Achieves Strong Cash Flows, Operating Margins, and EPS Amid
Continuing Transition to Recurring Revenue Models
Nuance Communications, Inc. (NASDAQ: NUAN) today announced
financial results for its third quarter fiscal 2016, ended June 30,
2016.
In the third quarter of fiscal 2016, Nuance reported GAAP
revenue of $477.9 million, compared to $477.9 million a year ago.
Nuance reported non-GAAP revenue of $484.9 million, which includes
$7.0 million of revenue excluded from GAAP revenue due to
accounting treatment in conjunction with acquisitions, as compared
to $488.7 million in the third quarter of fiscal 2015. In the third
quarter of 2016, recurring revenue was 71% of total revenue,
compared to 68% a year ago, on both a GAAP and non-GAAP basis. In
the third quarter of fiscal 2016, Nuance reported net new bookings
of $362.9 million. This includes an expected decline from $484.4
million recorded in the third quarter of fiscal 2015 as the
prior-year period included a significant automotive booking that
caused bookings in that quarter to be unusually high.
In the third quarter of fiscal 2016, Nuance recognized GAAP net
loss of $(11.8) million, or $(0.04) per share, compared to GAAP net
loss of $(39.4) million, or $(0.13) per share, in the third quarter
of fiscal 2015. Nuance reported non-GAAP net income of $107.8
million, or $0.38 per diluted share, up from non-GAAP net income of
$101.1 million, or $0.32 per diluted share, in the third quarter of
fiscal 2015. Nuance’s third quarter fiscal 2016 GAAP operating
margin was 6.0%, up from 3.0% in the third quarter of fiscal 2015.
Nuance’s third quarter fiscal 2016 non-GAAP operating margin was
27.2%, up from 26.4% in the third quarter of fiscal 2015. Nuance
reported cash flow from operations of $125.9 million in the third
quarter of fiscal 2016, up slightly from $120.3 million in the
third quarter of fiscal 2015.
“Overall, we have delivered a solid performance in our third
quarter and year-to-date 2016, particularly in our Enterprise
segment and automotive business,” said Daniel Tempesta, Nuance CFO.
“Balancing our continued initiatives to reduce costs and improve
productivity with investments in our products and growth markets,
we believe we are positioning the company for renewed growth and
profitability.”
Please refer to the “Discussion of Non-GAAP Financial Measures”
and to the “GAAP to Non-GAAP Reconciliations,” included elsewhere
in this release, for more information regarding the company’s use
of non-GAAP financial measures.
Conference Call and Prepared RemarksNuance will host an
investor conference call today that will begin at 5:00 p.m. ET and
will include only brief comments followed by questions and answers.
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 800-230-1092 or 612-288-0329 at least five minutes
prior to the call and referencing code 398580. 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 398580.
Nuance is providing a copy of prepared remarks along 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
are available at http://www.nuance.com/earnings-results/ in
conjunction with the press release.
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 and the Nuance logo 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 BookingsBookings
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. Constant currency
for net new bookings is calculated using current period net new
bookings denominated in currencies other than United States
dollars, converted into United States dollars using the average
exchange rate for those currencies from the prior year period
rather than the actual exchange rate in effect during the current
period.
Safe Harbor and Forward-Looking StatementsStatements 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 but
not limited to: fluctuations in demand for our existing and future
products; changes to economic conditions in the United States and
internationally; fluctuating currency rates, 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 quality issues 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, 2015, as
supplemented by our current report on Form 8-K filed on May 11,
2016, our quarterly reports, and other reports we have 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 MeasuresWe 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 constant
currency organic performance we mean performance excluding the
effect of current foreign currency rate fluctuations. 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, 2016, 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
and Quantim for the three and nine months ended June 30, 2016 that
we would have recognized but for the purchase accounting treatment
of these transactions. Non-GAAP revenue also includes revenue that
we would have 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 fall into the following
categories: (i) transition and integration costs; (ii) professional
service fees and expenses; 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, and
earn-out payments treated as compensation expense, as well as the
costs of integration-related activities, including services
provided by third-parties.
