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Press release from Business Wire

Nuance Announces Fiscal 2013 and Fourth Quarter Results

<p class='bwalignc'> <i>Nuance Delivers 12.6% FY 13 Revenue Growth; Key Customer Wins Demonstrate Progress in Attractive New Markets with Recurring Revenue Models</i> </p>

Monday, November 25, 2013

Nuance Announces Fiscal 2013 and Fourth Quarter Results

16:18 EST Monday, November 25, 2013

BURLINGTON, Mass. (Business Wire) -- Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results for its fiscal 2013 and fourth quarter, ended September 30, 2013.

In fiscal 2013, Nuance reported GAAP revenue of $1,855.3 million, a 12.3% increase over GAAP revenue of $1,651.5 million in fiscal 2012. In fiscal 2013, Nuance reported non-GAAP revenue of $1,957.7 million, which includes $102.4 million in revenue lost to accounting treatment in conjunction with acquisitions. Fiscal 2013 non-GAAP revenue grew 12.6% over non-GAAP revenue of $1,738.1 million in fiscal 2012.

In fiscal 2013, Nuance recognized GAAP net loss of ($115.2) million, or ($0.37) per share, compared with GAAP net income of $207.1 million, or $0.65 per diluted share, in fiscal 2012. In fiscal 2013, Nuance reported non-GAAP net income of $428.0 million, or $1.33 per diluted share, compared to $555.9 million, or $1.73 per diluted share, in fiscal 2012. Nuance's fiscal 2013 non-GAAP operating margin was 27.9%, compared to 35.8% in fiscal 2012. Nuance reported cash flow from operations of $395.0 million in fiscal 2013, compared to $473.0 million in fiscal 2012. Nuance ended fiscal 2013 with a balance of cash, cash equivalents and marketable securities of $846.8 million. As of September, Nuance had repurchased 9.805 million shares of common stock, for a total amount of $184.4 million at an average price per share of $18.81.

In the fourth quarter of fiscal 2013, Nuance reported GAAP revenue of $472.2 million, compared to $468.8 million in the fourth quarter of fiscal 2012. Nuance reported non-GAAP revenue of $490.4 million, which includes $18.2 million in revenue lost to accounting treatment in conjunction with acquisitions, compared to $490.1 million in the fourth quarter of fiscal 2012.

In the fourth quarter of fiscal 2013, Nuance recognized GAAP net loss of ($32.3) million, or ($0.10) per share, compared with GAAP net income of $117.6 million, or $0.36 per diluted share, in the fourth quarter of fiscal 2012. In the fourth quarter of fiscal 2013, Nuance reported non-GAAP net income of $95.2 million, or $0.30 per diluted share, compared to non-GAAP net income of $164.9 million, or $0.51 per diluted share, in the fourth quarter of fiscal 2012. Nuance's fourth quarter fiscal 2013 non-GAAP operating margin was 25.3%, down from 37.2% in the fourth quarter of fiscal 2012. Nuance reported cash flow from operations of $93.5 million in the fourth quarter of fiscal 2013, down from $141.5 million in the fourth quarter of fiscal 2012.

Please refer to the “Discussion of Non-GAAP Financial Measures” and to the “GAAP to Non-GAAP Reconciliations,” included elsewhere in this release, for more information regarding the company's use of non-GAAP measures.

“We are pleased that we achieved fourth quarter results consistent with our guidance, and executed on our strategy to enter new growth markets, deliver a new generation of solutions and enable attractive, recurring revenue streams,” said Paul Ricci, Nuance Chairman and CEO.

