Scala Reports 31% Year-on-Year Increase in License and Maintenance Revenue for Q3 2001

14% total revenue growth year-on-year, quarterly operating and net profits also reported as Company continues firmly on track to meeting 2001 profitability objective

22 October 2001: Scala Business Solutions NV (Euronext Amsterdam: SCALA) today announced increases in license and maintenance revenue for the quarter ending 30 September 2001 compared to the same period in 2000. Total revenue for the quarter showed the first year-on-year growth since the second quarter 1999. The company also reported an operating profit (before depreciation and amortisation) for the fourth consecutive quarter and a net profit for the third consecutive quarter, providing clear evidence that its strategy of delivering the collaborative ERP software that global companies need is producing continuing and sustainable profitability.

Firmly On Track

Collectively, license and maintenance revenue was USD 12.3 million, an increase of 31.1 percent compared to the same quarter in 2000. License revenue was USD 5.9 million, up by 53.4 percent compared to the same quarter in 2000, although a decrease of 15.1 percent compared to Q2 2001 reflecting normal seasonality in sales. Maintenance revenue was USD 6.4 million, an increase of 15.5 percent compared to the same quarter in 2000, and an increase of 5.6 percent compared to Q2 2001. Consulting revenue was USD 4.2 million, down 10.2 percent compared to the same quarter in 2000, in line with managements expectations.

Total revenue during the third quarter 2001 was USD 16.5 million, an increase of 13.9 percent compared to USD 14.5 million in the same quarter last year, and represents the first year-on-year total revenue growth since Q2 1999. The decrease of 4.9 percent on Q2 2001 is in line with managements expectations. Operating profit before depreciation and amortisation was USD 2.3 million, contrasting dramatically with the operating loss before depreciation and amortisation of USD 2.7 million reported in Q3 2000. It is a marginal decrease compared to the operating profit before depreciation and amortisation of USD 2.4 million reported in Q2 2001. Net profit for Q3 2001 was USD 0.6 million, again in sharp contrast to the net loss of USD 7.0 million in the third quarter of 2000.
For the nine months to 30 September 2001, net profit stands at USD 2.1 million, compared to a net loss of USD 31.7 million for the same period last year.

Total costs of revenue and operating expenses in Q3 2001 were USD 14.2 million, a decrease of 4.8 percent compared to the second quarter 2001, and a reduction of 17.4 percent from USD 17.2 million in the third quarter 2000. Up to 30 September 2001, costs of revenue and operating expenses totaled USD 43.2 million, a reduction of USD 25.1 million (36.7 percent) compared to the same period last year.

Chris Houle, Scalas Chief Executive Officer, reaffirms that maintaining operational profitability continues to be the prime goal for 2001 and beyond, and aims to build on the companys success this year with increasingly-solid operational profit and revenue growth even in the current economic climate. We recognised the signs of a downturn in the economy and took action well in advance in order to reach a workable cost base in a weak market," Houle says. Our clear focus has allowed us to continue our commitment to investing in new product development, while maintaining high levels of service to our customers. The success of this strategy is reflected in the encouraging growth we are seeing in license and maintenance revenues. The international strengths of our software mean we can continue with our strategy of specifically targeting global contracts to roll out our standard, collaborative ERP system across the subsidiaries, divisions and suppliers of global companies. As a result, we are firmly on track to achieving our revenue and profitability goals for this year."

Building for Future Growth

In July, Scala won the award from Microsoft as Best ERP Solution of The Year" (see press release 16 July), following a rigorous selection process that judged ERP packages from all continents. Houle comments, Having seen the criteria in which we had not only to pass, but also beat other vendors, I am proud to have Microsoft publicly recognise our product as the best on the market."

During the quarter, Scala acquired sophisticated ERP workflow and graphical user interface development software from New Miracle AG of Switzerland that will allow Scalas R&D organisation to realise the companys future product development plans at a much faster rate (see press release 28 August). Scala presented details of this acquisition at the companys second bi-annual Corporate Client Council (CCC) meeting in September to 40 key customers representing major multinational organisations. The overwhelming feedback from both CCC meetings this year confirms the support for collaborative ERP by global customers as the method of choice for connecting and working in partnership with their customers, partners and suppliers.
The September CCC meeting was held in Hamburg only two weeks after the terrorist attacks in the United States, and we are extremely grateful to our customers for their attendance," Houle says. While everyone recognised that the attacks will have an impact on an already-weakening global economy, none foresaw that it would have a direct negative effect on their organisations or their plans to continue with their iScala-based e-business strategies or continued roll-out of Scala products."

