ScanSoft Announces Third Quarter Results
PEABODY, Mass., November 13, 2003 - ScanSoft, Inc. (Nasdaq: SSFT), the leading supplier of speech and imaging solutions, today announced financial results for the third quarter ended September 30, 2003. ScanSoft reported third quarter 2003 revenue of $32.9 million, a 17 percent increase over third quarter 2002 revenue of $28.2 million. Net income before amortization of acquisition-related intangible assets and restructuring and other charges was $1.5 million, or $0.02 per diluted share, compared with $5.1 million, or $0.07 per diluted share, for the third quarter of 2002. After including amortization of acquisition-related intangible assets and restructuring and other charges, ScanSoft reported a third quarter 2003 net loss of $3.7 million, or $0.04 per share, compared with third quarter 2002 net income of $2.8 million, or $0.04 per diluted share. For the first nine months of 2003, ScanSoft reported total revenue of $88.5 million, a 13 percent increase over revenue of $78.2 million in the first nine months of 2002. Net income before amortization of acquisition-related intangible assets and restructuring and other charges was $5.3 million, or $0.06 per diluted share, compared with $11.9 million, or $0.16 per diluted share, for the first nine months of 2002. After including amortization of acquisition-related intangible assets and restructuring and other charges, ScanSoft reported a net loss of $6.8 million, or $0.10 per share, in the first nine months of 2003 compared with net income of $1.9 million, or $0.03 per diluted share, for the first nine months of 2002. Comments on the Third Quarter"ScanSoft's solid results in the third quarter were driven by a strong performance in network speech, domestically and internationally, as we communicated our product roadmap, expanded our channels and deployed new applications," said Paul Ricci, chairman and CEO of ScanSoft. "During the quarter, we made good progress in focusing resources and attention on timely product launches, international expansion and support of our global partner channel." Third Quarter Highlights- Operating Results
ScanSoft posted another quarter of operating profitability through synergies gained from the SpeechWorks acquisition and enterprise-wide expense control and productivity. ScanSoft ended the quarter with a cash balance of $48 million.
- SpeechWorks Acquisition
On August 11, 2003, ScanSoft completed the acquisition of SpeechWorks International, Inc. creating a global leader in speech markets. The organization and channel integration is substantially complete, with the company maintaining approximately 800 employees in 15 major offices worldwide and channel partners in an additional 60 countries. Product direction and technology integration plans have been finalized and being communicated to ScanSoft's global partner and customer network.
- Accelerating Adoption of Speech
Third quarter results were driven by strong performance in network speech as the company benefited from expanded channel relationships and growing deployments among its enterprise customers. The company recently showcased applications from customers such as Bank of America, Verizon, Dollar Rent-A-Car and Qantas Airways at Conversations, its annual customer and partner meeting.
- Global Leader in Speech Market
A recent Gartner Inc. report showed that ScanSoft and SpeechWorks together accounted for 38 percent of the speech recognition systems shipped worldwide in 2002.
- New PDF Solution
In the third quarter, ScanSoft began shipping PDF Converter, a new productivity applications offering that automatically converts PDF files into Microsoft Word documents. This product was officially launched in October in conjunction with the worldwide launch of Microsoft Office 2003.
- Microsoft Alliance
ScanSoft expanded its relationship with Microsoft through several initiatives including pre-launch activity for ScanSoft's new PDF Converter product; electronic forms for the Microsoft InfoPath system; and programs to enhance worker productivity in healthcare and education.
- Expanded International Presence
During the quarter, ScanSoft launched new, international versions of Dragon NaturallySpeaking v7, expanded its imaging R&D resources in Budapest and its sales efforts in Asia-Pacific, and introduced support for new languages in its speech recognition and text-to-speech (TTS) engines. International sales accounted for approximately 34 percent of the revenue in the third quarter.
