanSoft products and technologies, please visit www.nuance.com.
Trademark reference: ScanSoft, the ScanSoft logo, Dragon NaturallySpeaking, OmniPage Pro, RealSpeak and PaperPort are registered trademarks or trademarks of ScanSoft, Inc. in the United States and other countries. All other company or product names mentioned may be the trademarks of their respective owners.
>Safe Harbor Statement: 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 those regarding the future performance of the speech and language business; the outlook for the digital imaging business; future revenues and earnings per share; the ability to close the acquisition of the Philips Speech Processing Voice Control and Telephony business units and to realize the anticipated benefits from the acquisition and ScanSoft's relationship with Philips, and future prospects regarding product lines, sales channels and international operations. These statements are based on ScanSoft's current expectations, estimates as to prospective events and circumstances that 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, economic conditions in the United States and abroad, the ability to complete and deliver products and services within currently estimated time frames and budgets, the ability to effectively manage diverse and geographically dispersed operations, difficulties with integrating product plans and operations of acquired businesses, difficulties in implementing planned cost reductions, 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 filings. ScanSoft disclaims any intent or obligation to update these forward-looking statements.
ScanSoft, Inc.
Supplemental Condensed Consolidated Statements of Operations
Excluding amortization of intangible assets and restructuring charges
(in 000's, except per share amounts)
Unaudited
| |
Three months ended
September 30, |
|
Nine months ended
September 30, |
| |
2002 |
|
2001 |
|
2002 |
|
2001 |
|
Revenue |
$28,235 |
|
$16,765 |
|
$78,184 |
|
$44,130 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
4,199 |
|
3,498 |
|
12,937 |
|
9,215 |
|
Research and development |
7,257 |
|
3,582 |
|
21,310 |
|
10,016 |
|
Selling, general and administrative |
11,412 |
|
6,544 |
|
32,051 |
|
18,944 |
|
Total costs and expenses |
22,868 |
|
13,624 |
|
66,298 |
|
38,175 |
|
Income from operations |
5,367 |
|
3,141 |
|
11,886 |
|
5,955 |
|
Other income (expense), net |
(168) |
|
13 |
|
(178) |
|
(126) |
|
Income before income taxes |
5,199 |
|
3,154 |
|
11,708 |
|
5,829 |
|
(Benefit) provision for income taxes |
162 |
|
(465) |
|
(166) |
|
(162) |
|
Net income |
$5,037 |
|
$3,619 |
|
$11,874 |
|
$5,991 |
|
Net income per share: basic |
$0.07 |
|
$0.07 |
|
$0.18 |
|
$0.11 |
|
Net income per share: diluted |
$0.07 |
|
$0.06 |
|
$0.16 |
|
$0.11 |
|
Weighted average common shares: basic |
67,865 |
|
54,437 |
|
67,116 |
|
52,200 |
Weighted average common and
common equivalent shares: diluted |
74,787 |
|
56,176 |
|
74,869 |
|
53,249 |
ScanSoft, Inc.
Condensed Consolidated Statements of Operations
Including amortization of intangible assets and restructuring charges
(in 000's, except per share amounts)
Unaudited
| |
Three months ended
September 30, |
|
Nine months ended
September 30, |
| |
2002 |
|
2001 |
|
2002 |
|
2001 |
|
Revenue |
$28,235 |
|
$16,765 |
|
$78,184 |
|
$44,130 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenue |
4,199 |
|
3,498 |
|
12,937 |
|
9,215 |
|
Research and development |
7,257 |
|
3,582 |
|
21,310 |
|
10,016 |
|
Selling, general and administrative |
11,412 |
|
6,544 |
|
32,051 |
|
18,944 |
|
Restructuring and other charges |
- |
|
- |
|
1,041 |
|
- |
|
Amortization of intangible assets |
2,212 |
|
6,833 |
|
8,940 |
|
20,500 |
|
Total costs and expenses |
25,080 |
|
20,457 |
|
76,279 |
|
58,675 |
|
Income (loss) from operations |
3,155 |
|
(3,692) |
|
1,905 |
|
(14,545) |
|
Other income (expense), net |
(168) |
|
13 |
|
(178) |
|
(126) |
|
Income (loss) before income taxes |
2,987 |
|
(3,679) |
|
1,727 |
|
(14,671) |
|
(Benefit) provision for income taxes |
162 |
|
(465) |
|
(166) |
|
(162) |
|
Net income (loss) |
$2,825 |
|
$(3,214) |
|
$1,893 |
|
$(14,509) |
|
Net income (loss) per share: basic |
$0.04 |
|
$(0.06) |
|
$0.03 |
|
$(0.30) |
|
Net income (loss) per share: diluted |
$0.04 |
|
$(0.06) |
|
$0.03 |
|
$(0.30) |
|
Weighted average common shares: basic |
67,865 |
|
50,875 |
|
67,116 |
|
48,638 |
|
Weighted average common shares: diluted |
74,787 |
|
50,875 |
|
72,451 |
|
48,638 |
ScanSoft, Inc.
Balance Sheet Highlights
|
Balance Sheet Highlights: |
|
September 30, 2002 |
|
June 30, 2002 |
|
March 31, 2002 |
|
December 31, 2001 |
| |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
|
Cash and investments |
|
$14,382 |
|
$18,272 |
|
$12,783 |
|
$14,324 |
|
Receivables |
|
17,106 |
|
16,488 |
|
13,790 |
|
14,266 |
|
Working capital |
|
15,765 |
|
17,711 |
|
5,970 |
|
9,318 |
|
Total assets |
|
139,270 |
|
145,082 |
|
138,951 |
|
142,070 |
|
Stockholders' equity |
|
114,934 |
|
118,691 |
|
109,646 |
|
114,534 |
Contact Information
|
