Profitable Revenue Growth Driven by Strong Demand for Covus - A FormScape Solution

FormScape, the leading provider of Document Process Automation solutions, today announced revenues of $5.9 million for its second quarter of fiscal 2005. Revenues for the first half of the year amounted to more than $11.4 million, which represents growth upwards of 18% over the same period last year.

"We continued to make excellent progress with sales up 15% over the same quarter last year and EBITDA of approximately $500k in the quarter. Revenues in the United States, our strongest market at present were up 22% year on year. Deal sizes continued to increase in the quarter and a number of FormScape V3 customers migrated to Covus solutions, demonstrating that existing customers see tremendous value and ROI in migrating beyond traditional forms management to a complete inbound, outbound and document storage solution," says Malcolm Peden, FormScape's Chief Executive Officer.

Comments Peden: "Covus sales continue to exceed expectations demonstrated by the fact that the Company closed its largest ever U.S. license transactions in Q2. We continue to see a high level of interest in Covus among Global 1000 companies and within our installed customer base. This unique solution helps companies improve document processes, enhance customer and supplier service, and drive substantial costs out of the enterprise. FormScape V3 migrations are now occurring at a rapid rate and we continue to make substantial progress with signing new FormScape V3 partners and building the V3 installed base."

Highlights of second quarter fiscal year 2005 include:
- Revenue growth of 18% over the same quarter last year and 22% growth in total revenues in the United States.
- Software license revenue contributed more than 51% of total revenues.
- Strong Gross Margins of 85% in the quarter.
- Maintenance retention at record levels with annual maintenance base now in excess of $7.9 million at the end of the quarter.
- Formation of new FormScape User Group community with regional meetings in UK, New Jersey and North Carolina.
- Completed certification of Covus for SAP NetWeaver.
- Ranked #323 in Software Magazine's 2004 Software 500.
- Ranked #36 on the Fast 50 listing of the fastest growing private companies in the Research Triangle Park area of North Carolina, as determined by Triangle Business Journal, PricewaterhouseCoopers and the Council for Entrepreneurial Development.
- Selected new clients include Rand Refinery, Spartech, Q8 and Dole Deutschland GmbH.
- Existing customers purchasing additional licenses included L'Oreal, Tyco, BB&T, Hanson Americas, De Puy, Invesco and Daimler Chrysler.

"FormScape has continued to build on the strong start it made in Q1 with an excellent set of results for Q2 and continues to add worldwide recognized brands to its customer roster," says Chairman Don Cruickshank. "We are making excellent progress in establishing FormScape as the leading provider of Document Process Automation solutions."