Highlights from the quarter include:

  • Healthcare – For Nuance's healthcare solutions, fourth quarter fiscal 2013 non-GAAP revenue was $226.7 million and fiscal 2013 non-GAAP revenue was $911.6 million. We secured new business with key healthcare customers including Adventist, Brigham and Women's Hospital, Brooklyn Hospital, Hackensack University, Steward, SW General, Tenet, UAB, UMH, Union, Unity, US Veterans Administration and Wilson.
  • Mobile & Consumer – ForNuance's mobile and consumer solutions, fourth quarter fiscal 2013 non-GAAP revenue was $120.3 million and fiscal 2013 non-GAAP revenue was $479.2 million. We secured new business or design wins with key mobile customers including Charter Communications, Cisco, Daimler, DoCoMo, GM, Huawei, Hyundai, iMobile, Kyocera, Mahindra, Motospeak, Nissan, Nokia, Panasonic, Roadtrack, Samsung, TCL CarTel, Telstra, TIM Brazil, Toyota, Verizon, Vodafone Spain, Vonage and VW.
  • Enterprise – For Nuance's enterprise solutions, fourth quarter fiscal 2013 non-GAAP revenue was $86.4 million and fiscal 2013 non-GAAP revenue was $323.5 million. We secured new business with key enterprise customers including Allstate, Australia Department of Health Services, Barclays, Cathay Pacific, Charles Schwab, CIBC, DBS Bank, FIS, Garanti Bank, ING, Kaiser, Korea Telecomm, Nice, Optus, PG&E, Prime Therapeutics, PSE&G, Singtel, State of Illinois, TalkTalk, U.K. HM Revenue & Customs, Verint, Vodafone, VSP, WellPoint, Wells Fargo and Windstream.
  • Imaging – For Nuance's document imaging solutions, fourth quarter fiscal 2013 non-GAAP revenue was $57.0 million and fiscal 2013 non-GAAP revenue was $243.4 million. We secured new business with key imaging customers including Adidas, Bank Danamon, Bart's, Canon, City of Edmonton, Datev, HP, Ikea, Kodak, Nationwide, Ricoh, Steptoe & Johnson and Xerox.

Conference Call and Prepared Remarks
Nuance is providing a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts with additional time and detail for analyzing results in advance of the company's quarterly conference call. The remarks will be available at http://www.nuance.com/earnings-results/ in conjunction with the press release.

As previously scheduled, the conference call will begin today, November 25, 2013 at 5:00 pm EST and will include only brief comments followed by questions and answers. The prepared remarks will not be read on the call. To access the live broadcast, please visit the Investor Relations section of Nuance's Website at www.nuance.com. The call can also be heard by dialing (800) 230-1074 or (612) 288-0329 at least five minutes prior to the call and referencing code 304712. A replay will be available within 24 hours of the announcement by dialing (800) 475-6701 or (320) 365-3844 and using the access code 304712.

About Nuance Communications, Inc
Nuance Communications, Inc. (NASDAQ: NUAN) is a leading provider of voice and language solutions for businesses and consumers around the world. Its technologies, applications and services make the user experience more compelling by transforming the way people interact with devices and systems. Every day, millions of users and thousands of businesses experience Nuance's proven applications. For more information, please visit www.nuance.com.

Trademark reference: Nuance, the Nuance logo, Dragon Medical and eScription are registered trademarks or trademarks of Nuance Communications, Inc. or its affiliates in the United States and/or other countries. All other trademarks referenced herein are the property of their respective owners.

Safe Harbor and Forward-Looking Statements
Statements in this document regarding future performance and our management's future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” or “estimates” or similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: fluctuations in demand for our existing and future products; economic conditions in the United States and internationally; our ability to control and successfully manage our expenses and cash position; the effects of competition, including pricing pressure; possible defects in our products and technologies; our ability to successfully integrate operations and employees of acquired businesses; the ability to realize anticipated synergies from acquired businesses; and the other factors described in our annual report on Form 10-K for the fiscal year ended September 30, 2012 and our quarterly reports filed with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

The information included in this press release should not be viewed as a substitute for full GAAP financial statements.

