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8-K - FORM 8-K - Nuance Communications, Inc. | b87614e8vk.htm |
EX-99.1 - EX-99.1 - Nuance Communications, Inc. | b87614exv99w1.htm |
Exhibit 99.2
NUANCE COMMUNICATIONS, INC.
THIRD QUARTER FISCAL 2011
EARNINGS ANNOUNCEMENT
PREPARED CONFERENCE CALL REMARKS
THIRD QUARTER FISCAL 2011
EARNINGS ANNOUNCEMENT
PREPARED CONFERENCE CALL REMARKS
Nuance is providing a copy of prepared remarks in combination with its press release. This process
and these remarks are offered to provide shareholders and analysts with additional time and detail
for analyzing our results in advance of our quarterly conference call. As previously scheduled, the
conference call will begin today, August 9, 2011 at 5:00 pm EDT and will include only brief
comments followed by questions and answers. These 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 (800) 398-9402 or (612) 332-0523 at least
five minutes prior to the call and referencing conference code 210912. 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 210912.
Opening Remarks
In our press release this afternoon, we reported
non-GAAP revenue in Q3 11 of $345.1 million, up 17.6% from $293.4 million a year ago.
Total GAAP revenue in Q3 11 was $328.9 million, up 20.4% from $273.2 million in Q3 10.
We recognized non-GAAP net income in Q3 11 of $111.2 million, representing $0.35 per diluted share,
compared to non-GAAP net income of $91.3 million, or $0.30 per diluted share, in the same period last year.
We recognized GAAP net income in Q3 11 of $41.6 million, or $0.13 per diluted share, compared to Q3 10 GAAP
net loss of ($1.5) million, or ($0.01) per share. Nuances Q3 11 GAAP earnings per share included
a one-time benefit of $0.11 per share from non-cash taxes related to an acquisition completed during Q3 11.
Non GAAP operating margin was 35.4% for Q3 11, compared to 32.9% in Q3 10. Third quarter operating cash flow
was $100.1 million, compared to $64.1 million in the same quarter a year ago. Nuance ended Q3 11
with a balance of cash and marketable securities of $483.6 million. (Please see the section below,
Discussion of Non-GAAP Financial Measures, for more details on non-GAAP data.)
Discussion of Non-GAAP Revenue
Compared to Q3 10, Nuances Q3 11 non-GAAP revenue benefited from (1) growth in healthcare licenses
and on-demand services, (2) strength in our mobile & consumer business, and (3) product licensing
from our imaging business. In Q3 11, the United States contributed 72% of non-GAAP revenue and
international contributed 28%.
At the end of Q3 11, the estimated 3-year value of total on-demand contracts was $1,312.4 million,
up 21.2% from $1,083.1 million at the end of Q3 10. The trend toward customer preference for our
volume-based and transactional pricing models continues. As more of our large customers and
partners transition to these models, a greater proportion of bookings will contribute revenue over
extended periods.
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Table: Non-GAAP Revenue by Market
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | |||||||||||||||||||||||||
Healthcare |
$ | 106.8 | $ | 106.9 | $ | 114.3 | $ | 121.3 | $ | 449.3 | $ | 117.8 | $ | 121.0 | $ | 139.3 | ||||||||||||||||
Yr/Yr Organic Growth* |
6 | % | 13 | % | 17 | % | 16 | % | 13 | % | 3 | % | 6 | % | 12 | % | ||||||||||||||||
Mobile & Consumer |
$ | 66.4 | $ | 80.7 | $ | 72.2 | $ | 90.2 | $ | 309.4 | $ | 87.7 | $ | 93.7 | $ | 93.1 | ||||||||||||||||
Yr/Yr Organic Growth* |
15 | % | 29 | % | 14 | % | 30 | % | 22 | % | 20 | % | 17 | % | 31 | % | ||||||||||||||||
Enterprise |
$ | 75.7 | $ | 71.3 | $ | 71.1 | $ | 78.0 | $ | 296.1 | $ | 72.5 | $ | 74.0 | $ | 69.9 | ||||||||||||||||
Yr/Yr Organic Growth* |
12 | % | (6 | )% | (13 | )% | (7 | )% | (4 | )% | (8 | )% | (0 | )% | (5 | )% | ||||||||||||||||
Imaging |
$ | 35.7 | $ | 33.9 | $ | 35.8 | $ | 35.4 | $ | 140.8 | $ | 39.3 | $ | 43.2 | $ | 42.8 | ||||||||||||||||
Yr/Yr Organic Growth* |
7 | % | 9 | % | 5 | % | (9 | )% | 2 | % | 7 | % | 25 | % | 16 | % | ||||||||||||||||
Total revenue |
$ | 284.6 | $ | 292.8 | $ | 293.4 | $ | 324.9 | $ | 1,195.7 | $ | 317.3 | $ | 332.0 | $ | 345.1 | ||||||||||||||||
Yr/Yr Organic Growth* |
10 | % | 11 | % | 6 | % | 9 | % | 9 | % | 5 | % | 10 | % | 13 | % |
* | Organic growth is calculated by comparing Nuances reported non-GAAP revenue to revenue in the same period in the prior year. For purposes of this calculation, revenue is adjusted to include revenue from companies acquired by Nuance, as if we had owned the acquired business in all periods presented. |
Table: Non-GAAP Revenue by Type
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | |||||||||||||||||||||||||
Product and Licensing |
$ | 130.2 | $ | 128.0 | $ | 121.8 | $ | 150.6 | $ | 530.7 | $ | 145.0 | $ | 152.7 | $ | 162.3 | ||||||||||||||||
% of Revenue |
46 | % | 44 | % | 42 | % | 46 | % | 44 | % | 46 | % | 46 | % | 47 | % | ||||||||||||||||
Professional Services and
Hosting |
$ | 104.5 | $ | 118.6 | $ | 124.2 | $ | 127.6 | $ | 474.9 | $ | 124.1 | $ | 130.1 | $ | 130.5 | ||||||||||||||||
% of Revenue |
37 | % | 41 | % | 42 | % | 39 | % | 40 | % | 39 | % | 39 | % | 38 | % | ||||||||||||||||
Maintenance and Support |
$ | 49.9 | $ | 46.2 | $ | 47.4 | $ | 46.7 | $ | 190.1 | $ | 48.2 | $ | 49.2 | $ | 52.3 | ||||||||||||||||
% of Revenue |
18 | % | 16 | % | 16 | % | 14 | % | 16 | % | 15 | % | 15 | % | 15 | % | ||||||||||||||||
Total revenue |
$ | 284.6 | $ | 292.8 | $ | 293.4 | $ | 324.9 | $ | 1,195.7 | $ | 317.3 | $ | 332.0 | $ | 345.1 | ||||||||||||||||
Healthcare Solutions. Within our healthcare business, licenses and on-demand solutions
contributed to revenue growth. During Q3 11, the annualized line run-rate in Nuances healthcare
on-demand business was approximately 3.706 billion lines per year, up 12% from 3.295 billion lines
per year during Q3 10. Nuance had very strong bookings in healthcare on-demand contracts, and
continued to make progress in implementing on-demand contracts signed in prior quarters, which will
contribute to future revenue. During Q3 11, Nuance completed the acquisition of Webmedx, augmenting
Nuances transcription customer base and supplementing Nuances CLU technology base. Also during Q3
11, Nuance launched Dragon Medical 11 in UK English, French and German. In addition, Nuance
launched its Nuance Healthcare Development Platform and Nuance SpeechAnywhere services to provide
advanced, cloud-based medical speech-recognition services for healthcare information technology
developers, and is actively recruiting developers and ISV partners. Key customers in Q3 11 included
3M, Carolinas, Catholic Health Partners, CHS, Dolbey, Health Region West, Medquist, Premier, Sutter
Health, University of Pittsburgh Medical Center, WinScribe and Yale.
