ScanSoft Announces Second Quarter Results
PEABODY, Mass., August 14, 2003 - ScanSoft, Inc. (Nasdaq: SSFT), a leading supplier of digital imaging, speech and language solutions, today announced financial results for the second quarter ended June 30, 2003.
ScanSoft reported second quarter 2003 revenue of $27.7 million, a six percent increase over second quarter 2002 revenue of $26.2 million. Net income before amortization of acquisition-related intangible assets and restructuring and other charges was $1.3 million, or $0.02 per diluted share, compared with $4.2 million, or $0.05 per diluted share, for the second quarter of 2002. After including amortization of acquisition-related intangible assets and restructuring and other charges, ScanSoft reported a second quarter 2003 net loss of $2.6 million, or $0.04 per share, compared with second quarter 2002 net income of $1.9 million, or $0.03 per diluted share.
For the first six months of 2003, ScanSoft reported total revenue of $55.6 million, an eleven percent increase over revenue of $49.9 million in the first half of 2002. Net income before amortization of acquisition-related intangible assets and restructuring and other charges was $4.3 million, or $0.05 per diluted share, compared with $6.8 million, or $0.09 per diluted share, in 2002. After including amortization of acquisition-related intangible assets and restructuring and other charges, ScanSoft reported a net loss of $2.6 million, or $0.04 per share, in the first six months of 2003 compared with a net loss of $0.9 million, or $0.01 per share, for the first six months of 2002.
Comments on the Second Quarter
"ScanSoft revenue in the second quarter increased six percent year-over-over and remained essentially flat compared to the first quarter 2003," said Paul Ricci, chairman and CEO of ScanSoft. "Our year-over-year growth owed largely to good performance from PaperPort, Dragon NaturallySpeaking, embedded speech within the automotive sector and sales of products we acquired from Philips. Two areas of disappointment for the quarter included embedded text-to-speech for games and consumer devices in Asia and network speech, for which revenue was below our expectations. While we believe these disappointments are the result of transitory issues, we do expect to see a continuing adverse impact from one or more of these areas during the third quarter."
In imaging, ScanSoft continued to see demand for its PaperPort product family, while results for OmniPage products remained below expectations at levels similar to the first quarter 2003. The success for PaperPort was driven primarily from continued acceptance of the newest version launched in the first quarter of 2003 and from growth in network document capture solutions offered by OEM partners such as Canon, Lexmark and Xerox. During the quarter, the company also signed new or expanded agreements with a number of customers and partners, including Army Research Labs, Computer Sciences Corporation, Hewlett-Packard, IRS, Kyocera Mita and Liberty Mutual. In the third and fourth quarters of 2003, ScanSoft will launch international versions of PaperPort 9, our newest version of OmniPage and a new application that provides information workers a way to be more productive with digital paper.
In network speech, revenue was up substantially year-over year, owing primarily to the sale of products from Philips, but was below expectations as enterprise customers and partners awaited clarification of the company's post-merger technology direction. In dictation, the company continued to see the benefits, especially in healthcare and enterprise environments, from the launch of Dragon NaturallySpeaking version 7. The company will launch international versions of Dragon NaturallySpeaking in the third and fourth quarters of 2003. ScanSoft experienced very good performance in its automotive speech segment, though this was offset by weakness in embedded text-to-speech for games and consumer devices in Asia. ScanSoft secured several important embedded speech design wins in signing agreements with BMW, Nokia and Sierra Entertainment.
International sales accounted for approximately 38 percent of revenue in the second quarter. ScanSoft ended the quarter with a cash balance of $17.0 million. Cash flow from operations in the quarter was $3.5 million.
ScanSoft Acquires SpeechWorks, Creates Global Leader in Speech Markets
On April 24, 2003, ScanSoft announced it signed an agreement to acquire SpeechWorks International, Inc. The transaction closed on August 11, 2003. The combination of ScanSoft and SpeechWorks creates a clear leader in the speech industry and results in a global organization with an extensive portfolio of imaging and speech technologies, applications and services that automate business processes, offer innovative new solutions, and improve corporate and personal productivity.
"We're pleased with the progress our organizations have made in just a short time, helping us smoothly transition into one global organization, maintain strong momentum in each market segment and continue to support our customers and partners with innovative technologies and experienced professional services," said Stuart Patterson, president of ScanSoft. "We believe the combination of these two companies will create significant value and provide excellent growth opportunities for all stakeholders."
After the transition, the company will have approximately 750 employees in 15 offices worldwide. In addition, the company will operate a number of regional sales offices and through its broad channel network will maintain representation in more than 70 countries. As part of the integration, the company will reduce its collective employee base by about 175 individuals and will close excess facilities. The company has consolidated its sales, marketing and general and administrative functions and expects to realize additional synergies associated with expenses in these areas.
"We are pleased to add the highly valued SpeechWorks products, services and employees to ScanSoft," added Ricci. "Through the hard work of both organizations in recent months, the company is positioned to achieve the synergy targets that we established when we announced the merger. Together, ScanSoft is positioned to fully address the customers and markets we serve, provide broad opportunities for our employees and achieve strong financial performance for our shareholders."
ScanSoft will discuss progress on its integration, details on synergies, and third and fourth quarter 2003 guidance on its investor conference call scheduled for this morning. |
