Lernout & Hauspie Reports Record Revenues of $87.5 Million and Strong Earnings of $0.16 for Third Quarter.

IEPER, Belgium and BURLINGTON, Mass.--(BUSINESS WIRE)--Oct. 27, 1999--

Record Earnings Before Goodwill Amortization

of $18.5 Million or $0.31 per Share

Lernout & Hauspie (Nasdaq: LHSP, Easdaq: LHSP) (L&H(tm)), a worldwide market leader in speech and linguistic technologies, products and services, today announced financial results for the third quarter ended September 30, 1999.

For the third quarter of 1999, L&H's total revenues were $87.5 million, an increase of 59% over reported revenues of $54.9 million for the third quarter of 1998. L&H's total revenues for the nine months ended September 30, 1999 were $234.2 million, an increase of 74% over reported revenues of $134.9 million for the same period in 1998.

During the third quarter L&H completed two acquisitions that will continue to shift the company's emphasis from that of a technology provider to a solutions provider. In the medical arena, L&H completed its acquisition of Articulate Systems (Fonix Healthcare Solutions Group), providing it with resources to create enterprise dictation/transcription solutions for the healthcare market. The company also acquired Bumil Information and Communications, Ltd. This agreement provides L&H with increased telephony application development resources to further leverage its core technologies into applications and solutions. The development of additional applications and solutions should help drive L&H's offerings into a broader marketplace and provide additional opportunities for the company.

Net income for Q3 1999, before goodwill amortization, reached $18.5 million, or $0.31 per share on 60.5 million shares. This is a 25% increase compared to $14.7 million before goodwill amortization and one-time charges, or $0.26 per share on 55.8 million fully diluted shares, for the third quarter of 1998. Net income for the first nine months ended September 30, 1999 reached $50 million before goodwill amortization and one-time charges, or $0.85 per share on 59.1 million fully diluted shares which is a 43% increase when compared to $34.7 million in net income, or $0.64 per share on 54.1 million fully diluted shares for the nine months ended September 30, 1998. Net income for the third quarter of 1999 was $9.8 million or $.16 per share on a fully-diluted basis versus a net loss of $35.6 million or $.70 per share net loss for the third quarter of 1998.

The cash flow from operations for the first nine months ended September 30, 1999 was approximately $20.8 million.

Revenue for the third quarter 1999 included approximately $31 million from the company's Technologies and Solutions division, $32.1 million from the Applications division and $24.3 million from the Consulting and Services division.

"L&H has reached a critical juncture at which it is important to increase our emphasis on providing the market with speech and language solutions, in addition to speech and language technologies. With this approach we plan to create joint development projects with strategic partners, thus expanding our reach and providing us with access to ongoing shared revenues in lieu of advance royalties." said Gaston Bastiaens, president and CEO of L&H. "We are very pleased with the results of our third quarter. The third quarter activities, particularly our acquisitions of Articulate and Bumil, brought us much closer to our business model goals while simultaneously enhancing our leadership in the healthcare and telecommunications industries."

"Speech and language technologies and solutions are being deployed in an ever widening array of devices and across an increasingly broad range of industries. In response to this trend, we are enhancing our ability to deliver complete speech and language solutions," said Jo Lernout, L&H co-founder and co-chairman. "Most recently we've seen increased demand from all over the world to build Internet based solutions that use speech and language technologies to help users find relevant information in their native languages via an intuitive user interface."

The company announced today its intention to set up separate legal entities intended to help focus strategic development of its business in key growth industries, including Globalization and Internet Translation, Healthcare Solutions, and Enterprise and Telephony Solutions. These new entities will apply the rich resources the company has in each industry to expand L&H's worldwide leadership position within the various industries and in speech and language technology overall.

Highlights of the Quarter

Technology Use Expanded

During the third quarter L&H's speech and language technologies and solutions division enhanced its ability to develop telephony solutions and continued to expand its telecommunications leadership by acquiring Bumil Information & Communications, Ltd. It also forged a development partnership with National Semiconductor and secured a number of important contracts for L&H RealSpeak(tm) including Periphonics, Z-Tel and Key Voice.

Hanvit Bank Application

Further enhancing its presence in the Far East and underscoring Bumil's skill in the telecommunications market, L&H announced that Korea's largest commercial banking institution, Hanvit Bank, has recently deployed an automated attendant system that was developed by Bumil and employs L&H's ASR technology.