Mobile & Consumer Solutions. Within our mobile and consumer business, growth in the quarter was
driven by product licenses in automobile, handset and Dragon consumer markets, as well as
professional services revenue to support the implementation of recent handset and automobile design
wins. In Q3 11, Nuance continued to secure significant new design wins and expanded functionality
with our largest OEMs. In particular, Nuance had strong bookings in the automobile, handset and
voicemail-to-text markets. Nuances momentum continued in connected car implementations, through a
3-year cooperation agreement signed with BMW, positioning Nuance as the exclusive supplier for
dictation services; an agreement with Ford to add language understanding to Ford SYNC services; and
the launch of Nuances
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in-car dictation prototype. The Q3 11 acquisition of SVOX strengthens Nuances position with an
expanded technology portfolio and customer relationships in automobile, handset and other consumer
electronics markets. Demand continues to grow for network-based and hybrid speech capabilities, as
evidenced by increases in volumes of Nuances network services and recent Nuance Voice Control
contracts with HTC and Pantech, including the recent release of additional services in HTCs
T-Mobile 4G Slide. Nuance recently launched its DragonGo! for iOS, with partnerships with CNN,
eBay/Milo ESPN, Fandango, OpenTable, Pandora and others. Nuance is planning a future launch of
DragonGo! for the Android market. DragonGo! represents an expansion of mobile search from
understanding search terms to also understanding the users meaning or intent to provide search
results that take the user directly to relevant information. In the voicemail-to-text market,
Nuance had its highest bookings ever, including new or expanded relationships with Argentina LOA,
T-Mobile US, Time Warner Cable, Telstra and Vodafone (Germany). In our Dragon dictation solutions,
Q3 11 revenue benefited from the launch of Dragon NaturallySpeaking 11.5, with a launch of Dragon
Dictate for Mac 2.5 in Q4 11. Key mobile & consumer customers and design wins in Q3 11 included
Amazon, BMW, Coupons.com, eBay, Ford, GM, Harman Becker, HTC, Huawei, Hyundai, Landrover, Lenovo,
Mobis, Motorola, Pantech, SK Telecom, T-Mobile, Telstra, Time Warner Cable, Vodafone and Volvo.
Enterprise Solutions. Within our enterprise business, license, professional services and
maintenance growth in the quarter was offset by a decline in on-demand revenue. At the end of Q3
11, backlog hours in enterprise professional services stood at approximately 316,000 hours, as
compared with approximately 312,000 hours at the end of Q3 10. The estimated future value of
unimplemented contracts for the Nuance On Demand solution at the end of Q3 11 was $17.0 million, as
compared with $27.8 million at the end of Q2 11, reflecting deployments at USAA and US Airways
during the quarter, partially offset by new bookings at US Airways and PayPal. US Airways
successfully deployed a very sophisticated application that includes personalized greetings,
context-sensitive design and a natural language experience, and has received positive feedback from
customers and press. Nuances professional services team continues to progress toward
implementation of solutions under large contracts for the Nuance On Demand solution signed during
FY 10, which will lead to future professional services and hosting revenue. In addition, during Q3
11, Nuance launched Nuance Complete Care solutions, integrated inbound/outbound, multi-channel
solutions for customer care call centers that integrate inbound IVR with multi-channel proactive
communications. Key enterprise customers in Q3 11 included Axa, Barclaycard, Cigna Healthcare,
Citigroup, Farmers Insurance, HP, IBM, Kaiser Permanente, Lenovo, Michigan BCBS, PayPal, Suntrust
Bank, USAA and US Airways.
Imaging Solutions. Within our imaging business, revenue growth was driven by sales of the eCopy
ShareScan product, the launch of OmniPage 18 and the acquisition of Equitrac. A key growth
initiative includes expanded cross-selling of our imaging products into the healthcare market, and
early marketing efforts show encouraging results for FY 12. Nuance released PaperPort 14 during Q4
11, which includes cloud-based products and storage. Key imaging customers in Q3 11 included Canon,
HP, Konica Minolta, Kroger, Marathon Oil, Ricoh and Xerox.
Discussion of Non-GAAP Cost of Revenue and Gross Margins
In Q3 11, cost of revenue was $104.3 million, for a gross margin of 69.8%, compared to Q3 10 gross
margin of 69.2%. Gross margin for product and licensing improved to 89.0% in Q3 11 from 88.8% a
year ago. Gross margin for professional services and hosting declined to 40.2% in Q3 11 from 44.3%
a year ago, due to increased costs associated with personnel and equipment to support mobile
services, enterprise and healthcare on-demand contracts, as well as revenue declines from Nuance
Mobile Care and one enterprise on-demand customer. Gross margin for maintenance and support was
essentially flat in Q3 11 compared to Q3 10.
