ScanSoft Announces First Quarter Results
Growing Demand for Network, Dictation and Embedded Speech Solutions Produces Revenue Above Expectations
PEABODY, Mass., May 10, 2004 - ScanSoft, Inc. (Nasdaq: SSFT), the global leader of speech and imaging solutions, today announced financial results for the first quarter ended March 31, 2004.
ScanSoft reported first quarter 2004 revenue of $42.8 million, a 54 percent increase over first quarter 2003 revenue of $27.8 million. Net income before amortization of acquisition-related intangible assets, restructuring charges and non-cash stock compensation was $1.8 million, or $0.02 per diluted share, compared with $2.8 million, or $0.04 per diluted share for the first quarter of 2003. After including amortization of acquisition-related intangible assets, restructuring charges and non-cash stock compensation, ScanSoft reported a first quarter 2004 net loss of $2.8 million, or $0.03 per basic share, compared with a net loss of $0.2 million, or breakeven per basic share, in the first quarter of 2003.
"The company is off to a strong start in 2004 as we experienced increased demand in all of our speech segments and rapid growth internationally," said Paul Ricci, chairman and CEO of ScanSoft. "We are especially pleased with the growing demand from enterprise and telecommunications customers in our SpeechWorks division. We had strong performance for dictation in healthcare and record revenue in embedded speech. The company also enjoyed the continued benefits from recent launches of PDF Converter and OmniPage 14."
In addition, the company today disclosed that it saw increased royalty contributions from its speech partners, for the second sequential quarter, through the deployment of solutions in enterprise and telecommunications customers worldwide. In the first quarter, revenue contributions from partners and bookings for solutions services were each at record levels - strong indicators, the company believes, of growing demand for its speech applications and services. Bookings in the first quarter included Cox Communications, Nike, Dell and the Internal Revenue Service, as well as new contracts with a major North American wireless carrier with an expected valued this year in excess of $3 million and a Canadian leader in the travel industry with an expected value this year in excess of $1.7 million.
"Now two full quarters into the merger, we believe our results confirm the benefits of the SpeechWorks acquisition," Ricci said. "Our continued market share achievements across all segments of our speech business validates a sustained focus on and investment in our partner relationships, and our commitment to being the most partner-friendly speech solutions provider in the industry."
Frost & Sullivan, a leading industry research firm recognized the SpeechWorks Division of ScanSoft as the clear market share leader in the North American telephony-based speech technology and solutions market. The company far exceeded its competitors for market share in speech technology licenses and professional services (see today's announcement, "Frost & Sullivan Names ScanSoft Market Share Leader in North America Telephony Speech Market").
Other first quarter highlights include:
* Strong Growth in Embedded Solutions
In the first quarter, embedded revenue grew considerably, as an increasing number of ScanSoft-powered solutions were brought to mass market, resulting in strong royalties. In addition, ScanSoft continued to secure key contracts in core automotive and navigation customers such as Pioneer, Denso, Navigon and Voice-Insight, while the company gained momentum in handheld devices with customers such as ReignCom and Microsoft.
* Record Revenue for Dictation Applications
The company experienced record revenue worldwide from Dragon Naturally Speaking and its other dictation applications, through channel and value-added reseller partners, especially within healthcare organizations.
* Continued Performance from 2003 Product Launches
OmniPage 14 and PDF Converter sustained momentum from recent launches. Imaging products performed well in all channels, with OEM partners such as Xerox, Kyocera Mita and Konica Minolta expanding their distribution of ScanSoft's scan-to-desktop applications into corporate environments.
* Streamlined Organization
ScanSoft aligned the organization along two divisions - SpeechWorks Solutions and ScanSoft Productivity Applications - focusing global resources on high-growth markets and providing a platform to aggressively pursue targeted opportunities and manage resources more efficiently. The company named John Shagoury and Steve Chambers as division presidents for Productivity Applications and SpeechWorks Solutions, respectively.
* Warburg Pincus Strategic Investment
Warburg Pincus, a leading private equity firm, purchased all outstanding shares previously held by Xerox Corporation for approximately $80 million. Warburg Pincus is widely recognized for bringing companies to new levels of achievement and value, as evidenced by its portfolio of enterprise software companies. William Janeway, a vice chairman at Warburg Pincus, has joined ScanSoft's board of directors.
"With our strong performance and momentum heading into the second quarter, we are confident that with the alignment, strength and focus of our organization, we are well positioned for continued growth," Ricci continued. "We remain committed to expense controls and synergy targets from the merger, and we believe that we are on course to generate additional efficiencies in our operating model throughout the year." |
