Lernout & Hauspie Reports Record Revenues of $110 Million and Earnings Per Share of $0.22 for Fourth Quarter, Before Exceptional Items

Edge: Work-Group Computing Report, Feb 14, 2000

Lernout & Hauspie (Nasdaq: LHSP, Easdaq: LHSP) (L&H), a worldwide market leader in speech and linguistic technologies, products and services, Wednesday announced financial results for the fourth quarter and the year ended December 31, 1999.

For the fourth quarter of 1999, L&H's total revenues were $110 million, or a 43.5% increase in the reported revenue of $76.7 million for the fourth quarter 1998. For the fiscal 1999, the company reported total revenues of $344 million or an increase of 62.7% over the reported revenues of $211.6 million for 1998.

The company reported approximately $13.4 million in net income for the fourth quarter of 1999, before exceptional items, or EPS (Earnings Per Share) of $0.22 cents per share on 60.7 million average diluted shares outstanding. Net income for fiscal 1999, excluding exceptional items, totaled $40.2 million or $0.67 per share on 59.6 million average diluted shares compared to $38.2 million or $0.69 per share on 55.2 million average diluted shares during 1998. The exceptional items for the fourth quarter of 1999 resulted in a $2.7 million net loss (unrealized currency exchange loss). For fiscal 1999 the exceptional items resulted in a $2.5 million net benefit (mainly unrealized currency exchange gain).

Revenue for the fourth quarter of 1999 included approximately $56.4 million from the company's Technologies and Solutions Division, $30 million from the Applications Division, and $23.6 million from the Consulting and Services Division, of which $4.7 million came from Internet related business compared to $350,000 in 1998. The Technologies and Solutions Division signed a record of 80 contracts for the quarter. Related party revenue for fourth quarter for the Consulting and Services Division was $7.1 million coming from Microsoft and $1.8 million for the Technologies and Solutions Division, of which $1.4 million came from Microsoft.

The cash flow from operations for fiscal 1999 was approximately $68 million. Days Sales Outstanding (DSO's) for the fourth quarter of 1999 were reduced to 86 days as of December 31, 1999.

"In 1999 we experienced a strong demand for speech and language technologies, applications and solutions, specifically in the Enterprise and Telephony arena. This increase was mainly the result of internal growth and created a positive cash flow from operations of $68 million, reflecting the maturity of our operations," said Gaston Bastiaens, president and CEO of L&H. "During 2000 I believe we will reap the benefits of these changes as we plan to launch separate entities for Healthcare, Internet Translation and Globalization, Enterprise and Telephony Solutions. We foresee L&H's technologies will provide an intuitive speech user interface for the ever growing number of wireless, portable and handheld devices."

During the fourth quarter and throughout the year, the company remained focused on broadening the types of platforms and devices that employ its technologies, while simultaneously building its resources to create separate legal entities for its key industries: healthcare, telephony, and Internet and globalization. Its success in expanding speech and language technologies beyond the desktop was evidenced by contracts with a number of companies in the wireless and mobile arena. Developments in support of separate legal entity creation included a number of acquisitions and partnerships as well as ground breaking technological advances -- all designed to enhance its offerings and resources in strategic markets.

"The market for speech and language technologies is growing in key industries while also expanding into new markets," said Jo Lernout, co-founder of L&H. "We have the expertise and offerings to not only respond to all these opportunities but to also help accelerate the market through our educational efforts such as the recently launched S.A.I.L. (speech, artificial intelligence and language) Port concept, implemented by the Flanders Language Valley Center, and the L&H Worldwide Customer Support Center."

Highlights of Q4 1999 L&H Technologies Grow in Popularity During the fourth quarter, L&H's Technologies and Solutions Division continued its rapid growth in the Pacific Rim area, signing numerous contracts with high-profile Pac Rim-based developers. Contracts were also signed with Dialogic, Periphonics Corporation, Webley, Comverse and Z-Tel, all of whom plan to speech-enable their applications with the L&H RealSpeak TTS engine. Other noteworthy contracts included an agreement with Unisys to resell L&H's speech recognition and text-to-speech technology with its award-winning Unisys e-@ction Natural Language Speech Assistant (NLSA) developer's tool set.

Technologies and Solutions Expands in Asia The demand for speech-enabled applications continued to grow in the Pacific Rim and L&H technologies were increasingly popular in the region. South Korean- and other Pac Rim-based developers who plan to build applications employing L&H's RealSpeak, ASR, TTS and dialogue systems solutions include: Hyundai Securities, Samsung Securities, LG Securities, Daishin Securities and Daewoo Securities, EPC Asia, IBCC (International Business Computer Co., Ltd.) NeoTelecom, LG Electronics, Intelligent Communications, Softech Advantage, and Softel Telecommunications Pte Limited. Additionally, L&H introduced the product English as a Second Language.