Strategic Partnership with National Semiconductor for Information Appliances

L&H and National Semiconductor Corporation(R) signed an agreement to support and accelerate advanced speech processing technology in the emerging information appliance market and jointly develop new uses and applications for L&H's automatic speech recognition (ASR), text-to-speech (TTS) and speech compression technologies. As part of the agreement, the two companies plan to enable voice-activated computing on a variety of next-generation consumer electronics devices, such as personal Internet access devices like National's WebPAD(tm), as well as devices such as automobile PCs, handheld devices and other emerging information appliances.

Delphi Delco

Delphi Delco Electronics Systems licensed L&H's technology to speech enable Delphi Delco's mobile multi-media subsystem for vehicles, allowing drivers to use their voice to control devices such as radio or CD players, hands-free cell phones, and navigation and climate control systems.

Company Strengthens Healthcare Market Position

L&H's Healthcare Solutions Group completed a number of transactions during the third quarter that it expects will expand its role in the healthcare market by furthering the use of speech technology for medical transcription, electronic medical record keeping and medical coding. The company completed its acquisitions of Articulate Systems and of Computer Aided Medical Systems Limited (CAMS), a U.K. based company that has developed terminology for medical record coding. Its healthcare dictation offerings also were selected for use by several noteworthy healthcare institutions, among them Johns Hopkins Medical Institutions; the University of Pittsburgh Medical Center; the Veterans Affairs Medical Center in Omaha, NB; Temple University Hospital in Philadelphia, PA; Shands AGH in Gainesville, FL; Baptist Birmingham Health System in Birmingham, AL; and J.F.K. Health Center in Edison, NJ.

CAMS Acquisition Sets Stage for Speech-Enabled Medical Coding

L&H's acquisition of CAMs will allow it to combine its speech recognition technology and Natural Language Technology(tm) (NLT) with the CAMs ReadEngine to voice-enable and further automate the medical coding process. CAMS developed the ReadEngine and the Read Code Terminology that serves as the coding standard for medical records in the UK.

Medicalogic Partnership Brings Speech to Internet Based Medical Records

L&H and Medicalogic entered into an agreement to add L&H's Voice Xpress(tm) for Medicine to Logician(R) Internet, MedicaLogic's Web-enabled electronic medical record (EMR) technology for physicians. The integration of L&H's speech recognition software with MedicaLogic's Web-based physician documentation tool gives physicians a package that should simplify and speed up the documentation of patient encounters while reducing the cost of traditional transcription services.

Company Announces New Consumer Market Products

L&H announced the shipment of several new consumer products, furthering its strategy to employ speech and language technology in a wide variety of tools that simplify tasks for the average computer user.

L&H's new products for consumers include L&H Now You're Talking(tm) On The Web, a convenient voice interface for Web browsing, Internet chat, instant messaging and e-mail applications; L&H Simply Translating(tm) Deluxe, a machine translation and language reference tool with support for 35 languages; and L&H Easy Language(tm) 61, the market's only interactive language learning tool with support for 61 languages. The company also began shipping its new L&H Voice Xpress(tm) Personal Finance, expanding and diversifying the award-winning L&H Voice Xpress family of products with the addition of personal finance applications support.

Consulting & Services Division Contracts

During Q3 L&H entered into an agreement with Yahoo! Inc., a leading global Internet media company, to aid in the localization of features and services offered by Yahoo!'s network of global properties and services. It also received a new multimillion-dollar contract from Microsoft for ongoing localization work on projects including Microsoft(R) Encarta Encyclopedia(tm) in multiple languages, Microsoft(R) Network (MSN), Games, Microsoft(R) Works and Microsoft(R) Money.

Language Development

During the past nine months of 1999 L&H has continued to expand its strategic alliances for the development of additional new language versions for its speech and language technologies. Its goal is to expand the breadth of its speech and language technologies to include up to a total of 36 different languages. The company licenses its software development kits and tools to strategic partners to develop additional language version of its technologies and applications. Its strategic partners generally pay a license fee for the use of its tools and take a financial risks and share in the rewards. The company is in further discussions with partners for the development of additional languages for the internet and telephony markets.

