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8-K - FORM 8-K - Nuance Communications, Inc. | b86153e8vk.htm |
Exhibit 99.1 |
Contacts: |
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For Press and Investors
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For Investors | |
Richard Mack
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Kevin Faulkner | |
Nuance Communications, Inc.
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Nuance Communications, Inc. | |
Tel: 781-565-5000
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Tel: 408-992-6100 | |
Email: richard.mack@nuance.com
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Email: kevin.faulkner@nuance.com |
Nuance Announces Preliminary Results for Second Quarter Fiscal 2011
Company to Report Final Q2 11 Results on May 10, 2011
BURLINGTON, Mass., April 21, 2011 Nuance Communications, Inc. (NASDAQ: NUAN) today
announced preliminary revenue, EPS and cash flow from operations results for the second
quarter fiscal 2011, ended March 31, 2011. Nuance issued the preliminary results in conjunction
with todays executive appointments (see related release).
Based on preliminary financial data, Nuance expects Q2 11 non-GAAP revenues between $329 million
and $332 million; GAAP revenues between $316 million and $319 million; non-GAAP net income between
$0.31 and $0.32 per diluted share; GAAP net (loss)/income between $(0.01) and $0.00 per share; and,
cash flow from operations of approximately $95 million. The preliminary expectations are subject
to revision until the Company reports final Q2 11 results on May 10, 2011.
Improvements in imaging, healthcare and enterprise, and continued performance in mobile & consumer
helped to produce strong results in the quarter, said Tom Beaudoin, chief financial officer at
Nuance. We achieved our revenue goals while maintaining strict focus on our operations and
strategic investments.
On February 9, 2011, Nuance provided initial guidance for Q2 11 of non-GAAP revenues between $315
million and $327 million; GAAP revenues between $304 million and $316 million; non-GAAP net income
between $0.28 and $0.31 per diluted share; and a GAAP net loss between $(0.07) and $(0.04) per
share.
Nuance to Host Second Quarter Conference Call on May 10, 2011
The Company will release results for its fiscal second quarter ended March 31, 2011, after the
market close on Tuesday, May 10, 2011. Nuance will provide a copy of prepared conference call
remarks in combination with its press release. This process and these remarks are offered to
provide shareholders and analysts additional time and detail for analyzing Nuances results. The
remarks will be available at www.nuance.com/earningsresults in conjunction with the press release.
The conference call will begin at 5:00 p.m. ET 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 Nuances Website at www.nuance.com.
The call can also be heard by dialing (877) 777-1967 or (612) 332-0637 at least five minutes prior
to the call and
referencing conference code 201963. 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 201963.
About Nuance Communications
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 Nuances proven
applications. For more information, please visit www.nuance.com.
###
Safe Harbor and Forward-Looking Statements
Statements in this document regarding Nuances preliminary revenue, EPS and cash flow from
operations results for the second quarter fiscal 2011, and improvements in imaging, healthcare and
enterprise and continued performance in mobile & consumer 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 Nuances existing and future products; economic conditions in the United
States and abroad; Nuances ability to control and successfully manage its expenses and cash
position; the effects of competition, including pricing pressure; possible defects in Nuances
products and technologies; the ability of Nuance to successfully integrate operations and employees
of acquired businesses; the ability to realize anticipated synergies from acquired businesses; and
the other factors described in Nuances annual report on Form 10-K for the fiscal year ended
September 30, 2010 and Nuances quarterly reports on Form 10-Q filed with the Securities and
Exchange Commission. Nuance disclaims 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
Management utilizes 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 managements 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 months ended March 31, 2011, 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 are described below.
Acquisition-Related Revenue and Cost of Revenue.
The Company provides supplementary non-GAAP financial measures of revenue, which include revenue
related to acquisitions, primarily from eCopy for the three months ended March 31, 2011, that would
otherwise have been recognized but for the purchase accounting treatment of these transactions.
Non-GAAP revenue also includes revenue that the Company would have otherwise recognized had the
Company not acquired intellectual property and other assets from the same customer during the same
quarter. Because GAAP accounting requires the elimination of this revenue, GAAP results alone do
not fully capture all of the Companys economic activities. These non-GAAP adjustments are intended
to reflect the full amount of such revenue. The Company includes 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. The Company believes 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, the
Company historically has 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, the Company generally will incur these adjustments
in connection with any future acquisitions.