(ii) Professional service fees and expenses. Professional
service fees and expenses include financial advisory, legal,
accounting and other outside services in connection with
acquisition activities, and disputes and regulatory matters related
to acquired entities.
(iii) Acquisition-related adjustments. Acquisition-related
adjustments include 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
and costs for extending 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 valuation
methodologies, subjective assumptions and the variety of award
types, we believe that excluding 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 result
from unplanned events in order to measure operating performance and
current and future liquidity both with and without these expenses.
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 arise outside of the
ordinary course of continuing operations. These items include
losses from extinguishing our convertible debt and adjustments from
changes in fair value of share-based instruments relating to
issuing 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.
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, 2016 2015 2016
2015
Revenues: Product and licensing $ 153,015 $
162,806 $ 490,687 $ 506,945 Professional services and hosting
242,331 234,253 709,662 684,927 Maintenance and support
82,505 80,880 242,350
235,145 Total revenues 477,851 477,939
1,442,699 1,427,017
Cost of revenues: Product and licensing 20,785 21,276 65,020
68,498 Professional services and hosting 158,412 153,646 466,383
461,220 Maintenance and support 13,574 13,702 40,496 41,091
Amortization of intangible assets 15,107
15,776 47,077 46,538 Total cost
of revenues 207,878 204,400
618,976 617,347 Gross profit
269,973 273,539 823,723
809,670
Operating expenses: Research and
development 67,761 78,188 205,512 233,337 Sales and marketing
96,012 99,285 289,439 303,785 General and administrative 40,328
42,130 126,769 141,366 Amortization of intangible assets 26,748
26,371 80,229 78,526 Acquisition-related costs, net 4,721 2,423
8,426 13,702 Restructuring and other charges, net 5,717
10,808 20,257 12,703
Total operating expenses 241,287
259,205 730,632 783,419
Income from operations 28,686 14,334 93,091 26,251 Other expense,
net (32,661 ) (47,191 ) (99,165 )
(106,828 ) Loss before income taxes (3,975 ) (32,857 ) (6,074 )
(80,577 ) Provision for income taxes 7,846
6,533 24,858 23,406 Net loss $
(11,821 ) $ (39,390 ) $ (30,932 ) $ (103,983 )
Net loss
per share: Basic $ (0.04 ) $ (0.13 ) $ (0.10 ) $ (0.33 )
Diluted $ (0.04 ) $ (0.13 ) $ (0.10 ) $ (0.33 )
Weighted
average common shares outstanding: Basic 279,373
312,680 295,319 319,415
Diluted 279,373 312,680 295,319
319,415 Nuance Communications,
Inc. Condensed Consolidated Balance Sheets (in thousands) Unaudited
ASSETS June 30,
2016 September 30, 2015 Current assets: Cash and cash
equivalents $ 559,055 $ 479,449 Marketable securities 38,029 57,237
Accounts receivable, net 363,476 373,162 Prepaid expenses and other
current assets 84,193 76,777 Total current assets
1,044,753 986,625 Marketable securities 20,189 32,099 Land,
building and equipment, net 186,561 186,007 Goodwill 3,382,405