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Discussion of Non-GAAP Operating Expenses and Operating Margins
In Q3 11, operating margin was 35.4%, up from 32.9% in Q3 10, driven by leverage on operating
expenses, as well as credits under a funded R&D arrangement with a customer. Expenses increased
during Q3 11 due to accelerated investments related to strategic mobile partnerships, recent
acquisitions, and increased sales and marketing, all to support recent product releases and future
growth, as well as approximately $3 million in increased litigation expense. R&D expense declined primarily due to the funded
R&D credits. In Q3 11, the R&D credit was $4.6 million, and in Q4 11 the credit is expected to be
approximately $1.0 million.
Balance Sheet and Cash Flow Highlights
Cash and Cash Flow Activities
Nuance reported Q3 11 cash flow from operations of $100.1 million, up from $64.1 million in Q3 10,
driven by increased profitability, improved collections and other factors, partially offset by $4.2
million of income tax benefits related to stock-based compensation deductions that are recorded as
a use of cash in cash flow from operations and corresponding cash provided in cash flow from
financing. At the end of Q3 11, our cash and marketable securities balance was approximately $483.6
million. Capital expenditures totaled $7.7 million for Q3 11, and depreciation was $6.9 million for
Q3 11.
Days Sales Outstanding (DSO)
Beginning Q1 11, we have updated the manner in which we calculate DSO. Our updated calculation is
as follows: Accounts receivable, net, divided by GAAP revenue for the period, multiplied by 90.
In Q3 11, DSO was 68 days, compared to 71 days in Q3 10. DSO improved due to improved cash
collection, offset in part by accounts receivable balances from acquisitions closed late in the
quarter which impacted DSO by 5 days. Below is a table providing historical DSO using this
updated calculation:
Q1 10 | Q2 10 | Q3 10 | Q4 10 | Q1 11 | Q2 11 | Q3 11 | ||||||||||||||||||||||
DSO |
74 | 71 | 71 | 63 | 70 | 65 | 68 |
Deferred Revenue
Total deferred revenue increased from $206.3 million at the end of Q3 10 to $265.0 million at the
end of Q3 11, and current deferred revenue increased from $139.1 million to $183.5 million over the
same period. The increase in deferred revenue was primarily attributable to set-up and
implementation activities related to our hosted offerings, billings in excess of revenues earned on
several large professional services implementation projects and maintenance and support contracts
in imaging.
Discussion of Q4 11 Guidance and Fiscal Year Outlook
We are raising the range on our fourth quarter revenue
projection from the guidance we provided during the previous earnings call, based upon the strength in our
mobile & consumer, healthcare and imaging businesses, in addition to contributions from recent acquisitions,
including Equitrac, Webmedx and SVOX. Our healthcare business should benefit from a continuation of recent trends,
including the momentum within our on-demand offerings, more robust purchasing of our radiology solutions and an
increase in Dragon Medical license revenues in association with EHR usage.
Within our mobile and consumer business, we expect
continued growth during Q4 11, based upon design wins, mobile services growth, acceptance of our consumer
products and strong royalty reports. Revenues will reflect the benefits of past bookings and the heightened
interest and acceptance for our offerings. Revenues will also benefit from continued investments in brand
advertising and from investments in global language expansion.
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In our imaging business, eCopy revenues,
the acquisition of Equitrac and the launch of PaperPort 14 should assist growth in Q4 11.
Our enterprise business should benefit from fiscal year-end licensing sales, offset primarily
by the revenue decline associated with an on-demand customer.
Previously, we provided non-GAAP revenue
guidance for fiscal Q4 of $352 to $370 million. Now, taking into account all the factors above,
we expect Q4 11 non-GAAP revenues to be in the range of $380 million to $395 million.
We expect GAAP revenues for Q4 11 to be in the range of $355.3 to $370.3 million.
For the full year, we expect FY 11 non-GAAP revenues between $1,374.4 million and $1,389.4 million.
We expect GAAP revenues for FY 11 to be in the range of $1,306.9 to $1,321.9 million.
Turning to expenses, we remind investors of our
intention to fund investments in research and development, sales and professional services personnel to
capture additional growth in FY 12. In particular, we are funding an unprecedented level of strategic
engagements in our mobile market, where the demand for advanced mobile cloud-based services is growing rapidly.
We expect these investments to contribute to growth in FY 12. Within healthcare, we are similarly
investing in growth initiatives, intended to leverage our voice and clinical language understanding
technologies with several key partners. We also note that cost synergies from recent acquisitions will
mostly not be realized until early FY12. We also anticipate
additional legal expenses, of around $5 million,
in the fourth quarter, associated with current litigation activities.
We therefore expect FY 11 GAAP EPS to be in the range
of $0.07 to $0.10 and FY 11 non-GAAP EPS to be in the range of $1.33 to $1.36. We expect Q4 11 GAAP EPS
to be in the range of ($0.07) to ($0.04) and Q4 11 non-GAAP EPS to be in the range of $0.38 to $0.41.
Although we do not provide a specific forecast
for cash flow from operations, we do expect in FY 11 to achieve strong cash flows, based upon increased
revenues, strong margins and disciplined working capital practices. Investors should be advised,
though, that during Q4 11, we will make payments for restructuring and services costs related to
recently completed acquisitions, which will reduce cash flows by approximately $20 million.
This ends the prepared conference call remarks.
Definitions
Certain supplemental data provided in the prepared call remarks above are based upon internal
Nuance definitions that are important for the reader to understand.
Enterprise professional services backlog hours. Nuance defines its enterprise professional
services backlog hours as the accumulated estimated professional services hours necessary to
fulfill all of its existing, executed professional services contracts within the enterprise
business, including those that are cancelable by customers, based on the original estimate
of hours sold. Nuance believes its professional services backlog hours are useful in
forecasting its internal professional services needs, as well as for projecting future
professional services revenues.