Houle says the company intends to continue increasing shareholder value in the long term. We are in a unique position within a large niche, and the possibilities for our future growth are substantial." he states. We are generally the low-cost solution for our global customers compared to the high-cost of many of our competitors. Therefore we are in a position to offer an alternative which is more attractive when there is less money to spend. But we remain cautious, paying close attention to the market and to our customers."

Q3 2001 Highlights

As well as an award, acquisition and new partnerships, Scala signed major contracts during the third quarter 2001, especially for its iScala Internet software products, many of which were to roll out Scala's software on a worldwide basis across the subsidiaries and divisions of global enterprises.

New partners -- Scala signed major partnerships throughout the quarter in order to further establish and consolidate its presence in major markets and utilise its international capabilities to secure market share. These include: Digital Design, an established name in Russia which has excellent experience of large-scale implementations; JSeed Information Systems, which will concentrate on delivering Scalas ERP and e-business solutions to local and international companies in Japan; and KEY Partners SA, a Swiss-based partner who will work with global roll-out implementations across the subsidiaries and divisions of multinationals.

New Miracle software acquisition -- see above.

Launch of Scala Smart Tags for Microsoft® Office XP and the iScala Adapter for BizTalk Server -- Scalas Smart Tags for Office XP is a development that allows access to information held in a Scala system, for integration with Office XP applications such as Word or Excel, without the need to log in to the Scala system. The iScala Adapter for BizTalk Server further strengthens the iScala Connectivity Solution, enabling the exchange, integration and management of documents between departments and companies -- whether they use Scala or virtually any other ERP application.

ERP Solution of The Year award -- see above.

Johnson Controls International (JCI) -- Following the evaluation of many software vendors, JCI, the international leader in building automation, security access and fire alarm systems, signed a contract to implement Scala across the Middle East. The company cited the richness of functionality and top-class" project management module, as well as the Scala teams high level of commitment, as key to choosing Scala.

ITT Flygt -- This global industrial manufacturer of pumps has selected the iScala Global Commerce Server and the iScala Data Exchange Server to integrate their bespoke quotation system with online activities and back office processes. This will centralise distribution centres to supply their customers worldwide, saving massive amounts of manual processing through business transaction automation.

Alarmcom (a Siemens subsidiary) -- Scala has planned and implemented an e-commerce project that fully-integrates Alarmcom's business from the website to the back office. The world's leading supplier of fire and intrusion detection systems aims to use this project to drive down costs, while ensuring that the new channel to customers will allow it to gain an even greater hold over market share.

Corporate Client Council (CCC) -- the second of Scalas bi-annual Triple Cs" was held in Hamburg in September (see above). The positive feedback from participants adds further fuel to Scalas determination that enabling automated trade between customers, partners and suppliers via a collaborative ERP system is the right way to progress its product strategy.

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Notes to Editors

Forward-Looking Statements

Management believes certain statements in this press release may constitute forward-looking statements with respect to the financial condition, results of operations and activities of Scala Business Solutions NV with respect to these items. These forward-looking statements are based on currently available competitive, financial and economic data together with managements views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied in the forward-looking statements. Such differences may result from, but are not limited to, changes in the demand for business management and e-business products, competitive pressures, changes in the financial condition of the Companys major commercial customers and the Companys future ability to continue to develop and expand its product and service offerings to address emerging business demand and technological trends.

About Scala Business Solutions

Scala Business Solutions creates collaborative ERP software -- integrating Internet technology and traditional ERP functionality -- to make global business simple. With Scala, global companies can fully integrate all their ERP systems anywhere in the world, whether in a subsidiary, division or headquarters, and extending to their partners and suppliers. Scalas collaborative ERP software makes it possible for global companies to meet the requirements for advanced e-business as well as use a standard ERP product for managing traditional business processes. This enables them to gain measurable benefits from trading electronically, building a private exchange or global portal, or optimising the supply chain.
From offices in Europe, North America and the Far East, and through its network of partners and dealers, Scala delivers software and services that are available in over 30 languages in more than 100 countries.

Scala is listed on the Euronext Amsterdam Stock Exchange (symbol: SCALA). 2000 revenue was USD 71.2 million.

Visit Scalas website at www.scala.net for press information including press releases, information for investors, and company and product information.

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