Discussion of Non-GAAP Financial Measures
We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the annual financial plan. The board of directors and management utilize these non-GAAP measures and results (in addition to the GAAP results) to determine our allocation of resources. In addition and as a consequence of the importance of these measures in managing the business, we use non-GAAP measures and results in the evaluation process to establish management's compensation. For example, our annual bonus program payments are based upon the achievement of consolidated non-GAAP revenue and consolidated non-GAAP earnings per share financial targets. We consider the use of non-GAAP revenue helpful in understanding the performance of our business, as it excludes the purchase accounting impact on acquired deferred revenue and other acquisition-related adjustments to revenue. We also consider the use of non-GAAP earnings per share helpful in assessing the organic performance of the continuing operations of our business. By organic performance we mean performance as if we had owned an acquired business in the same period a year ago. By continuing operations we mean the ongoing results of the business excluding certain unplanned costs. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP revenue and earnings per share. Consistent with this approach, we believe that disclosing non-GAAP revenue and non-GAAP earnings per share to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP revenue and earnings per share, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and twelve months ended September 30, 2013 and 2012, and, in particular, in evaluating our revenue and earnings per share, our management has either included or excluded items in six general categories, each of which is described below.

Acquisition-Related Revenue and Cost of Revenue.
We provide supplementary non-GAAP financial measures of revenue, which include revenue related to acquisitions, primarily from Equitrac, Quantim and J.A. Thomas for the three months ended September 30, 2013 and primarily from Quantim, SafeCom, Equitrac and J.A. Thomas for the twelve months ended September 30, 2013, that would otherwise have been recognized but for the purchase accounting treatment of these transactions. Non-GAAP revenue also includes revenue that we would have otherwise recognized had we not acquired intellectual property and other assets from the same customer. Because GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. These non-GAAP adjustments are intended to reflect the full amount of such revenue. We include non-GAAP revenue and cost of revenue to allow for more complete comparisons to the financial results of historical operations, forward-looking guidance and the financial results of peer companies. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we generally will incur these adjustments in connection with any future acquisitions.

Acquisition-Related Costs, Net.
In recent years, we have completed a number of acquisitions, which result in operating expenses which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward-looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition-related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

These acquisition-related costs are included in the following categories: (i) transition and integration costs; (ii) professional service fees; and (iii) acquisition-related adjustments. Although these expenses are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions. These categories are further discussed as follows:

(i) Transition and integration costs. Transition and integration costs include retention payments, transitional employee costs, earn-out payments treated as compensation expense, as well as the costs of integration-related services, including services provided by third parties.

(ii) Professional service fees. Professional service fees include third party costs related to the acquisition, and legal and other professional service fees associated with disputes and regulatory matters related to acquired entities.

(iii) Acquisition-related adjustments. Acquisition-related adjustments include adjustments to acquisition-related items that are required to be marked to fair value each reporting period, such as contingent consideration, and other items related to acquisitions for which the measurement period has ended, such as gains or losses on settlements of pre-acquisition contingencies.

Amortization of Acquired Intangible Assets.
We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets.

Costs Associated with IP Collaboration Agreement.
In order to gain access to a third party's extensive speech recognition technology and natural language and semantic processing technology, we have entered into IP collaboration agreements, with terms ranging between five and six years. Depending on the agreement, some or all intellectual property derived from these collaborations will be jointly owned by the two parties. For the majority of the developed intellectual property, we will have sole rights to commercialize such intellectual property for periods ranging between two to six years, depending on the agreement. For non-GAAP purposes, we consider these long-term contracts and the resulting acquisitions of intellectual property from this third-party over the agreements' terms to be an investing activity, outside of our normal, organic, continuing operating activities, and are therefore presenting this supplemental information to show the results excluding these expenses. We do not exclude from our non-GAAP results the corresponding revenue, if any, generated from these collaboration efforts. Although our bonus program and other performance-based incentives for executives are based on the non-GAAP results that exclude these costs, certain engineering senior management are responsible for execution and results of the collaboration agreement and have incentives based on those results.