Estimated future value of unimplemented Nuance Enterprise on-demand contracts. Nuance
considers contracts for its Nuance On Demand solutions to be unimplemented for the time
period from execution of the contract with the customer until such time as implementation
and set-up services are complete and the customers have begun utilizing the on-demand
platform. Once a
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contract is implemented, the entire estimated value of the contract is deducted from the
total. Because contracts for our Nuance On Demand solutions are generally large, multi-year
contracts, the aggregate estimated value of these contracts can materially increase or
decrease from period to period as contracts are executed and implemented.
Annualized line run-rate in Nuances healthcare on-demand business. Nuance determines this
run-rate using billed equivalent line counts in a given quarter, multiplied by four.
Estimated 3-year value of total on-demand contracts. Nuance determines this value as of the
end of the period reported, by using our best estimate of all anticipated future revenue
streams under signed on-demand contracts then in place, whether or not they are guaranteed
through a minimum commitment clause. Our best estimate is based on estimates used in
evaluating the contracts and determining sales compensation, adjusted for changes in
estimated launch dates, actual volumes achieved and other factors deemed relevant. For
contracts with an expiration date beyond 3 years, we include only the value expected within
3 years. For other contracts, we assume renewal consistent with historic renewal rates
unless there is a known cancellation. Investors should be aware that most of these contracts
are priced by volume of usage and typically have no or low minimum commitments. Actual
revenue could vary from our estimates due to factors such as cancellations, non-renewals or
volume fluctuations.
Safe Harbor and Forward-Looking Statements
Statements in this document regarding continued growth in the fourth fiscal quarter, strength in
our healthcare, mobile-consumer and imaging business, improvements in our enterprise business,
investments in sales and marketing resources, enterprise professional services backlog, the value
of unimplemented Nuance On Demand contracts, growth in the remainder of fiscal 2011, new product
and service offerings, moderation of expenses associated with sales, services, and research and
development, increases in advertising and promotion expenses, the general economic condition,
fourth quarter and fiscal 2011 financial performance and Nuance managements 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 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
- 6 -
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 and nine months ended June 30, 2011 and 2010, 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 and nine months ended June 30, 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
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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 three 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, Nuance 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, 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
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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.
Financial Tables Follow
- 9 -
Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Product and licensing |
$ | 152,745 | $ | 108,840 | $ | 428,181 | $ | 335,228 | ||||||||
Professional services and hosting |
125,347 | 117,875 | 377,078 | 337,798 | ||||||||||||
Maintenance and support |
50,817 | 46,488 | 146,441 | 136,159 | ||||||||||||
Total revenues |
328,909 | 273,203 | 951,700 | 809,185 | ||||||||||||
Cost of revenues: |
||||||||||||||||
Product and licensing |
15,820 | 10,901 | 47,950 | 34,194 | ||||||||||||
Professional services and hosting |
83,301 | 71,353 | 248,003 | 206,349 | ||||||||||||
Maintenance and support |
8,836 | 7,631 | 26,645 | 23,335 | ||||||||||||
Amortization of intangible assets |
13,087 | 11,893 | 40,541 | 35,095 | ||||||||||||
Total cost of revenues |
121,044 | 101,778 | 363,139 | 298,973 | ||||||||||||
Gross profit |
207,865 | 171,425 | 588,561 | 510,212 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
42,245 | 38,916 | 129,898 | 113,797 | ||||||||||||
Sales and marketing |
73,336 | 67,219 | 225,817 | 196,680 | ||||||||||||
General and administrative |
35,901 | 29,887 | 104,271 | 88,643 | ||||||||||||
Amortization of intangible assets |
20,972 | 21,459 | 65,221 | 65,786 | ||||||||||||
Acquisition-related costs, net |
8,595 | 6,125 | 13,910 | 26,892 | ||||||||||||
Restructuring and other charges, net |
864 | 3,257 | 5,343 | 16,244 | ||||||||||||
Total operating expenses |
181,913 | 166,863 | 544,460 | 508,042 | ||||||||||||
Income from operations |
25,952 | 4,562 | 44,101 | 2,170 | ||||||||||||
Other expense, net |
(7,721 | ) | (4,261 | ) | (15,736 | ) | (18,915 | ) | ||||||||
Income (loss) before income taxes |
18,231 | 301 | 28,365 | (16,745 | ) | |||||||||||
(Benefit) provision for income taxes |
(23,390 | ) | 1,831 | (14,982 | ) | 4,459 | ||||||||||
Net income (loss) |
$ | 41,621 | $ | (1,530 | ) | $ | 43,347 | $ | (21,204 | ) | ||||||
Net income (loss) per share: |
||||||||||||||||
