Nuance Achieves Revenue and EPS above Non-GAAP Guidance
Ranges; Delivers 24% Growth in Operating Cash Flow and Deferred
Revenue
Nuance Communications, Inc. (NASDAQ: NUAN) today announced
financial results for its third quarter fiscal 2015, ended June 30,
2015.
In the third quarter of fiscal 2015, Nuance reported GAAP
revenue of $477.9 million, compared to $475.5 million in the third
quarter of fiscal 2014. Nuance reported non-GAAP revenue of $488.7
million, which includes $10.8 million of revenue lost due to
accounting treatment in conjunction with acquisitions, compared to
$486.8 million in the third quarter of fiscal 2014. Q3 15 revenue
was negatively affected by currency fluctuations. If Q3 14 currency
rates were applied to Nuance’s Q3 15 revenue, Q3 15 revenue would
have been approximately $17 million higher. In Q3 15, total
recurring revenue was $330.4 million and represented 68% of total
non-GAAP revenue, compared to $314.3 million and 65% in Q3 14.
In the third quarter of fiscal 2015, Nuance recognized GAAP net
loss of $(39.4) million, or $(0.13) per share, compared to GAAP net
loss of $(54.2) million, or $(0.17) per share, in the third quarter
of fiscal 2014. In the third quarter of fiscal 2015, Nuance
reported non-GAAP net income of $101.1 million, or $0.32 per
diluted share, up from non-GAAP net income of $87.6 million, or
$0.27 per diluted share, in the third quarter of fiscal 2014.
Nuance’s third quarter fiscal 2015 non-GAAP operating margin was
26.4%, up from 23.5% in the third quarter of fiscal 2014. Nuance
reported cash flow from operations of $120.3 million in the third
quarter of fiscal 2015, up 24% from $97.0 million in the third
quarter of fiscal 2014. Nuance ended the third quarter of fiscal
2015 with $647.6 million in total deferred revenue, up 24% from
$523.4 million at the end of the third quarter of fiscal 2014. In
the third quarter of fiscal 2015, Nuance reported net new bookings
of $484.4 million, compared to $330.4 million in the third quarter
of fiscal 2014. Through the first three quarters of fiscal 2015,
Nuance reported total net new bookings of $1,092.9 million, up 2%
from $1,071.7 million in the first three quarters of fiscal 2014.
Nuance ended the third quarter of fiscal 2015 with $488.7 million
in cash, cash equivalents and marketable securities.
“In our third quarter, Nuance delivered revenue and EPS that
exceeded our non-GAAP guidance ranges, and net new bookings that
have us on track to our full fiscal year guidance,” said Dan
Tempesta, Nuance CFO. “Last quarter, we announced a formal
transformation program with a goal of delivering $125 million in
annualized expense reductions by the end of fiscal 2016. Actions
taken to date under that program are expected to deliver $50
million in annualized expense reductions and contributed to
improved third quarter EPS, operating margin and operating cash
flow.”
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,
August 6, 2015 at 5:00 pm EDT 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) 230-1059 or (612)
234-9959 at least five minutes prior to the call and referencing
code 363855. 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 363855.
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.
Definitions of Bookings and Net New Bookings
Bookings represent the estimated gross revenue value of
transactions at the time of contract execution, except for
maintenance and support offerings. For fixed price contracts, the
bookings value represents the gross total contract value. For
contracts where revenue is based on transaction volume, the
bookings value represents the contract price multiplied by the
estimated future transaction volume during the contract term,
whether or not such transaction volumes are guaranteed under a
minimum commitment clause. Actual results could be different than
our initial estimates. The maintenance and support bookings value
represents the amounts billed in the period the customer is
invoiced. Because of the inherent estimates required to determine
bookings and the fact that the actual resultant revenue may differ
from our initial bookings estimates, we consider bookings one
indicator of potential future revenue and not as an arithmetic
measure of backlog.
Net new bookings represents the estimated revenue value at the
time of contract execution from new contractual arrangements or the
estimated revenue value incremental to the portion of value that
will be renewed under pre-existing arrangements.