Non-Cash Expenses.
We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; (ii) certain accrued interest; and (iii) certain accrued income taxes. These items are further discussed as follows:

(i) Stock-based compensation. Because of varying available valuation methodologies, subjective assumptions and the variety of award types, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of operating results to peer companies, as well as to times in our history when stock-based compensation was more or less significant as a portion of overall compensation than in the current period. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and the options and restricted awards granted are influenced by the Company's stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods.

(ii) and (iii) Certain accrued interest and income taxes. We also exclude certain accrued interest and certain accrued income taxes because we believe that excluding these non-cash expenses provides senior management, as well as other users of the financial statements, with a valuable perspective on the cash-based performance and health of the business, including the current near-term projected liquidity. These non-cash expenses will continue in future periods.

Other Expenses.
We exclude certain other expenses that are the result of unplanned events to measure operating performance and current and future liquidity both with and without these expenses; and therefore, by providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as restructuring charges, asset impairments and other charges (credits), net. These events are unplanned and arose outside of the ordinary course of continuing operations. These items also include adjustments from changes in fair value of share-based instruments relating to the issuance of our common stock with security price guarantees payable in cash. Other items such as gains or losses on non-controlling strategic equity interests and contributions of $5.0 million to the Nuance Foundation, which was established to provide grants to educational institutions and other non-profit organizations to advance charitable, scientific, literary or educational purposes, are also excluded.

We believe that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance.

Financial Tables Follow

                   
Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
 
Three months ended Twelve months ended
September 30, September 30,
2013 2012 2013 2012
 
Revenues:
Product and licensing $ 192,302 $ 209,227 $ 753,665 $ 740,726
Professional services and hosting 208,436 196,886 832,428 673,943
Maintenance and support   71,505     62,668     269,186     236,840  
Total revenues   472,243     468,781     1,855,279     1,651,509  
 
Cost of revenues:
Product and licensing 24,285 21,713 99,381 74,837
Professional services and hosting 146,750 122,153 550,881 424,733
Maintenance and support 12,224 12,319 52,705 45,325
Amortization of intangible assets   15,476     15,300     63,583     60,034  
Total cost of revenues   198,735     171,485     766,550     604,929  
 
Gross profit   273,508     297,296     1,088,729     1,046,580  
 
Operating expenses:
Research and development 77,673 63,311 292,081 225,441
Sales and marketing 105,812 101,298 420,184 369,205
General and administrative 51,126 47,838 176,654 163,318
Amortization of intangible assets 26,528 24,391 105,258 95,416
Acquisition-related cost, net 6,962 12,374 29,685 58,746
Restructuring and other charges, net   1,716     1,466     16,385     8,268  
Total operating expenses   269,817     250,678     1,040,247     920,394  
 
Income from operations 3,691 46,618 48,482 126,186
 
Other expense, net   (36,556 )   (24,969 )   (145,162 )   (60,884 )
 
(Loss) income before income taxes (32,865 ) 21,649 (96,680 ) 65,302
 
(Benefit) provision from income taxes   (545 )   (95,992 )   18,558     (141,833 )
 
Net (loss) income $ (32,320 ) $ 117,641   $ (115,238 ) $ 207,135  
 
Net (loss) income per share:
Basic $ (0.10 ) $ 0.38   $ (0.37 ) $ 0.67  
Diluted $ (0.10 ) $ 0.36   $ (0.37 ) $ 0.65  
 
Weighted average common shares outstanding:
Basic   310,944     309,307     313,587     306,371  
Diluted   310,944     322,424     313,587     320,822  
 
 
 
Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
         
 
 
ASSETS September 30, 2013 September 30, 2012
Unaudited
 
Current assets:
Cash and cash equivalents $ 808,118 $ 1,129,761
Marketable securities 38,728 -
Accounts receivable, net 382,741 381,417
Prepaid expenses and other current assets   179,940   190,128
Total current assets 1,409,527 1,701,306
 