Basic |
$ | 0.14 | $ | (0.01 | ) | $ | 0.14 | $ | (0.07 | ) | ||||||
Diluted |
$ | 0.13 | $ | (0.01 | ) | $ | 0.14 | $ | (0.07 | ) | ||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
303,100 | 291,610 | 300,846 | 285,202 | ||||||||||||
Diluted |
317,802 | 291,610 | 314,791 | 285,202 | ||||||||||||
Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
Unaudited
Condensed Consolidated Balance Sheets
(in thousands)
Unaudited
June 30, 2011 | September 30, 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 446,981 | $ | 516,630 | ||||
Restricted cash |
7,212 | 24,503 | ||||||
Marketable securities |
36,617 | 5,044 | ||||||
Accounts receivable, net |
247,972 | 217,587 | ||||||
Acquired unbilled accounts receivable |
914 | 7,412 | ||||||
Prepaid expenses and other current assets |
79,339 | 70,466 | ||||||
Total current assets |
819,035 | 841,642 | ||||||
Land, building and equipment, net |
79,623 | 62,083 | ||||||
Marketable securities |
| 28,322 | ||||||
Goodwill |
2,318,555 | 2,077,943 | ||||||
Intangible assets, net |
757,599 | 685,865 | ||||||
Other assets |
75,375 | 73,844 | ||||||
Total assets |
$ | 4,050,187 | $ | 3,769,699 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of long-term debt and capital leases |
$ | 6,909 | $ | 7,764 | ||||
Contingent and deferred acquisition payments |
34,712 | 2,131 | ||||||
Accounts payable and accrued expenses |
239,867 | 230,237 | ||||||
Deferred and unearned revenue |
183,455 | 142,340 | ||||||
Total current liabilities |
464,943 | 382,472 | ||||||
Long-term portion of debt and capital leases |
852,444 | 851,014 | ||||||
Long-term deferred revenue |
81,502 | 76,598 | ||||||
Other long term liabilities |
188,514 | 162,419 | ||||||
Total liabilities |
1,587,403 | 1,472,503 | ||||||
Stockholders equity |
2,462,784 | 2,297,196 | ||||||
Total liabilities and stockholders equity |
$ | 4,050,187 | $ | 3,769,699 | ||||
Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
Three months ended | Nine months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss) |
$ | 41,621 | $ | (1,530 | ) | $ | 43,347 | $ | (21,204 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash
provided by operating activities: |
||||||||||||||||
Depreciation and amortization |
40,996 | 38,761 | 125,719 | 116,738 | ||||||||||||
Stock-based compensation |
33,788 | 28,094 | 109,505 | 72,868 | ||||||||||||
Non-cash interest expense |
3,155 | 3,222 | 9,524 | 9,746 | ||||||||||||
Non-cash restructuring and other expense |
| | | 6,833 | ||||||||||||
Deferred tax provision |
(36,291 | ) | (1,210 | ) | (35,727 | ) | (2,321 | ) | ||||||||
Other |
3,559 | 1,005 | 4,259 | 1,671 | ||||||||||||
Changes in operating assets and liabilities, net of effects
from acquisitions: |
||||||||||||||||
Accounts receivable |
(1,160 | ) | (4,482 | ) | (3,679 | ) | (13,023 | ) | ||||||||
Prepaid expenses and other assets |
(5,899 | ) | (1,150 | ) | (17,095 | ) | (4,869 | ) | ||||||||
Accounts payable |
(8,553 | ) | (1,711 | ) | (9,999 | ) | (3,960 | ) | ||||||||
Accrued expenses and other liabilities |
21,085 | 2,532 | (9,950 | ) | (7,825 | ) | ||||||||||
Deferred revenue |
7,758 | 587 | 43,603 | 30,044 | ||||||||||||
Net cash provided by operating activities |
100,059 | 64,118 | 259,507 | 184,698 | ||||||||||||
Cash flows from investing activities: |
||||||||||||||||
Capital expenditures |
(7,703 | ) | (8,434 | ) | (24,267 | ) | (16,284 | ) | ||||||||
Payments for acquisitions, net of cash acquired |
(302,491 | ) | 3,470 | (319,299 | ) | (155,882 | ) | |||||||||
Payments for acquired technology |
| (7,500 | ) | (715 | ) | (14,850 | ) | |||||||||
Payments for equity investments |
| | | (14,970 | ) | |||||||||||
Purchases of marketable securities |
| | (10,776 | ) | | |||||||||||
Proceeds from sales of marketable securities |
| | 6,650 | | ||||||||||||
Change in restricted cash balance |
| (22,070 | ) | 17,184 | (22,070 | ) | ||||||||||
Net cash used in investing activities |
(310,194 | ) | (34,534 | ) | (331,223 | ) | (224,056 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||||||
Payments of debt and capital leases |
(1,773 | ) | (2,312 | ) | (5,864 | ) | (6,376 | ) | ||||||||
Payments of other long-term liabilities |
(2,520 | ) | (2,501 | ) | (7,794 | ) | (7,319 | ) | ||||||||
Proceeds on settlement of share-based derivatives, net |
10,042 | 2,607 | 9,414 | 6,391 | ||||||||||||
Excess tax benefits on employee equity awards |
4,200 | | 8,220 | | ||||||||||||
Proceeds from issuance of common stock, net of issuance costs |
| 12,350 | | 12,350 | ||||||||||||
Proceeds from issuance of common stock from employee stock
plans |
7,101 | 4,009 | 21,712 | 22,832 | ||||||||||||
Cash used to net share settle employee equity awards |
(3,601 | ) | (8,256 | ) | (30,027 | ) | (18,040 | ) | ||||||||
Net cash provided by (used in) financing activities |
13,449 | 5,897 | (4,339 | ) | 9,838 | |||||||||||
Effects of exchange rate changes on cash and cash equivalents |
1,955 | (5,211 | ) | 6,406 | (5,444 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents |
(194,731 | ) | 30,270 | (69,649 | ) | (34,964 | ) | |||||||||
Cash and cash equivalents at beginning of period |
641,712 | 461,804 | 516,630 | 527,038 | ||||||||||||
Cash and cash equivalents at end of period |
$ | 446,981 | $ | 492,074 | $ | 446,981 | $ | 492,074 | ||||||||
Nuance Communications, Inc.
