ScanSoft Announces Record First-Quarter Revenues, Up 90% over Year Earlier

Company Raises Full-Year Revenue and Earnings Guidance

PEABODY, Mass., April 30, 2002 - ScanSoft, Inc. (Nasdaq: SSFT), a leading supplier of digital imaging, speech and language solutions, today announced financial results for the first quarter ended March 31, 2002.

ScanSoft reported first quarter 2002 revenues of $23.8 million, a 90 percent increase over first quarter 2001 revenues of $12.5 million. Income from operations for the first quarter of 2002 was $2.9 million, a $2.8 million increase from the $0.1 million reported during the same period a year ago. Net income before acquisition-related intangibles and restructuring charges was $2.7 million, or $0.04 per diluted share, compared with a net loss before intangibles of $0.1 million, or breakeven per share, for the first quarter of 2001. After including acquisition-related intangibles and restructuring charges, ScanSoft reported a net loss of $3.5 million, or $0.06 per share, in the first quarter of 2002 compared with a net loss of $6.9 million, or $0.15 per share, for the first quarter of 2001.

During the first quarter, the company substantially completed the consolidation of facilities, worldwide sales organizations, research and development teams, and other personnel following the acquisition of the Lernout & Hauspie (L&H) assets. As a result, ScanSoft recorded associated restructuring charges totaling $1.0 million, primarily for severance payments and facilities-related expenses.

Comments on the First Quarter

"ScanSoft's excellent first quarter resulted from strong demand for both our digital imaging and speech and language solutions, particularly among our OEM and licensing partners and within our North American channels," said Paul Ricci, ScanSoft's chairman and CEO. "Sales of our Dragon NaturallySpeaking® v6 product line through our VAR channels exceeded our expectations. PaperPort Deluxe® 8.0 achieved record quarterly revenues, building on the momentum we saw in the fourth quarter. RealSpeak™ text-to-speech and embedded ASR revenues grew steadily throughout the quarter as we continued to sign new distribution and licensing agreements."

ScanSoft's revenue growth included a substantial increase in revenue from channel and OEM partners. Factors contributing to this increase included the first full quarter of speech and language royalties, an expanding base of digital imaging licensees and strong revenue from technology partners, particularly Microsoft. The company signed agreements for RealSpeak text-to-speech (TTS) with CMG, InterVoice-Brite and Philips, among others. In addition, the company completed agreements with more than 50 customers to incorporate ScanSoft's RealSpeak and embedded ASR technologies in future commercial deployments.

In dictation, ScanSoft secured distribution agreements for Dragon NaturallySpeaking with AOL, Panasonic and Sony. Within digital imaging, the company signed new or expanded licensing agreements with Brother, Canon, Corel, Kyocera Mita, Symantec and Xerox, as the company continued to leverage its partnerships with the leading manufacturers of digital copier and multifunction devices to take advantage of the growing demand for network-enabled scanning.

ScanSoft experienced strong sales of its products throughout its North American channels. The company released new versions of Dragon NaturallySpeaking v.6, including editions specifically designed for the medical and legal markets. ScanSoft also added to its digital imaging revenues by launching OmniPage Pro® X for Macintosh in January.

International sales accounted for 30 percent of revenues in the first quarter. ScanSoft ended the first quarter with cash balances of $12.8 million. Subsequent to the close of the quarter, ScanSoft completed the private placement of 1.0 million shares of its common stock for which it received consideration of $6.0 million on April 12, 2002.

Comments on the L&H Acquisition

"The integration of the L&H assets has essentially been completed," said Michael Tivnan, president and COO of ScanSoft. "During the past few months, we completed the consolidation of facilities and the merger of our sales and marketing teams and continued our long-running efforts to direct our R&D activities to our lower-cost centers in Europe. In addition, we completed the purchase of L&H AudioMining technology and introduced new products that address growing demand for audio/visual search solutions."

"Concurrent with the integration, we launched an aggressive program to re-engage L&H customers and channel partners," added Tivnan. "We are especially heartened by the response from our RealSpeak and embedded ASR customers that have acknowledged the financial stability and commitment to innovation that ScanSoft brings to these solutions. Customers' continued preference for RealSpeak TTS technology, based on its unmatched language options and voice quality, is a strong endorsement of our market leadership, a position further validated by Frost & Sullivan in a recent independent study."

Business Outlook

"The success that ScanSoft achieved in the first quarter was a result of an intense focus on our customers and productivity gains across the organization," said Ricci. "Our new products won praise from users, press and industry analysts, and extended our lead in delivering applications that help eliminate barriers to productivity. During the quarter we introduced our new Productivity Without Boundaries™ branding program to identify the value we deliver to our customers and partners. Through digital imaging and speech and language, ScanSoft products simplify users' interaction with technology and enhance their computing experience."

ScanSoft's objectives for the balance of 2002 include embracing PDF for imaging, enhancing network scanning, expanding Dragon NaturallySpeaking's penetration of vertical and corporate markets, further strengthening the company's lead in the text-to-speech market, increasing the presence of ScanSoft's embedded ASR in automotive/mobile markets and capitalizing on new opportunities with the AudioMining solutions.

"In view of our first quarter performance, we are raising our full-year guidance," added Ricci. "Revenues for 2002 are expected to be $110 million. Earnings per share, before amortization of acquisition-related intangibles and restructuring charges, are expected to be $0.26."

Investor Call

In conjunction with this announcement, the Company will conduct its quarterly conference call at 10:00 a.m. (ET) today, April 30, 2002. To listen to the call, please telephone (800) 819-9193 or (913) 981-4911 five minutes prior to the call. A replay of the call will be available from 1:00 p.m. ET on Tuesday, April 30 through 11:30 p.m. ET Monday, May 6. To access the replay, dial (888) 203-1112 or (719) 457-0820 and refer to confirmation code 414429.

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.scansoft.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 the 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.scansoft.com.

ScanSoft, Inc.
Supplemental Condensed Consolidated Statements of Operations
Excluding amortization of intangible assets, restructuring and other charges
(in 000's, except per share amounts)
Unaudited

ScanSoft, Inc.
Condensed Consolidated Statements of Operations
Including amortization of intangible assets, restructuring and other charges
(in 000's, except per share amounts)
Unaudited

ScanSoft, Inc.
Balance Sheet Highlights

Trademark reference: ScanSoft, the ScanSoft logo, Dragon NaturallySpeaking, OmniPage Pro, Productivity Without Boundaries, RealSpeak, AudioMining and PaperPort Deluxe 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.

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 the Company's expectations: 2002 revenue of approximately $110 million, earnings per share, before intangibles, of $0.26, and the perceived benefits of the agreements between the Company and its customers. 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, schedules and resources, 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 reports. ScanSoft disclaims any intent or obligation to update these forward-looking statements.

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