"Through the SpeechWorks integration, the launch of new products and a market-oriented, company-wide reorganization, the third quarter had a profound, beneficial impact on the company, our partners and our customers," Ricci continued. "We are pleased with our early success as a new organization and are even more encouraged at the opportunity before us. With an intense focus on addressing customer needs and gaining additional market share across our Network Speech, Productivity Applications and Embedded Speech businesses, we are confident in ScanSoft's growth opportunities and the strength of our business model." ScanSoft will discuss the quarter in greater detail, progress on its integration, and revenue and earnings guidance on its investor conference call scheduled for this morning. As a result of recent accounting interpretations brought to our attention by our independent auditors, the Company has determined that a deferred tax provision was required in the first two quarters of 2003 to appropriately account for goodwill that was created as a result of taxable acquisitions. Consequently, the company will revise first and second quarter results by increasing its tax provision by $250,000 for the first quarter 2003 and $304,000 for the second quarter 2003. All comparative figures in this release reflect these changes. Tables reflecting these changes are attached to this press release. Investor CallIn conjunction with this announcement, ScanSoft management will conduct a Webcast and conference call on Thursday, November 13, 2003 at 8:30 a.m. ET. Those who wish to listen to the live broadcast should visit the Investor Relations section of the company's Web site at www.scansoft.com at least 15 minutes prior to the event and follow the instructions provided to assure that the necessary audio applications are downloaded and installed. The conference call can be heard live by dialing (800) 539-9343 or (706) 643-0195 and refer to the conference name ScanSoft, five minutes prior to the call. A replay of the call will be available within 24 hours of the announcement. To access the replay, dial (800) 642-1687 or (706) 645-9291 and enter conference number 3759085. About ScanSoft, Inc.ScanSoft, Inc. (Nasdaq: SSFT) is the leading supplier of speech and imaging 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.scansoft.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. This press release contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to potential synergies from, and the completion of the integration of, the acquisition of SpeechWorks International, Inc; future prospects regarding product lines, sales channels, deployments and market share; the strength of existing products, services and relationships as well as the introduction of new products, services and relationships; the future performance of, and opportunities for growth in, ScanSoft's businesses; and future prospects regarding international operations. Such statements are based on current expectations that are subject to a number of risks and uncertainties, and actual results may differ materially. These risks and uncertainties include, without limitation, the following: difficulties with integrating product plans and operations of acquired businesses and the accounting effects of such acquisitions on ScanSoft's operating results; risks related to speech technologies; economic conditions in the United States and abroad; ScanSoft's ability to control and successfully manage its expenses, inventory and cash position; fluctuations in demand for ScanSoft's existing and future products; the effects of competition, including pricing pressure; possible defects in products and technologies; ScanSoft's dependence on OEM customers; and economic, political, regulatory and other risks associated with international regions. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in ScanSoft's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2002, its most recent quarterly reports on Form 10-Q, and its Registration Statement on Form S-1 declared effective on February 10, 2003, and post-effective amendments thereto filed on June 20, 2003 and October 16, 2003. ScanSoft undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this document.  | ScanSoft, Inc. Supplemental Condensed Consolidated Statements of Operations Excluding amortization of intangible assets, non-cash stock compensation, restructuring and other charges (in 000's, except per share amounts) Unaudited Three months ended Nine Months ended September 30, September 30, ----------------- ----------------- 2003 2002 2003 2002 -------- -------- -------- -------- Revenue, third parties $31,179 $27,101 $84,214 $74,598 Revenue, related parties 1,771 1,134 4,315 3,586 -------- -------- -------- -------- Total revenue 32,950 28,235 88,529 78,184 Costs and expenses: Cost of revenue 6,768 4,199 15,643 12,937 Research and development 9,543 7,257 25,070 21,310 Selling, general and administrative 15,624 11,386 42,702 31,975 -------- -------- -------- -------- Total costs and expenses 31,935 22,842 83,415 66,222 Income from operations 1,015 5,393 5,114 11,962 Other income (expense), net 248 (168) 658 (178) -------- -------- -------- -------- Income before income taxes 1,263 5,225 5,772 11,784 Provision (benefit) for income taxes (243) 162 473 (166) -------- -------- -------- -------- Net income $1,506 $5,063 $5,299 $11,950 ======== ======== ======== ======== Net income per share: basic $0.02 $0.07 $0.07 $0.18 ======== ======== ======== ======== Net income per share: diluted $0.02 $0.07 $0.06 $0.16 ======== ======== ======== ======== Weighted average common shares: basic 87,256 67,865 74,848 67,116 ======== ======== ======== ======== Weighted average common and common equivalent shares: diluted 98,050 74,787 85,570 72,451 ======== ======== ======== ======== ScanSoft, Inc. Condensed Consolidated Statements of Operations Including amortization of intangible assets, non-cash stock compensation and restructuring and other charges (in 000's, except per share amounts) Unaudited Three months ended Nine months ended September 30, September 30, ----------------- ----------------- 2003 2002 2003 2002 -------- -------- -------- -------- Revenue, third parties $31,179 $27,101 $84,214 $74,598 Revenue, related parties 1,771 1,134 4,315 3,586 -------- -------- -------- -------- Total revenue 32,950 28,235 88,529 78,184 Costs and expenses: Cost of revenue 6,768 4,199 15,643 12,937 Cost of revenue from amortization of intangible assets 2,752 1,976 7,481 7,494 Research and development 9,543 7,257 25,070 21,310 Selling, general and administrative 15,624 11,386 42,702 31,975 Non-cash stock compensation 104 26 155 76 Amortization of other intangible assets 662 236 1,446 1,446 Restructuring and other charges 1,719 - 3,065 1,041 -------- -------- -------- -------- Total costs and expenses 37,172 25,080 95,562 76,279 Income (loss) from operations (4,222) 3,155 (7,033) 1,905 Other income (expense), net 248 (168) 658 (178) -------- -------- -------- -------- Income (loss) before income taxes (3,974) 2,987 (6,375) 1,727 Provision (benefit) for income taxes (243) 162 473 (166) -------- -------- -------- -------- Net income (loss) $(3,731) $2,825 $(6,848) $1,893 ======== ======== ======== ======== Net income (loss) per share: basic $(0.04) $0.04 $(0.10) $0.03 ======== ======== ======== ======== Net income (loss) per share: diluted $(0.04) $0.04 $(0.10) $0.03 ======== ======== ======== ======== Weighted average common shares: basic 83,694 67,865 71,286 67,116 ======== ======== ======== ======== Weighted average common shares: diluted 83,694 74,787 71,286 72,451 ======== ======== ======== ======== ScanSoft, Inc. Condensed Consolidated Balance Sheet (Unaudited, in thousands) Assets September December 30, 2003 31, 2002 Current assets: Cash and cash equivalents $47,485 $18,853 Marketable securities 553 - Accounts receivable, net 30,216 15,650 Receivable from related party 1,630 1,518 Prepaid expenses and other current assets 7,142 4,408 --------- --------- Total current assets 87,026 40,429 Goodwill, net 225,080 63,059 Other intangible assets, net 55,227 33,823 Property and equipment, net 6,028 2,846 Other assets 2,980 3,533 --------- --------- Total assets $376,341 $143,690 ========= ========= Liabilities and stockholders' equity Current liabilities: Short term note payable $6,746 $3,273 Accounts payable and accrued expenses 31,008 16,858 Deferred revenue 8,283 1,790 Other current liabilities 4,614 1,666 --------- --------- Total current liabilities 50,651 23,587 --------- --------- Long term portion of deferred revenue 359 244 Long term note payable 28,085 - Deferred tax liabilities 1,441 - Other long term liabilities 7,293 481 --------- --------- Total liabilities 87,829 24,312 Stockholders' equity: 288,512 119,378 --------- --------- Total liabilities and stockholders' equity $376,341 $143,690 ========= ========= ScanSoft, Inc. Reconciliation of Supplemental Financial Information (in 000's, except