Supplemental Financial Information GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Unaudited
Supplemental Financial Information GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Unaudited
Three months ended | Nine months ended | |||||||||||||||
June 30 , | June 30 , | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
GAAP revenue |
$ | 328,909 | $ | 273,203 | $ | 951,700 | $ | 809,185 | ||||||||
Acquisition-related revenue adjustments: product and licensing |
9,562 | 12,922 | 31,821 | 44,726 | ||||||||||||
Acquisition-related revenue adjustments: professional services
and hosting |
5,197 | 6,359 | 7,585 | 9,632 | ||||||||||||
Acquisition-related revenue adjustments: maintenance and support |
1,463 | 900 | 3,297 | 7,269 | ||||||||||||
Non-GAAP revenue |
$ | 345,131 | $ | 293,384 | $ | 994,403 | $ | 870,812 | ||||||||
GAAP cost of revenue |
$ | 121,044 | $ | 101,778 | $ | 363,139 | $ | 298,973 | ||||||||
Cost of revenue from amortization of intangible assets |
(13,087 | ) | (11,893 | ) | (40,541 | ) | (35,095 | ) | ||||||||
Cost of revenue adjustments: product and licensing (1,2) |
2,038 | 2,794 | 6,807 | 8,920 | ||||||||||||
Cost of revenue adjustments: professional services and hosting
(1,2) |
(5,197 | ) | (2,181 | ) | (19,564 | ) | (7,086 | ) | ||||||||
Cost of revenue adjustments: maintenance and support (1,2) |
(518 | ) | (165 | ) | (1,545 | ) | (582 | ) | ||||||||
Non-GAAP cost of revenue |
$ | 104,280 | $ | 90,333 | $ | 308,296 | $ | 265,130 | ||||||||
GAAP gross profit |
$ | 207,865 | $ | 171,425 | $ | 588,561 | $ | 510,212 | ||||||||
Gross profit adjustments |
32,986 | 31,626 | 97,546 | 95,470 | ||||||||||||
Non-GAAP gross profit |
$ | 240,851 | $ | 203,051 | $ | 686,107 | $ | 605,682 | ||||||||
GAAP income from operations |
$ | 25,952 | $ | 4,562 | $ | 44,101 | $ | 2,170 | ||||||||
Gross profit adjustments |
32,986 | 31,626 | 97,546 | 95,470 | ||||||||||||
Research and development (1) |
5,280 | 2,282 | 18,188 | 6,731 | ||||||||||||
Sales and marketing (1) |
10,341 | 12,516 | 32,748 | 29,813 | ||||||||||||
General and administrative (1) |
11,883 | 10,512 | 36,481 | 27,544 | ||||||||||||
Amortization of intangible assets |
20,972 | 21,459 | 65,221 | 65,786 | ||||||||||||
Costs associated with IP collaboration agreements |
5,250 | 4,208 | 14,500 | 12,208 | ||||||||||||
Acquisition-related costs, net |
8,595 | 6,125 | 13,910 | 26,892 | ||||||||||||
Restructuring and other charges, net |
864 | 3,257 | 5,343 | 16,244 | ||||||||||||
Non-GAAP income from operations |
$ | 122,123 | $ | 96,547 | $ | 328,038 | $ | 282,858 | ||||||||
GAAP (benefit) provision for income taxes |
$ | (23,390 | ) | $ | 1,831 | $ | (14,982 | ) | $ | 4,459 | ||||||
Non-cash taxes |
29,390 | 3,471 | 28,781 | 6,772 | ||||||||||||
Non-GAAP provision for income taxes |
$ | 6,000 | $ | 5,302 | $ | 13,799 | $ | 11,231 | ||||||||
GAAP net income (loss) |
$ | 41,621 | $ | (1,530 | ) | $ | 43,347 | $ | (21,204 | ) | ||||||
Acquisition-related adjustment revenue (2) |
16,222 | 20,181 | 42,703 | 61,627 | ||||||||||||
Acquisition-related adjustment cost of revenue (2) |
(2,607 | ) | (3,232 | ) | (7,786 | ) | (10,032 | ) | ||||||||
Acquisition-related costs, net |
8,595 | 6,125 | 13,910 | 26,892 | ||||||||||||
Cost of revenue from amortization of intangible assets |
13,087 | 11,893 | 40,541 | 35,095 | ||||||||||||
Amortization of intangible assets |
20,972 | 21,459 | 65,221 | 65,786 | ||||||||||||
Non-cash stock-based compensation (1) |
33,788 | 28,094 | 109,505 | 72,868 | ||||||||||||
Non-cash interest expense, net |
3,155 | 3,222 | 9,524 | 9,746 | ||||||||||||
Non-cash income taxes |
(29,390 | ) | (3,471 | ) | (28,781 | ) | (6,772 | ) | ||||||||
Costs associated with IP collaboration agreements |
5,250 | 4,208 | 14,500 | 12,208 | ||||||||||||
Change in fair value of share-based instruments |
(395 | ) | 1,044 | (10,844 | ) | (3,663 | ) | |||||||||
Restructuring and other charges, net |
864 | 3,257 | 5,343 | 16,244 | ||||||||||||
Non-GAAP net income |
$ | 111,162 | $ | 91,250 | $ | 297,183 | $ | 258,795 | ||||||||
Non-GAAP diluted net income per share |
$ | 0.35 | $ | 0.30 | $ | 0.94 | $ | 0.86 | ||||||||
Diluted weighted average common shares outstanding |
317,802 | 305,427 | 314,791 | 300,511 | ||||||||||||
Nuance Communications, Inc.
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
Three months ended | Nine months ended | |||||||||||||||
June 30 , | June 30 , | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(1) Non-Cash Stock-Based Compensation |
||||||||||||||||
Cost of product and licensing |
$ | 2 | $ | 7 | $ | 29 | $ | 25 | ||||||||
Cost of professional services and hosting |
5,764 | 2,612 | 20,514 | 8,173 | ||||||||||||
Cost of maintenance and support |
518 | 165 | 1,545 | 582 | ||||||||||||
Research and development |
5,280 | 2,282 | 18,188 | 6,731 | ||||||||||||
Sales and marketing |
10,341 | 12,516 | 32,748 | 29,813 | ||||||||||||
General and administrative |
11,883 | 10,512 | 36,481 | 27,544 | ||||||||||||
Total |
$ | 33,788 | $ | 28,094 | $ | 109,505 | $ | 72,868 | ||||||||
(2) Acquisition-Related Revenue and Cost of Revenue |
||||||||||||||||
Revenue |
$ | 16,222 | $ | 20,181 | $ | 42,703 | $ | 61,627 | ||||||||
Cost of product and licensing |
(2,040 | ) | $ | (2,801 | ) | (6,836 | ) | (8,945 | ) | |||||||
Cost of professional services and hosting |
(567 | ) | (431 | ) | (950 | ) | (1,087 | ) | ||||||||
Cost of maintenance and support |
| | | | ||||||||||||
Total |
$ | 13,615 | $ | 16,949 | $ | 34,917 | $ | 51,595 | ||||||||
Nuance Communications, Inc.