3,378,334 Intangible assets, net 686,661 796,285 Other assets
156,824 148,301 Total assets $ 5,477,393 $ 5,527,651
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Current portion of long-term debt $ - $ 4,834
Contingent and deferred acquisition payments 23,236 15,651 Accounts
payable and accrued expenses 291,936 281,190 Deferred revenue
353,083 324,709 Total current liabilities 668,255
626,384 Long-term portion of debt 2,443,126 2,118,821
Deferred revenue, net of current portion 376,062 343,452 Other
liabilities 195,696 173,742 Total liabilities
3,683,139 3,262,399 Stockholders' equity
1,794,254 2,265,252 Total liabilities and stockholders'
equity $ 5,477,393 $ 5,527,651 Nuance Communications,
Inc. Consolidated Statements of Cash Flows (in thousands) Unaudited
Three months ended Nine months ended
June 30, June 30, 2016 2015 2016 2015
Cash
flows from operating activities: Net loss $ (11,821 ) $ (39,390
) $ (30,932 ) $ (103,983 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation and
amortization 57,267 57,872 173,093 171,892 Stock-based compensation
42,447 41,701 122,957 119,972 Non-cash interest expense 12,829
7,160 34,044 22,078 Deferred tax provision 2,742 1,143 6,480 7,529
Loss on extinguishment of debt - 17,714 4,851 17,714 Other 146
4,214 12 5,641 Changes in operating assets and liabilities, net of
effects from acquisitions: Accounts receivable 1,264 34,002 23,374
50,990 Prepaid expenses and other assets 4,239 (1,496 ) (12,526 )
(14,709 ) Accounts payable 22,344 (16,516 ) 25,041 (14,647 )
Accrued expenses and other liabilities 11,215 6,851 18,549 (43,167
) Deferred revenue (16,808 ) 7,085
61,984 116,660 Net cash provided by operating
activities 125,864 120,340
426,927 335,970
Cash flows from investing
activities: Capital expenditures (9,188 ) (17,401 ) (41,423 )
(48,159 ) Payments for business and technology acquisitions, net of
cash acquired (795 ) (50,143 ) (28,194 ) (82,034 ) Purchases of
marketable securities and other investments (3,494 ) (23,417 )
(36,251 ) (114,765 ) Proceeds from sales and maturities of
marketable securities and other investments 33,573
26,316 66,254 49,481 Net
cash provided by (used in) investing activities 20,096
(64,645 ) (39,614 ) (195,477 )
Cash
flows from financing activities: Payments of debt - (257,425 )
(511,844 ) (259,843 ) Proceeds from issuance of long-term debt, net
of issuance costs 296,103 256,212 959,860 256,212 Payments for
repurchase of common stock (125,134 ) (128,365 ) (699,472 )
(238,203 ) Payments for settlement of other share-based derivatives
- - - (340 ) Net payments on other long-term liabilities (236 )
(857 ) (1,320 ) (2,383 ) Proceeds from issuance of common stock
from employee stock plans 21 3,186 8,461 12,335 Cash used to net
share settle employee equity awards (10,074 ) (6,320
) (67,047 ) (53,273 ) Net cash provided by (used in)
financing activities 160,680 (133,569 )
(311,362 ) (285,495 ) Effects of exchange rate changes on
cash and cash equivalents 1,725 340
3,655 (5,112 ) Net increase (decrease) in cash
and cash equivalents 308,365 (77,534 ) 79,606 (150,114 ) Cash and
cash equivalents at beginning of period 250,690
474,650 479,449 547,230
Cash and cash equivalents at end of period $ 559,055 $