per share amounts) Unaudited Three months Nine months ended ended September 30, September 30, ---------------- ----------------- 2003 2002 2003 2002 -------- ------- -------- -------- Non-GAAP Financial Measures: GAAP net income (loss) $(3,731) $2,825 $(6,848) $1,893 Cost of revenue from amortization of intangible assets 2,752 1,976 7,481 7,494 Amortization of other intangible assets 662 236 1,446 1,446 Restructuring and other charges 1,719 - 3,065 1,041 Non-cash stock compensation 104 26 155 76 -------- ------- -------- -------- Net income excluding acquisition related amortization, non-cash stock compensation and restructuring and other charges $1,506 $5,063 $5,299 $11,950 ======== ======= ======== ======== Net income per share, excluding acquisition related amortization, non-cash stock compensation and restructuring and other charges: basic $0.02 $0.07 $0.07 $0.18 ======== ======= ======== ======== Net income per share, excluding acquisition related amortization, non-cash stock compensation and restructuring and other charges: diluted $0.02 $0.07 $0.06 $0.16 ======== ======= ======== ======== Shares used in computing net income per share, excluding acquisition related amortization, non-cash stock compensation and restructuring and other charges: Weighted average common shares: basic 87,256 67,865 74,848 67,116 ======== ======= ======== ======== Weighted average common and common equivalent shares: diluted 98,050 74,787 85,570 72,451 ======== ======= ======== ======== Restated Condensed Consolidated Statement of Operations Three months ended 31-Mar-03 (Unaudited) (In thousands, except per share amounts) As Originally As Reported Restated Gross revenues $27,836 $27,836 Total operating expenses 27,687 27,687 ---------------------- Income/(loss) from operations 149 149 Other income, net 61 61 Interest (expense), net (39) (39) ---------------------- Income/(loss) before income taxes 171 171 Income tax provision 95 345 ---------------------- Net income/(loss) $76 $(174) ====================== Diluted income/(loss) per share $0.00 $(0.00) Weighted average common shares and common share equivalents 77,220 64,127 Three months ended 30-Jun-03 (Unaudited) (In thousands, except per share amounts) As Originally As Reported Restated Gross revenues $27,743 $27,743 Total operating expenses 30,703 30,703 ---------------------- Income/(loss) from operations (2,960) (2,960) Other income, net 501 501 Interest (expense), net (113) (113) ---------------------- Income/(loss) before income taxes (2,572) (2,572) Income tax provision 67 371 ---------------------- Net income/(loss) $(2,639) $(2,943) ====================== Diluted income/(loss) per share $(0.04) $(0.04) Weighted average common shares and common share equivalents 65,821 65,821 Six months ended 30-Jun-03 (Unaudited) (In thousands, except per share amounts) As Originally As Reported Restated Gross revenues $55,579 $55,579 Total operating expenses 58,390 58,390 ---------------------- Income/(loss) from operations (2,811) (2,811) Other income, net 562 562 Interest (expense), net (152) (152) ---------------------- Income/(loss) before income taxes (2,401) (2,401) Income tax provision 162 716 ---------------------- Net income/(loss) $(2,563) $(3,117) ====================== Diluted income/(loss) per share $(0.04) $(0.05) Weighted average common shares and common share equivalents 64,979 64,979 |
This press release and the reconciliation contained herein, disclose certain financial measures that exclude acquisition-related amortization and restructuring charges that may be considered non-GAAP financial measures. Generally a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures are provided to enhance the user's overall understanding of ScanSoft's current financial performance and ScanSoft's prospects for the future. Management believes that these measures present a more representative measure of ScanSoft's operating performance because they exclude identified non-cash and restructuring charges that are not necessarily relevant to an understanding of ScanSoft's business or the prospects for ScanSoft's future performance. Management uses these measures for evaluating historical performance and for forecasting and planning for future periods. These measures, however, should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with generally accepted accounting principles. The non-GAAP measures included in our press release have been reconciled to the nearest GAAP measure. Contact Information |