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Healthcare | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 105.5 | $ | 105.8 | $ | 113.5 | $ | 119.8 | $ | 444.6 | $ | 117.4 | $ | 120.7 | $ | 135.4 | ||||||||||||||||
Adjustment |
$ | 1.3 | $ | 1.1 | $ | 0.8 | $ | 1.5 | $ | 4.7 | $ | 0.4 | $ | 0.3 | $ | 3.9 | ||||||||||||||||
Non-GAAP Revenue |
$ | 106.8 | $ | 106.9 | $ | 114.3 | $ | 121.3 | $ | 449.3 | $ | 117.8 | $ | 121.0 | $ | 139.3 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Mobile & Consumer | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 64.1 | $ | 77.8 | $ | 66.3 | $ | 89.2 | $ | 297.3 | $ | 86.1 | $ | 93.1 | $ | 91.6 | ||||||||||||||||
Adjustment |
$ | 2.3 | $ | 2.9 | $ | 5.9 | $ | 1.0 | $ | 12.1 | $ | 1.6 | $ | 0.6 | $ | 1.5 | ||||||||||||||||
Non-GAAP Revenue |
$ | 66.4 | $ | 80.7 | $ | 72.2 | $ | 90.2 | $ | 309.4 | $ | 87.7 | $ | 93.7 | $ | 93.1 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Enterprise | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 75.4 | $ | 70.9 | $ | 71.0 | $ | 76.6 | $ | 293.9 | $ | 71.1 | $ | 72.3 | $ | 68.5 | ||||||||||||||||
Adjustment |
$ | 0.3 | $ | 0.4 | $ | 0.1 | $ | 1.4 | $ | 2.2 | $ | 1.4 | $ | 1.7 | $ | 1.4 | ||||||||||||||||
Non-GAAP Revenue |
$ | 75.7 | $ | 71.3 | $ | 71.1 | $ | 78.0 | $ | 296.1 | $ | 72.5 | $ | 74.0 | $ | 69.9 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Imaging Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 18.0 | $ | 18.5 | $ | 22.4 | $ | 24.2 | $ | 83.1 | $ | 29.2 | $ | 32.8 | $ | 33.4 | ||||||||||||||||
Adjustment |
$ | 17.7 | $ | 15.4 | $ | 13.4 | $ | 11.2 | $ | 57.7 | $ | 10.0 | $ | 10.4 | $ | 9.4 | ||||||||||||||||
Non-GAAP Revenue |
$ | 35.7 | $ | 33.9 | $ | 35.8 | $ | 35.4 | $ | 140.8 | $ | 39.3 | $ | 43.2 | $ | 42.8 | ||||||||||||||||
Schedules may not add due to rounding.
Nuance Communications, Inc.
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
Supplemental Financial Information GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Total Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 263.0 | $ | 273.0 | $ | 273.2 | $ | 309.8 | $ | 1,118.9 | $ | 303.8 | $ | 319.0 | $ | 328.9 | ||||||||||||||||
Adjustment |
$ | 21.6 | $ | 19.8 | $ | 20.2 | $ | 15.1 | $ | 76.7 | $ | 13.4 | $ | 13.0 | $ | 16.2 | ||||||||||||||||
Non-GAAP Revenue |
$ | 284.6 | $ | 292.8 | $ | 293.4 | $ | 324.9 | $ | 1,195.7 | $ | 317.3 | $ | 332.0 | $ | 345.1 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Healthcare | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 105.5 | $ | 105.8 | $ | 113.5 | $ | 119.8 | $ | 444.6 | $ | 117.4 | $ | 120.7 | $ | 135.4 | ||||||||||||||||
Adjustment |
$ | 1.3 | $ | 1.1 | $ | 0.8 | $ | 1.5 | $ | 4.7 | $ | 0.4 | $ | 0.3 | $ | 3.9 | ||||||||||||||||
Non-GAAP Revenue |
$ | 106.8 | $ | 106.9 | $ | 114.3 | $ | 121.3 | $ | 449.3 | $ | 117.8 | $ | 121.0 | $ | 139.3 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Mobile & Consumer | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 64.1 | $ | 77.8 | $ | 66.3 | $ | 89.2 | $ | 297.3 | $ | 86.1 | $ | 93.1 | $ | 91.6 | ||||||||||||||||
Adjustment |
$ | 2.3 | $ | 2.9 | $ | 5.9 | $ | 1.0 | $ | 12.1 | $ | 1.6 | $ | 0.6 | $ | 1.5 | ||||||||||||||||
Non-GAAP Revenue |
$ | 66.4 | $ | 80.7 | $ | 72.2 | $ | 90.2 | $ | 309.4 | $ | 87.7 | $ | 93.7 | $ | 93.1 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Enterprise | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 75.4 | $ | 70.9 | $ | 71.0 | $ | 76.6 | $ | 293.9 | $ | 71.1 | $ | 72.3 | $ | 68.5 | ||||||||||||||||
Adjustment |
$ | 0.3 | $ | 0.4 | $ | 0.1 | $ | 1.4 | $ | 2.2 | $ | 1.4 | $ | 1.7 | $ | 1.4 | ||||||||||||||||
Non-GAAP Revenue |
$ | 75.7 | $ | 71.3 | $ | 71.1 | $ | 78.0 | $ | 296.1 | $ | 72.5 | $ | 74.0 | $ | 69.9 | ||||||||||||||||
Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | |||||||||||||||||||||||||
Imaging Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 18.0 | $ | 18.5 | $ | 22.4 | $ | 24.2 | $ | 83.1 | $ | 29.2 | $ | 32.8 | $ | 33.4 | ||||||||||||||||
Adjustment |
$ | 17.7 | $ | 15.4 | $ | 13.4 | $ | 11.2 | $ | 57.7 | $ | 10.0 | $ | 10.4 | $ | 9.4 | ||||||||||||||||
Non-GAAP Revenue |
$ | 35.7 | $ | 33.9 | $ | 35.8 | $ | 35.4 | $ | 140.8 | $ | 39.3 | $ | 43.2 | $ | 42.8 | ||||||||||||||||
Product and Licensing | Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | ||||||||||||||||||||||||
Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 113.2 | $ | 113.2 | $ | 108.8 | $ | 138.2 | $ | 473.5 | $ | 133.8 | $ | 141.6 | $ | 152.7 | ||||||||||||||||
Adjustment |
$ | 17.0 | $ | 14.8 | $ | 13.0 | $ | 12.4 | $ | 57.2 | $ | 11.1 | $ | 11.1 | $ | 9.6 | ||||||||||||||||
Non-GAAP Revenue |
$ | 130.2 | $ | 128.0 | $ | 121.8 | $ | 150.6 | $ | 530.7 | $ | 145.0 | $ | 152.7 | $ | 162.3 | ||||||||||||||||
Professional Services | Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | ||||||||||||||||||||||||
and On-Demand Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 103.7 | $ | 116.2 | $ | 117.9 | $ | 125.8 | $ | 463.6 | $ | 122.8 | $ | 128.9 | $ | 125.3 | ||||||||||||||||
Adjustment |
$ | 0.8 | $ | 2.4 | $ | 6.3 | $ | 1.8 | $ | 11.3 | $ | 1.2 | $ | 1.1 | $ | 5.2 | ||||||||||||||||
Non-GAAP Revenue |
$ | 104.5 | $ | 118.6 | $ | 124.2 | $ | 127.6 | $ | 474.9 | $ | 124.1 | $ | 130.1 | $ | 130.5 | ||||||||||||||||
Maintenance and Support | Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | Q3 | ||||||||||||||||||||||||
Revenue | 2010 | 2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||||
GAAP Revenue |
$ | 46.1 | $ | 43.6 | $ | 46.5 | $ | 45.8 | $ | 181.9 | $ | 47.2 | $ | 48.5 | $ | 50.8 | ||||||||||||||||
Adjustment |
$ | 3.8 | $ | 2.6 | $ | 0.9 | $ | 0.9 | $ | 8.2 | $ | 1.1 | $ | 0.8 | $ | 1.5 | ||||||||||||||||
Non-GAAP Revenue |
$ | 49.9 | $ | 46.2 | $ | 47.4 | $ | 46.7 | $ | 190.1 | $ | 48.2 | $ | 49.2 | $ | 52.3 | ||||||||||||||||
Schedules may not add due to rounding.