Acquisition-Related Costs, Net.
In recent years, the Company has completed a number of acquisitions, which result in operating
expenses which would not otherwise have been incurred. The Company provides 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. The Company considers 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
the control of the Company. Furthermore, the Company does 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 the Companys ability to utilize its
existing assets and estimate the long-term value that acquired assets will generate for the
Company. The Company believes 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, the Company 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 provided by third parties.
(ii) Professional service fees. Professional service fees include direct costs of the
acquisition, as well as post-acquisition 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.
The Company excludes 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 the Companys acquired intellectual property is treated in a
comparable manner to its internally developed intellectual property. Although the Company excludes
amortization of acquired intangible assets from its non-GAAP expenses, the Company believes 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 partys extensive speech recognition technology and natural
language and semantic processing technology, Nuance has entered into two IP collaboration
agreements, spanning six years and five years, respectively. All intellectual property derived
from these collaborations will be jointly owned by the two parties, but Nuance will have sole
rights to commercialize this intellectual property during the term of these agreements. For
non-GAAP purposes, Nuance considers 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 its normal, organic, continuing operating activities, and is therefore presenting this
supplemental information to show the results excluding these expenses. Nuance does not exclude from
its non-GAAP results the corresponding revenue, if any, generated from these collaboration efforts.
Although the Companys 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.
The Company provides 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, the Company believes that the exclusion of
stock-based compensation allows for more accurate comparisons of operating results to peer
companies, as well as to times in the Companys history when stock-based compensation was more
or less significant as a portion of overall compensation than in the current period. The
Company evaluates 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 Companys stock price and other factors such as volatility that
are beyond the Companys 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, the Company does not include such charges in operating plans.
Stock-based compensation will continue in future periods.
(ii and iii) Certain accrued interest and income taxes. The Company also excludes certain
accrued interest and certain accrued income taxes because the Company believes 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.
The Company excludes 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, the Company believes management and the users of the
financial statements are better able to understand the financial results of what the Company
considers to be its 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.
The Company believes 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. The Company further believes that providing this information allows investors to
not only better understand the Companys financial performance, but more importantly, to evaluate
the efficacy of the methodology and information used by management to evaluate and measure such
performance.
Nuance Communications, Inc.
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income (Loss) per Share Preliminary Results
(in thousands, except per share amounts)
Unaudited
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income (Loss) per Share Preliminary Results
(in thousands, except per share amounts)
Unaudited
Three months ended | ||||||||
March 31, 2011 | ||||||||
Low | High | |||||||
GAAP revenue |
$ | 316,000 | $ | 319,000 | ||||
Acquisition-related adjustment revenue |
13,000 | 13,000 | ||||||
Non-GAAP revenue |
$ | 329,000 | $ | 332,000 | ||||
GAAP net income (loss) per share |
$ | (0.01 | ) | $ | 0.00 | |||
Acquisition-related adjustment revenue |
0.04 | 0.04 | ||||||
Acquistion-related adjustment cost of revenue |
(0.01 | ) | (0.01 | ) | ||||
Acquisition-related costs, net |
0.01 | 0.01 | ||||||
Cost of revenue from amortization of intangible assets |
0.05 | 0.05 | ||||||
Amortization of intangible assets |
0.07 | 0.07 | ||||||
Non-cash stock-based compensation |
0.14 | 0.14 | ||||||
Non-cash interest expense |
0.01 | 0.01 | ||||||
Non-cash income taxes |
(0.00 | ) | (0.00 | ) | ||||
Costs associated with IP collaboration agreements |
0.01 | 0.01 | ||||||
Restructuring and other charges, net |
0.01 | 0.01 | ||||||
Change in fair value of share-based instruments |
(0.01 | ) | (0.01 | ) | ||||
Non-GAAP net income (loss) per share |
$ | 0.31 | $ | 0.32 | ||||
Shares used in computing GAAP and non-GAAP net income
(loss) per share: |
||||||||
Weighted average common shares: basic |
300,937 | 300,937 | ||||||
Weighted average common shares: diluted |
314,756 | 314,756 | ||||||