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; our ability to execute our formal
transformation program to reduce costs and optimize processes; 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 conversion rate of bookings into revenue; 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, 2014 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
considered superior to, or a substitute for, financial statements
prepared in accordance with GAAP.
Discussion of Non-GAAP Financial Measures
We utilize a number of different financial measures, both
Generally Accepted Accounting Principles (“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 non-GAAP 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 financial statements. Consistent
with this approach, we believe that disclosing non-GAAP financial
measures to the readers of our financial statements provides such
readers with useful supplemental data that, while not a substitute
for GAAP financial statements, 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, 2015 and 2014, 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
Notable Solutions, Quantim and Equitrac for the three and nine
months ended June 30, 2015 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.
Costs associated with the research and development portion of the
agreements have been excluded from research and development expense
while costs for the extension of the marketing exclusivity period
are excluded from sales and marketing expense.
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 include
losses from the extinguishment of our convertible debt and
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 consulting and
professional services fees related to assessing strategic
alternatives and our transformation program, and gains or losses on
non-controlling strategic equity interests, 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 Nine months
ended June 30, June 30, 2015 2014
2015 2014
Revenues:
Product and licensing $ 162,806 $ 168,224 $ 506,945 $ 521,480
Professional services and hosting 234,253 231,698 684,927 677,359
Maintenance and support 80,880 75,582
235,145 222,298 Total revenues
477,939 475,504 1,427,017
1,421,137
Cost of revenues: Product and
licensing 21,276 23,934 68,498 74,598 Professional services and
hosting 153,924 163,587 462,188 475,604 Maintenance and support
13,715 13,566 41,151 38,533 Amortization of intangible assets
15,776 15,006 46,538
45,542 Total cost of revenues 204,691
216,093 618,375 634,277
Gross profit 273,248 259,411
808,642 786,860
Operating
expenses: Research and development 79,050 87,137 236,393
252,188 Sales and marketing 99,285 99,783 303,789 316,969 General
and administrative 40,977 43,732 137,278 131,890 Amortization of
intangible assets 26,371 27,287 78,526 81,330 Acquisition-related
cost, net 2,423 9,110 13,702 18,710 Restructuring and other
charges, net 10,808 8,622 12,703
17,178 Total operating expenses 258,914
275,671 782,391 818,265
Income (loss) from operations 14,334 (16,260 ) 26,251
(31,405 ) Other expense, net (47,191 ) (31,028
) (106,828 ) (101,151 ) Loss before income
taxes (32,857 ) (47,288 ) (80,577 ) (132,556 ) Provision for
income taxes 6,533 6,959 23,406
16,331 Net loss $ (39,390 ) $ (54,247 )
$ (103,983 ) $ (148,887 )
Net loss per share: Basic $
(0.13 ) $ (0.17 ) $ (0.33 ) $ (0.47 ) Diluted $ (0.13 ) $ (0.17 ) $
(0.33 ) $ (0.47 )
Weighted average common shares
outstanding: Basic 312,680 317,610
319,415 316,334 Diluted 312,680
317,610 319,415 316,334
Nuance
Communications, Inc. Condensed Consolidated Balance Sheets (in
thousands) Unaudited
ASSETS June 30, 2015
September 30, 2014 Current assets: Cash and cash equivalents
$ 397,116 $ 547,230 Marketable securities 54,697 40,974 Accounts