397,116 $ 559,055 $ 397,116
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, 2016
2015 2016 2015
GAAP
revenues $ 477,851 $ 477,939 $1,442,699 $1,427,017
Acquisition-related revenue adjustments: product and licensing
4,676 7,142 16,384 26,897 Acquisition-related revenue adjustments:
professional services and hosting 2,315 3,153 7,678 10,299
Acquisition-related revenue adjustments: maintenance and support 19
422 383 1,536
Non-GAAP revenues $ 484,861 $ 488,656
$1,467,144 $1,465,749
GAAP cost of revenues $ 207,878
$ 204,400 $ 618,976 $ 617,347 Cost of revenues from amortization of
intangible assets (15,107) (15,776) (47,077) (46,538) Cost of
revenues adjustments: product and licensing (1,2) (42) 56 (286) 880
Cost of revenues adjustments: professional services and hosting
(1,2) (7,562) (7,518) (22,701) (19,240) Cost of revenues
adjustments: maintenance and support (1,2) (1,083) (1,002) (3,074)
(2,576)
Non-GAAP cost of revenues $ 184,084 $ 180,160 $
545,838 $ 549,873
GAAP gross profit $ 269,973 $
273,539 $ 823,723 $ 809,670 Gross profit adjustments 30,804 34,957
97,583 106,206
Non-GAAP gross profit $ 300,777 $ 308,496 $
921,306 $ 915,876
GAAP income from operations $
28,686 $ 14,334 $ 93,091 $ 26,251 Gross profit adjustments 30,804
34,957 97,583 106,206 Research and development (1) 9,157 9,210
27,056 26,387 Sales and marketing (1) 13,726 11,760 37,023 32,176
General and administrative (1) 10,327 11,748 31,892 38,317
Amortization of intangible assets 26,748 26,371 80,229 78,526 Costs
associated with IP collaboration agreements - 2,625 4,000 8,501
Acquisition-related costs, net 4,721 2,423 8,426 13,702
Restructuring and other charges, net 5,717 10,808 20,257 12,703
Other 2,114 4,757 11,989 20,590
Non-GAAP income from
operations $ 132,000 $ 128,993 $ 411,546 $ 363,359
GAAP provision for income taxes $ 7,846 $ 6,533 $ 24,858 $
23,406 Non-cash taxes (2,794) (1,086) (8,471) (8,578)
Non-GAAP
provision for income taxes $ 5,052 $ 5,447 $ 16,387 $ 14,828
GAAP net loss $ (11,821) $ (39,390) $ (30,932) $
(103,983) Acquisition-related adjustment - revenues (2) 7,010
10,717 24,445 38,732 Acquisition-related adjustment - cost of
revenues (2) (550) (519) (925) (2,156) Acquisition-related costs,
net 4,721 2,423 8,426 13,702 Cost of revenue from amortization of
intangible assets 15,107 15,776 47,077 46,538 Amortization of
intangible assets 26,748 26,371 80,229 78,526 Restructuring and
other charges, net 5,717 10,808 20,257 12,703 Non-cash stock-based
compensation (1) 42,447 41,701 122,957 119,972 Non-cash interest
expense 12,829 7,160 34,044 22,078 Non-cash income taxes 2,794
1,086 8,471 8,578 Costs associated with IP collaboration agreements
- 2,625 4,000 8,501 Change in fair value of share-based instruments
- (334) (61) 204 Loss on extinguishment of debt - 17,714 4,851
17,714 Other 2,838 4,917 13,024 20,853
Non-GAAP net income $
107,840 $ 101,055 $ 335,863 $ 281,962
Non-GAAP diluted
net income per share $ 0.38 $ 0.32 $ 1.12 $ 0.87
Diluted weighted average common shares outstanding 281,786
316,160 298,830 323,665 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, 2016 2015 2016 2015
(1) Non-cash
stock-based compensation