About Lernout & Hauspie

Lernout & Hauspie (L&H) is a global leader in advanced speech and language solutions for vertical markets, computers, automobiles, telecommunications, embedded products, consumer goods and the Internet. The company is making the speech user interface (SUI) the keystone of simple, convenient interaction between humans and technology, and is using advanced translation technology to break down language barriers. The company provides a wide range of offerings, including: customized solutions for corporations; core speech technologies marketed to OEMs; end user and retail applications for continuous speech products in horizontal and vertical markets; and document creation, human and machine translation services, Internet translation offerings, and linguistic tools. L&H's products and services originate in four basic areas: automatic speech recognition (ASR), text-to-speech (TTS), digital speech and music compression (SMC) and text-to-text (translation). For more information, please visit Lernout & Hauspie on the World Wide Web at www.lhsl.com.

This News Release contains forward-looking information that involves risks and uncertainties, including statements about the company's plans, objectives, expectations and intentions. Such statements include, without limitation, discussions concerning the company's strategic direction, new product introductions and developments, and the expected developments of targeted markets. Readers are cautioned that such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially than those set forth in the forward looking statements. The risks and uncertainties include, without limitation, the company's reliance on sales by its customers and strategic partners to generate recurring revenues, the early stage of the speech technology market, the management of growth, the successful integration of the company's recent acquisitions, the ability of the company and its customers and strategic partners to develop and successfully market new products, the ability of the company to enter into advantageous strategic alliances, rapid technological change and competition. The forward-looking statements contained herein speak only as of the date of this News Release. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the company's expectations or any change in events, conditions or circumstance on which any such statement is based.

All product names and trademarks mentioned herein are trademarks of L&H or their respective owners. -0-

        LERNOUT & HAUSPIE SPEECH PRODUCTS N.V. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF OPERATIONS
                           ($ in thousands)
                              (Unaudited)


                     Three Months Three Months Nine Months Nine Months
                           Ended       Ended      Ended       Ended
                         Sept. 30,   Sept. 30,   Sept. 30,  Sept. 30,
                           1999        1998        1999        1998

Total Revenues
 Technologies &
  Solutions             $  31,033   $  20,471   $  82,244   $  56,053
 Applications           $  32,107   $  16,295   $  83,659   $  35,559
 Consulting & Services  $  24,333   $  18,094   $  68,293   $  43,304
    Total Net Revenues  $  87,473   $  54,860   $ 234,196   $ 134,916

Cost of Revenues
 Technologies &
  Solutions             $   5,122   $   3,754   $  10,464   $   8,917
 Applications           $   4,709   $   4,078   $  13,250   $  11,243
 Consulting & Services  $  14,139   $  10,098   $  40,294   $  24,887
    Total Cost of
     Revenues           $  23,970   $  17,930   $  64,008   $  45,047

Gross Profit            $  63,503   $  36,930   $ 170,188   $  89,869

Operating Expenses
 General &
  Administrative        $   9,932   $   5,855   $  26,245   $  15,834
 Marketing & Sales      $  15,577   $   8,875   $  43,511   $  21,354
 Research & Development $  12,473   $   6,436   $  33,088   $  16,293
 Amortization of
  Goodwill              $   8,703   $   3,970   $  23,122   $   9,416
 Write-off of
  In-Process R&D             --     $  44,613        --     $  79,023
 Write-off of
  Goodwill BST               --          --          --     $   3,704
 Other operating
  expense                    --         1,821        --     $   1,821
 Non-recurring expense        ($9)       --     $     926        --
    Total Operating
     Expenses           $  46,676   $  71,570   $ 126,892   $ 147,445

Operating Income (Loss) $  16,827   ($ 34,640)  $  43,296   ($ 57,576)

Other (Income) / Expense
 Share in Loss
  Unconsolidated
  Affiliates            $      92   $     427   $     922   $   1,493
 Other (Income)/
  Expense                 ($1,976)  $   2,029    ($11,144)    ($3,008)
 Debt Conversion
  Expense                    --          --          --     $     891

Net Income (Loss)
 before Taxes and
 Minority Interest      $  18,711   ($ 37,096)  $  53,518   ($ 56,952)

Taxes                   $   7,178   $   1,002   $  19,058   $   1,890

Net Income (Loss)
 before
 Minority Interest      $  11,533   ($ 38,098)  $  34,460   ($ 58,842)

 Minority Interest      $   1,087   $   1,651   $   3,364   $   2,349

Net Income (Loss)       $  10,446  ($ 39,749)   $  31,096   ($ 61,191)