receivable, net 365,661 428,266 Prepaid expenses and other current
assets 148,747 148,030 Total current assets 966,221
1,164,500 Marketable securities 36,876 - Land, building and
equipment, net 191,814 191,411 Goodwill 3,392,844 3,410,893
Intangible assets, net 847,205 915,483 Other assets 154,061
137,997 Total assets $ 5,589,021 $ 5,820,284
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Current portion of long-term debt $ 4,834 $ 4,834
Contingent and deferred acquisition payments 21,929 35,911 Accounts
payable and accrued expenses 246,318 303,039 Deferred revenue
327,736 298,225 Total current liabilities 600,817
642,009 Long-term debt 2,113,741 2,127,392 Deferred revenue,
net of current portion 319,895 249,879 Other liabilities
227,308 219,012 Total liabilities 3,261,761
3,238,292 Stockholders' equity 2,327,260
2,581,992 Total liabilities and stockholders' equity $
5,589,021 $ 5,820,284
Nuance Communications,
Inc. Consolidated Statements of Cash Flows (in thousands) Unaudited
Three months ended Nine months ended June 30, June 30, 2015
2014 2015 2014
Cash flows from operating activities:
Net loss $ (39,390 ) $ (54,247 ) $ (103,983 ) $ (148,887 )
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 57,872 55,863 171,892 165,280
Stock-based compensation 41,701 55,382 119,972 147,541 Non-cash
interest expense 7,160 8,744 22,078 28,187 Loss on extinguishment
of debt 17,714 - 17,714 - Deferred tax provision (benefit) 1,143
(1,095 ) 7,529 2,351 Other 4,214 964 5,641 (4,294 ) Changes in
operating assets and liabilities, net of effects from acquisitions:
Accounts receivable 34,002 (11,224 ) 50,990 (4,706 ) Prepaid
expenses and other assets (1,496 ) 2,242 (14,709 ) (9,453 )
Accounts payable (16,516 ) 7,094 (14,647 ) (25,003 ) Accrued
expenses and other liabilities 6,851 13,935 (43,167 ) 3,634
Deferred revenue 7,085 19,373
116,660 107,563 Net cash provided by operating
activities 120,340 97,031
335,970 262,213
Cash flows from investing
activities: Capital expenditures (17,401 ) (16,640 ) (48,159 )
(41,359 ) Payments for business and technology acquisitions, net of
cash acquired (50,143 ) (646 ) (82,034 ) (136,183 ) Purchases of
marketable securities and other investments (23,417 ) (8,109 )
(114,765 ) (19,613 ) Proceeds from sales and maturities of
marketable securities and other investments 26,316
11,217 49,481 32,851 Net
cash used in investing activities (64,645 ) (14,178 )
(195,477 ) (164,304 )
Cash flows from financing
activities: Payments of debt (257,425 ) (1,339 ) (259,843 )
(3,855 ) Proceeds from long-term debt, net of issuance costs
256,212 - 256,212 - Payments for repurchases of common stock
(128,365 ) (48 ) (238,203 ) (26,483 ) Payments for settlement of
share-based derivatives - - (340 ) (5,286 ) Payments of other
long-term liabilities (857 ) (697 ) (2,383 ) (2,216 ) Proceeds from
issuance of common stock from employee stock plans 3,186 1,603
12,335 13,525 Cash used to net share settle employee equity awards
(6,320 ) (4,271 ) (53,273 ) (35,318 )
Net cash used in financing activities (133,569 )
(4,752 ) (285,495 ) (59,633 ) Effects of exchange
rate changes on cash and cash equivalents 340
533 (5,112 ) 542 Net (decrease)
increase in cash and cash equivalents (77,534 ) 78,634 (150,114 )
38,818 Cash and cash equivalents at beginning of period
474,650 768,302 547,230
808,118 Cash and cash equivalents at end of period $ 397,116
$ 846,936 $ 397,116 $ 846,936
Nuance Communications, Inc. 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, 2015 2014
2015 2014
GAAP
revenue $ 477,939 $ 475,504 $ 1,427,017 $ 1,421,137
Acquisition-related revenue adjustments: product and licensing
7,142 5,626 26,897 24,384 Acquisition-related revenue adjustments:
professional services and hosting 3,153 4,898 10,299 18,771
Acquisition-related revenue adjustments: maintenance and support
422 786 1,536
2,540
Non-GAAP revenue $ 488,656 $ 486,814
$ 1,465,749 $ 1,466,832
GAAP cost of
revenue $ 204,691 $ 216,093 $ 618,375 $ 634,277 Cost of revenue
from amortization of intangible assets (15,776 ) (15,006 ) (46,538
) (45,542 ) Cost of revenue adjustments: product and licensing
(1,2) 56 307 880 1,232 Cost of revenue adjustments: professional
services and hosting (1,2) (7,518 ) (10,213 ) (19,240 ) (23,402 )
Cost of revenue adjustments: maintenance and support (1,2)
(1,002 ) (1,290 ) (2,576 ) (2,480 )
Non-GAAP cost of revenue $ 180,451 $ 189,891 $
550,901 $ 564,085
GAAP gross profit $
273,248 $ 259,411 $ 808,642 $ 786,860 Gross profit adjustments
34,957 37,512 106,206
115,887
Non-GAAP gross profit $ 308,205
$ 296,923 $ 914,848 $ 902,747
GAAP
income (loss) from operations $ 14,334 $ (16,260 ) $ 26,251 $
(31,405 ) Gross profit adjustments 34,957 37,512 106,206 115,887
Research and development (1) 9,210 12,960 26,387 33,703 Sales and
marketing (1) 11,760 13,656 32,176 39,110 General and
administrative (1) 11,748 16,710 38,317 46,702 Amortization of
intangible assets 26,371 27,287 78,526 81,330 Costs associated with
IP collaboration agreements 2,625 4,937 8,501 14,811
Acquisition-related costs, net 2,423 9,110 13,702 18,710
Restructuring and other charges, net 10,808 8,622 12,703 17,178
Other 4,757 - 20,590
1,061
Non-GAAP income from operations $
128,993 $ 114,534 $ 363,359 $ 337,087
GAAP provision for income taxes $ 6,533 $ 6,959 $
23,406 $ 16,331 Non-cash taxes (1,086 ) (2,973 )
(8,578 ) (2,681 )
Non-GAAP provision for income
taxes $ 5,447 $ 3,986 $ 14,828 $ 13,650
GAAP net loss $ (39,390 ) $ (54,247 ) $
(103,983 ) $ (148,887 ) Acquisition-related adjustment - revenue
(2) 10,717 11,310 38,732 45,695 Acquisition-related adjustment -
cost of revenue (2) (519 ) (860 ) (2,156 ) (3,376 )
Acquisition-related costs, net 2,423 9,110 13,702 18,710 Cost of
revenue from amortization of intangible assets 15,776 15,006 46,538
45,542 Amortization of intangible assets 26,371 27,287 78,526
81,330 Restructuring and other charges, net 10,808 8,622 12,703
17,178
Non-cash stock-based compensation (1) 41,701 55,382 119,972 147,541
Non-cash interest expense 7,160 8,744 22,078 28,187 Non-cash income
taxes 1,086 2,973 8,578 2,681 Costs associated with IP
collaboration agreements 2,625 4,937 8,501 14,811 Change in fair
value of share-based instruments (334 ) (651 ) 204 3,571 Loss on
extinguishment of debt 17,714 - 17,714 - Other 4,917
- 20,853 (454 )
Non-GAAP net
income $ 101,055 $ 87,613 $ 281,962 $
252,529
Non-GAAP diluted net income per share
$ 0.32 $ 0.27 $ 0.87 $ 0.79
Diluted weighted average common shares outstanding
316,160 322,849 323,665
320,246
Nuance Communications,
Inc. Supplemental Financial Information - GAAP to Non-GAAP
Reconciliations, continued (in thousands) Unaudited Three
months ended Nine months ended June 30, June 30, 2015
2014 2015 2014
(1) Non-Cash
Stock-Based Compensation
Cost of product and licensing $ 148 $ 238 $ 331 $ 1,200 Cost of
professional services and hosting 7,833 10,528 20,185 24,346 Cost
of maintenance and support 1,002 1,290 2,576 2,480 Research and
development 9,210 12,960 26,387 33,703 Sales and marketing 11,760
13,656 32,176 39,110 General and administrative 11,748
16,710 38,317 46,702
Total $ 41,701 $ 55,382 $ 119,972 $
147,541
(2)
Acquisition-Related Revenue and Cost of Revenue
Revenue $ 10,717 $ 11,310 $ 38,732 $ 45,695 Cost of product and
licensing (204 ) (545 ) (1,211 ) (2,432 ) Cost of professional
services and hosting (315 ) (315 ) (945 )
(944 ) Total $ 10,198 $ 10,450 $ 36,576
$ 42,319
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