Cost of product and licensing $ 42 $ 148 $ 286 $ 331 Cost of
professional services and hosting 8,112 7,833 23,626 20,185 Cost of
maintenance and support 1,083 1,002 3,074 2,576 Research and
development 9,157 9,210 27,056 26,387 Sales and marketing 13,726
11,760 37,023 32,176 General and administrative 10,327
11,748 31,892 38,317
Total $ 42,447 $ 41,701 $ 122,957 $
119,972
(2)
Acquisition-related revenue and cost of revenue
Revenues $ 7,010 $ 10,717 $ 24,445 $ 38,732 Cost of product and
licensing - (204 ) - (1,211 ) Cost of professional services and
hosting (550 ) (315 ) (925 ) (945 )
Total $ 6,460 $ 10,198 $ 23,520 $ 36,576
Nuance Communications, Inc. Supplemental
Financial Information – GAAP to Non-GAAP Reconciliations, continued
(in millions) Unaudited
Perpetual Product
and LicensingRevenue
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenue $ 584.1 $ 578.1 $ 496.6 $ 117.0 $ 121.3 $ 108.1 $ 115.9 $
462.1 $ 115.2 $ 88.0 $ 80.9 Adjustment 73.9 45.7
21.7 2.2 4.6 3.6 2.4 13.0
2.0 2.2 1.4 Non-GAAP Revenue $ 658.0 $ 623.8 $
518.3 $ 119.2 $ 125.9 $ 111.7 $ 118.3 $ 475.2 $ 117.2 $ 90.2 $ 82.3
Recurring Product
and LicensingRevenue
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenue $ 156.6 $ 175.6 $ 214.4 $ 52.7 $ 53.2 $ 54.7 $ 73.5 $ 234.1
$ 63.9 $ 70.6 $ 72.1 Adjustment - 24.4 15.6
8.4 4.6 3.5 3.6 20.1 4.0
3.5 3.3 Non-GAAP Revenue $ 156.6 $ 200.0 $ 230.0 $
61.1 $ 57.8 $ 58.2 $ 76.9 $ 254.0 $ 67.9 $ 74.1 $ 75.3
Professional
Services Revenue
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenue $ 183.1 $ 208.1 $ 220.7 $ 54.8 $ 51.2 $ 51.2 $ 52.9 $ 210.0
$ 49.7 $ 55.6 $ 61.2 Adjustment 0.7 17.9 7.5
0.4 0.4 0.4 0.3 1.5 0.3
0.4 0.3 Non-GAAP Revenue $ 183.8 $ 226.0 $ 228.2 $
55.2 $ 51.6 $ 51.6 $ 53.2 $ 211.5 $ 50.0 $ 55.9 $ 61.5
Hosting
Revenue
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenue $ 490.9 $ 624.3 $ 690.2 $ 171.4 $ 173.3 $ 183.1 $ 181.7 $
709.5 $ 177.4 $ 184.6 $ 181.1 Adjustment 5.3 9.3
15.6 3.4 2.9 2.8 2.4 11.5
2.3 2.5 2.0 Non-GAAP Revenue $ 496.2 $ 633.6 $
705.8 $ 174.8 $ 176.2 $ 185.9 $ 184.2 $ 721.2 $ 179.7 $ 187.1 $
183.2
Maintenance and
Support Revenue
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenue $ 236.8 $ 269.2 $ 301.6 $ 78.2 $ 76.1 $ 80.9 $ 80.2 $ 315.4
$ 79.9 $ 79.9 $ 82.5 Adjustment 6.7 5.1 3.2
0.6 0.5 0.4 0.3 1.8 0.2
0.1 0.0 Non-GAAP Revenue $ 243.5 $ 274.3 $ 304.8 $
78.8 $ 76.6 $ 81.3 $ 80.6 $ 317.1 $ 80.2 $ 80.0 $ 82.5
Total Recurring
Revenues
FY FY FY Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 2012
2013 2014 2015 2015 2015
2015 2015 2016 2016 2016 GAAP
Revenues $ 896.7 $ 1,087.4 $ 1,228.4 $ 308.9 $ 307.5 $ 323.6 $
340.5 $ 1,280.5 $ 326.1 $ 339.6 $ 339.7 Adjustment 12.2
40.2 34.9 12.7 8.1 6.8
6.5 34.1 6.4 6.2 5.3 Non-GAAP Revenues
$ 908.8 $ 1,127.6 $ 1,263.3 $ 321.7 $ 315.6 $ 330.4 $ 347.0 $
1,314.7 $ 332.5 $ 345.8 $ 345.0
Schedules may not add due to rounding.
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version on businesswire.com: http://www.businesswire.com/news/home/20160808006156/en/
Nuance Communications, Inc.For InvestorsRichard
Mack, 781-565-5000richard.mack@nuance.comorFor PressRebecca
Paquette, 781-565-5000rebecca.paquette@nuance.com
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