Nuance Communications, Inc.
Supplemental Non-Financial Information
Unaudited
Supplemental Non-Financial Information
Unaudited
Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | ||||||||||||||||||||||
2010 | 2010 | 2010 | 2010 | 2011 | 2011 | 2011 | ||||||||||||||||||||||
Enterprise
Professional
Services Backlog
Hours (in
thousands) |
250.2 | 266.8 | 312.0 | 328.2 | 335.2 | 333.2 | 316.2 | |||||||||||||||||||||
Estimated Future
Value of
Unimplemented
Nuance Enterprise
On-Demand Contracts
(in millions) |
41.8 | 45.0 | 47.1 | 50.4 | 31.2 | 27.8 | 17.0 | |||||||||||||||||||||
Annualized Line
Run-Rate in
Nuances Healthcare
On-Demand Business
(in billions) |
3.003 | 3.137 | 3.295 | 3.349 | 3.554 | 3.650 | 3.706 | |||||||||||||||||||||
Estimated 3-year
Value of Total
On-Demand Contracts
(in millions) |
968.6 | 1,025.0 | 1,083.1 | 1,143.2 | 1,174.4 | 1,225.5 | 1,312.4 |
Nuance Communications, Inc.
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income per Share Guidance
(in thousands, except per share amounts)
Unaudited
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income per Share Guidance
(in thousands, except per share amounts)
Unaudited
Three months ended | ||||||||
September 30, 2011 | ||||||||
Low | High | |||||||
GAAP revenue |
$ | 355,300 | $ | 370,300 | ||||
Acquisition-related adjustment revenue |
24,700 | 24,700 | ||||||
Non-GAAP revenue |
$ | 380,000 | $ | 395,000 | ||||
GAAP net loss per share |
$ | (0.07 | ) | $ | (0.04 | ) | ||
Acquisition-related adjustment revenue |
0.08 | 0.08 | ||||||
Acquisition-related adjustment cost of revenue |
(0.01 | ) | (0.01 | ) | ||||
Acquisition-related costs, net |
0.03 | 0.03 | ||||||
Cost of revenue from amortization of intangible assets |
0.04 | 0.04 | ||||||
Amortization of intangible assets |
0.07 | 0.07 | ||||||
Non-cash stock-based compensation |
0.12 | 0.12 | ||||||
Non-cash interest expense |
0.01 | 0.01 | ||||||
Non-cash income taxes |
0.06 | 0.06 | ||||||
Costs associated with IP collaboration agreements |
0.02 | 0.02 | ||||||
Restructuring and other charges, net |
0.03 | 0.03 | ||||||
Non-GAAP net income per share |
$ | 0.38 | $ | 0.41 | ||||
Shares used in computing GAAP and non-GAAP net income per share: |
||||||||
Weighted average common shares: basic |
306,500 | 306,500 | ||||||
Weighted average common shares: diluted |
321,000 | 321,000 | ||||||
Nuance Communications, Inc.
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income per Share Guidance
(in thousands, except per share amounts)
Unaudited
Reconciliation of Supplemental Financial Information
GAAP and non-GAAP Revenue and Net Income per Share Guidance
(in thousands, except per share amounts)
Unaudited
Twelve months ended | ||||||||
September 30, 2011 | ||||||||
Low | High | |||||||
GAAP revenue |
$ | 1,306,905 | $ | 1,321,905 | ||||
Acquisition-related adjustment revenue |
67,500 | 67,500 | ||||||
Non-GAAP revenue |
$ | 1,374,405 | $ | 1,389,405 | ||||
GAAP net income per share |
$ | 0.07 | $ | 0.10 | ||||
Acquisition-related adjustment revenue |
0.21 | 0.21 | ||||||
Acquisition-related adjustment cost of revenue |
(0.03 | ) | (0.03 | ) | ||||
Acquisition-related costs, net |
0.08 | 0.08 | ||||||
Cost of revenue from amortization of intangible assets |
0.17 | 0.17 | ||||||
Amortization of intangible assets |
0.28 | 0.28 | ||||||
Non-cash stock-based compensation |
0.46 | 0.46 | ||||||
Non-cash interest expense |
0.04 | 0.04 | ||||||
Non-cash income taxes |
(0.03 | ) | (0.03 | ) | ||||
Costs associated with IP collaboration agreements |
0.06 | 0.06 | ||||||
Change in fair value of share-based instruments |
(0.03 | ) | (0.03 | ) | ||||
Restructuring and other charges, net |
0.05 | 0.05 | ||||||
Non-GAAP net income per share |
$ | 1.33 | $ | 1.36 | ||||
Shares used in computing GAAP and non-GAAP net income per share: |
||||||||
Weighted average common shares: basic |
302,000 | 302,000 | ||||||
Weighted average common shares: diluted |
316,500 | 316,500 | ||||||