EPS Calculation
 Net Income (Loss)
  Attributable to
  Common Stockholders     $10,446    ($39,749)    $31,096    ($61,191)
 Net Income (Loss) per
  Share - Basic                        ($0.79)                 ($1.25)
 Average number of
  Shares - Basic                       50,622                  49,008
 Net Income (Loss) per
  Share - Diluted           $0.17                   $0.53
 Average Number of
  Shares - Diluted         60,514                  59,106

EPS Calculation before
 one time charges and
 after exchange gain
 Net Income (Loss)
  before one time
  charges and
  after exchange gain   $   9,766   $  10,786   $  26,830   $  25,343
 Number of Shares
  - Diluted                60,514      55,861      59,106      54,138
 EPS before one-time
  charges               $    0.16   $    0.19   $    0.45   $    0.47


        LERNOUT & HAUSPIE SPEECH PRODUCTS N.V. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                           ($ in thousands)
                                             At Sept. 30,  At Dec. 31,
                                                 1999         1998
                                             (unaudited)
ASSETS
CURRENT ASSETS
Cash and marketable securities                $  90,685    $ 189,429
Accounts receivable                           $ 122,871    $  81,212
Recoverable VAT and Tax                       $   3,944    $   2,312
Inventories                                   $   3,965    $   2,649
Prepaid expenses and other current assets     $  14,654    $   8,347

TOTAL CURRENT ASSETS                          $ 236,118    $ 283,949

Deferred tax asset                            $   4,507    $   4,507
Property and equipment, net                   $  24,940    $  23,298
Investments, net                              $  13,538    $  12,103
Goodwill and intangibles, net                 $ 357,844    $ 245,467
Software development costs, net               $   3,386    $   2,210

TOTAL ASSETS                                  $ 640,333    $ 571,534

LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable                                 $   4,499    $   6,652
Current portion of long-term debt             $  13,425    $  17,653
Accounts payable                              $  19,122    $  22,684
Accrued expenses                              $  45,741    $  39,903
TOTAL CURRENT LIABILITIES                     $  82,787    $  86,892

Long-term debt                                $  13,411    $  20,004
TOTAL LIABILITIES                             $  96,198    $ 106,896

Minority interest - PIERS                     $ 149,078    $ 149,232

Common stock and additional paid-in capital   $ 525,115    $ 465,749
Accumulated deficit                           ($118,544)   ($149,640)
Cumulative currency translation adjustment    ($ 11,515)   ($    703)
TOTAL SHAREHOLDERS' EQUITY                    $ 395,056    $ 315,406

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $ 640,333    $ 571,534


                                                            30-Sep-99
                                                           (unaudited)

Cash flows from operating activities :
Net income                                                    $31,096

Adjustments to reconcile net earnings to net
 income provided by operating activities:


 Depreciation                                                   5,282
 Amortization of software development costs                     3,430
 Amortization of goodwill                                      23,122
 Gain on sale of investment                                      (163)
 Share in loss of unconsolidated affiliates                       922
 Loss (gain) on sale of property and equipment                     69
 Changes in operating assets and liabilities :
 Accounts receivable, net                                     (46,308)
 Inventories, net                                                 170
 Prepaid expenses and other current assets                       (826)
 Accounts payable                                              (2,805)
 Accrued expenses                                               7,009
 Deferred revenue                                                (186)


            Net cash provided by operating activities          20,812

Cash flows from investing activities :

 Acquisition of businesses                                    (99,945)
 Licenses and software development costs capitalized          (17,452)
 Additions to property and equipment                           (8,254)
 Proceeds from (purchases of) marketable securities               568
 Investments in and loans provided to associated companies     (5,758)
 Proceeds from sale of property and equipment                     453


            Net cash used by investing activities            (130,388)

Cash flows from financing activities :

 Proceeds from (Repayment of) notes payable to bank            (4,060)
 Repayments of long term debt and capital lease obligations   (28,573)
 Proceeds from long-term debt and capital lease obligations     1,828
 Proceeds from issuance of common and preferred shares         54,379


            Net cash provided by financing activities          23,575


Effect of exchange rate changes on cash and cash equivalents  (12,267)

Increase (decrease) in cash and cash equivalents              (98,268)

Cash and cash equivalents at the beginning of the period      188,464

Cash and cash equivalents at the end of the period          $  90,196