Land, building and equipment, net 143,465 116,134
Goodwill 3,293,198 2,955,477
Intangible assets, net 953,278 906,538
Other assets   159,135   119,585
Total assets $ 5,958,603 $ 5,799,040
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Current portion of long-term debt $ 246,040 $ 148,542
Redeemable convertible debentures - 231,552
Contingent and deferred acquisition payments - 49,685
Accounts payable and accrued expenses 305,441 328,374
Deferred revenue   253,753   206,610
Total current liabilities 805,234 964,763
 
Long-term portion of debt 2,108,091 1,735,811
Deferred revenue, net of current portion 160,823 108,481
Other liabilities   246,441   243,279
Total liabilities   3,320,589   3,052,334
 
Equity component of currently redeemable convertible debentures   -   18,430
Stockholders' equity   2,638,014   2,728,276
 
Total liabilities and stockholders' equity $ 5,958,603 $ 5,799,040
 
 
 
Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
      Three months ended       Twelve months ended
September 30, September 30,
2013     2012 2013     2012
 
Cash flows from operating activities:
Net (loss) income $ (32,320 ) $ 117,641 $ (115,238 ) $ 207,135
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization 53,550 47,665 208,659 187,183
Stock-based compensation 45,217 58,165 159,325 174,581
Non-cash interest expense 11,096 10,709 40,019 35,497
Deferred tax benefit (1,293 ) (92,347 ) (2,472 ) (151,547 )
Loss (gain) on non-controlling strategic equity interest - - 790 (13,726 )
Other 4,103 504 (6,537 ) 4,016
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (1,548 ) (21,880 ) 25,165 (55,210 )
Prepaid expenses and other assets 23,237 14,861 10,988 13,881
Accounts payable (7,028 ) 153 (26,843 ) 22,645
Accrued expenses and other liabilities (12,576 ) (2,796 ) 16,506 8,939
Deferred revenue   11,057     8,781     84,648     39,605  
Net cash provided by operating activities   93,495     141,456     395,010     472,999  
Cash flows from investing activities:
Capital expenditures (13,911 ) (10,901 ) (55,588 ) (62,910 )
Payments for business and technology acquisitions, net of cash acquired (32,882 ) (229,128 ) (607,653 ) (884,945 )
Purchases of marketable securities and other investments (38,987 ) - (39,435 ) (15,156 )
Proceeds from sales and maturities of marketable securities and other investments 8,768 778 8,768 31,789
Change in restricted cash balances   -     -     -     6,747  
Net cash used in investing activities   (77,012 )   (239,251 )   (693,908 )   (924,475 )
Cash flows from financing activities:
Payments of debt (278,281 ) (1,626 ) (425,634 ) (6,605 )
Proceeds from long-term debt, net of issuance costs 273,407 688,908 625,155 1,364,925
Payments for repurchases of common stock (81,352 ) - (184,388 ) (199,997 )
Payments of other long-term liabilities (59 ) (380 ) (1,688 ) (8,525 )
(Payments for) proceeds from settlement of share-based derivatives, net - - (3,801 ) 9,020
Excess tax benefits on employee equity awards - 500 - (3,583 )
Proceeds from issuance of common stock from employee stock plans 11,485 8,884 30,216 27,747
Cash used to net share settle employee equity awards   (6,928 )   (10,822 )   (60,517 )   (49,947 )
Net cash (used in) provided by financing activities   (81,728 )   685,464     (20,657 )   1,133,035  
Effects of exchange rate changes on cash and cash equivalents   312     2,537     (2,088 )   978  
Net (decrease) increase in cash and cash equivalents (64,933 ) 590,206 (321,643 ) 682,537
Cash and cash equivalents at beginning of period   873,051     539,555     1,129,761     447,224  
Cash and cash equivalents at end of period $ 808,118   $ 1,129,761   $ 808,118   $ 1,129,761  
 
 
 
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Unaudited
      Three months ended       Twelve months ended
September 30 September 30
2013     2012 2013     2012
 
GAAP revenue $ 472,243 $ 468,781 $ 1,855,279 $ 1,651,509
Acquisition-related revenue adjustments: product and licensing 10,728 17,624 70,112 74,060
Acquisition-related revenue adjustments: professional services and hosting 6,270 2,775 27,139 5,864
Acquisition-related revenue adjustments: maintenance and support   1,148     908     5,100     6,632  
Non-GAAP revenue $ 490,389   $ 490,088   $ 1,957,630   $ 1,738,065  
 
GAAP cost of revenue $ 198,735 $ 171,485 $ 766,550 $ 604,929
Cost of revenue from amortization of intangible assets (15,476 ) (15,300 ) (63,583 ) (60,034 )
Cost of revenue adjustments: product and licensing (1,2) 956 2,002 6,117 8,135
Cost of revenue adjustments: professional services and hosting (1,2) (4,925 ) (8,818 ) (16,139 ) (25,981 )
Cost of revenue adjustments: maintenance and support (1,2)   (446 )   (330 )   (3,537 )   (956 )
Non-GAAP cost of revenue $ 178,844   $ 149,039   $ 689,408   $ 526,093  
 
GAAP gross profit $ 273,508 $ 297,296 $ 1,088,729 $ 1,046,580
Gross profit adjustments   38,037     43,753     179,493     165,392  
Non-GAAP gross profit $ 311,545   $ 341,049   $ 1,268,222   $ 1,211,972  
 
GAAP income from operations $ 3,691 $ 46,618 $ 48,482 $ 126,186
Gross profit adjustments 38,037 43,753 179,493 165,392
Research and development (1) 9,548 10,258 34,957 29,565
Sales and marketing (1) 15,817 18,187 58,451 54,281
General and administrative (1) 13,532 20,238 43,687 63,233
Amortization of intangible assets 26,528 24,391 105,258 95,416
Costs associated with IP collaboration agreements 4,937 5,250 20,582 21,000
Acquisition-related costs, net 6,962 12,374 29,685 58,746
Restructuring and other charges, net 1,716 1,466 16,385 8,268
Other   3,543     -     9,732     -  
Non-GAAP income from operations $ 124,311   $ 182,535   $ 546,712   $ 622,087  
 
GAAP (benefit) provision from income taxes $ (545 ) $ (95,992 ) $ 18,558 $ (141,833 )
Non-cash taxes   5,065     97,741     2,450     160,883  
Non-GAAP provision for income taxes $ 4,520   $ 1,749   $ 21,008   $ 19,050  
 
GAAP net (loss) income $ (32,320 ) $ 117,641 $ (115,238 ) $ 207,135
Acquisition-related adjustment - revenue (2) 18,146 21,307 102,351 86,556
Acquisition-related adjustment - cost of revenue (2) (1,905 ) (2,336 ) (8,671 ) (8,700 )
Acquisition-related costs, net 6,962 12,374 29,685 58,746
Cost of revenue from amortization of intangible assets 15,476 15,300 63,583 60,034
Amortization of intangible assets 26,528 24,391 105,258 95,416
Non-cash stock-based compensation (1) 45,217 58,165 159,325 174,581
Non-cash interest expense 11,096 10,709 40,019 35,497
Non-cash income taxes (5,065 ) (97,741 ) (2,450 ) (160,883 )
Costs associated with IP collaboration agreements 4,937 5,250 20,582 21,000
Change in fair value of share-based instruments 862 (1,647 ) 6,615 (7,997 )
Loss or (gain) on non-controlling strategic equity interest - - 790 (13,726 )
Restructuring and other charges, net 1,716 1,466

 

16,385 8,268
Other   3,543     -     9,732     -  
Non-GAAP net income $ 95,193   $ 164,879   $ 427,966   $ 555,927  
 
Non-GAAP diluted net income per share $ 0.30   $ 0.51   $ 1.33   $ 1.73  
 
Diluted weighted average common shares outstanding   317,574     322,424     322,952     320,822  
 
Schedules may not add due to rounding.
 
 
 
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
                   
Three months ended Twelve months ended
September 30, September 30,
2013 2012 2013 2012
 

(1) Non-Cash Stock-Based Compensation

Cost of product and licensing $ 271 $ 19 $ 769 $ 137
Cost of professional services and hosting 5,603 9,133 17,924 26,409
Cost of maintenance and support 446 330 3,537 956
Research and development 9,548 10,258 34,957 29,565
Sales and marketing 15,817 18,187 58,451 54,281
General and administrative   13,532     20,238     43,687     63,233  
Total $ 45,217   $ 58,165   $ 159,325   $ 174,581  
 

(2) Acquisition-Related Revenue and Cost of Revenue

Revenue $ 18,146 $ 21,307 $ 102,351 $ 86,556
Cost of product and licensing (1,227 ) (2,021 ) (6,886 ) (8,272 )
Cost of professional services and hosting   (678 )   (315 )   (1,785 )   (428 )
Total $ 16,241   $ 18,971   $ 93,680   $ 77,856  
 
 
 
Nuance Communications, Inc.
Supplemental Financial Information – GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
                                         
 

Healthcare

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
2012 2012 2012 2012 2012 2013 2013 2013 2013 2013
GAAP Revenue $145.1 $149.7 $184.5 $189.3 $668.6 $204.7 $219.1 $230.0 $220.0 $873.8
Adjustment $0.2 $0.2 $0.0 $0.4 $0.8 $12.7 $10.2 $8.1 $6.7 $37.8
Non-GAAP Revenue $145.3 $149.9 $184.5 $189.7 $669.4 $217.4 $229.3 $238.1 $226.7 $911.6
 

Mobile & Consumer

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
2012 2012 2012 2012 2012 2013 2013 2013 2013 2013
GAAP Revenue $103.4 $110.3 $126.0 $143.2 $483.0 $128.8 $113.0 $108.7 $117.2 $467.7
Adjustment $5.1 $4.8 $6.4

$9.0

$25.3 $2.9 $3.2 $2.3 $3.1 $11.5
Non-GAAP Revenue $108.5 $115.1 $132.4 $152.2 $508.3 $131.7 $116.2 $111.0 $120.3 $479.2
 

Enterprise

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
2012 2012 2012 2012 2012 2013 2013 2013 2013 2013
GAAP Revenue $72.2 $79.6 $74.1 $89.1 $315.0 $83.7 $72.9 $78.1 $85.5 $320.2
Adjustment $3.6 $11.8 $0.4 $1.2 $17.0 $0.0 $1.6 $0.8 $0.9 $3.3
Non-GAAP Revenue $75.8 $91.4 $74.5 $90.3 $332.0 $83.7 $74.5 $78.9 $86.4 $323.5
 

Imaging

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
2012 2012 2012 2012 2012 2013 2013 2013 2013 2013
GAAP Revenue $39.9 $50.7 $47.1 $47.2 $184.9 $45.1 $46.0 $53.0 $49.5 $193.6
Adjustment $12.5 $10.6 $9.7 $10.7 $43.5 $14.5 $18.0 $9.8 $7.5 $49.8
Non-GAAP Revenue $52.4 $61.3 $56.8 $57.9 $228.4 $59.6 $64.0 $62.8 $57.0 $243.4
 
Schedules may not add due to rounding.

Nuance Communications, Inc.
For Investors
Kevin Faulkner, 408-992-6100
kevin.faulkner@nuance.com
or
For Press and Investors
Richard Mack, 781-565-5000
richard.mack@nuance.com

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