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Nuance Announces Fiscal 2012 And Fourth Quarter Results

The Company believes that providing 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 Company’s 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 Twelve months ended
September 30, September 30,
  2012     2011     2012     2011  
 
Revenues:
Product and licensing $ 209,227 $ 179,177 $ 740,726 $ 607,358
Professional services and hosting 196,886 132,063 673,943 509,141
Maintenance and support   62,668     55,801     236,840     202,242  
Total revenues   468,781     367,041     1,651,509     1,318,741  
 
Cost of revenues:
Product and licensing 21,713 17,651 74,837 65,601
Professional services and hosting 122,153 93,052 424,733 341,055
Maintenance and support 12,319 11,412 45,325 38,057
Amortization of intangible assets   15,300     14,570     60,034     55,111  
Total cost of revenues   171,485     136,685     604,929     499,824  
 
Gross profit   297,296     230,356     1,046,580     818,917  
 
Operating expenses:
Research and development 63,311 49,479 225,441 179,377
Sales and marketing 101,298 80,622 369,205 306,439
General and administrative 47,838 43,332 163,318 147,603
Amortization of intangible assets 24,391 22,998 95,416 88,219
Acquisition-related costs, net 12,374 7,956 58,746 21,866
Restructuring and other charges, net   1,466     17,519     8,268     22,862  
Total operating expenses   250,678     221,906     920,394     766,366  
 
Income from operations 46,618 8,450 126,186 52,551
 
Other expense, net   (24,969 )   (6,798 )   (60,884 )   (22,534 )
 
Income before income taxes 21,649 1,652 65,302 30,017
 
(Benefit) provision for income taxes   (95,992 )   6,761     (141,833 )   (8,221 )
 
Net income (loss) $ 117,641   $ (5,109 ) $ 207,135   $ 38,238  
 
Net income per share:
Basic $ 0.38   $ (0.02 ) $ 0.67   $ 0.13  
Diluted $ 0.36   $ (0.02 ) $ 0.65   $ 0.12  
 
Weighted average common shares outstanding:
Basic   309,307     306,541     306,371     302,277  
Diluted   322,424     306,541     320,822     315,960  
 
 
Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
   
ASSETS September 30, 2012 September 30, 2011
Unaudited
 
Current assets:
Cash and cash equivalents $ 1,129,761 $ 447,224
Restricted cash - 6,799
Marketable securities - 31,244
Accounts receivable, net 381,417 280,856
Prepaid expenses and other current assets   190,128   88,804
Total current assets 1,701,306 854,927
 
Land, building and equipment, net 116,134 78,218
Goodwill 2,955,477 2,347,880
Intangible assets, net 906,538 731,577
Other assets   119,585   82,691
Total assets $ 5,799,040 $ 4,095,293
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Current portion of long-term debt $ 148,542 $ 6,905
Redeemable convertible debentures 231,552 -
Contingent and deferred acquisition payments 49,685 23,783
Accounts payable and accrued expenses 328,374 258,777
Deferred revenue   206,610   185,605
Total current liabilities 964,763 475,070
 
Long-term portion of debt 1,735,811 853,020
Deferred revenue, net of current portion 108,481 90,382
Other liabilities   243,279   183,450
Total liabilities   3,052,334   1,601,922
 
Equity component of currently redeemable convertible debentures   18,430   -
Stockholders' equity   2,728,276   2,493,371
 
Total liabilities and stockholders' equity $ 5,799,040 $ 4,095,293
 
 
Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
     
Three months ended Twelve months ended
September 30, September 30,
  2012       2011     2012       2011  
 
Cash flows from operating activities:
Net income (loss) $ 117,641 $ (5,109 ) $ 207,135 $ 38,238
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 47,665 45,214 187,183 170,933
Stock-based compensation 58,165 37,791 174,581 147,296
Non-cash interest expense 10,709 2,986 35,497 12,510
Non-cash restructuring and other expense - 11,725 - 11,725
Deferred tax (benefit) provision (92,347 ) (8,163 ) (151,547 ) (43,890 )
Gain on non-controlling strategic equity interest - - (13,726 ) -
Other 504 12,233 4,016 16,492
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (21,880 ) (21,851 ) (55,210 ) (25,530 )
Prepaid expenses and other assets 14,861 5,302 13,881 (11,793 )
Accounts payable 153 1,806 22,645 (8,193 )
Accrued expenses and other liabilities (2,796 ) 3,175 8,939 (6,775 )
Deferred revenue   8,781     12,795     39,605     56,398  
Net cash provided by operating activities   141,456     97,904     472,999     357,411  
Cash flows from investing activities:
Capital expenditures (10,901 ) (10,640 ) (62,910 ) (34,907 )
Payments for business and technology acquisitions, net of cash acquired (229,128 ) (88,991 ) (884,945 ) (409,005 )
Purchases of marketable securities and other investments - - (15,156 ) (10,776 )
Proceeds from sales and maturities of marketable securities and other investments 778 5,000 31,789 11,650
Change in restricted cash balance   -     -     6,747     17,184  
Net cash used in investing activities   (239,251 )   (94,631 )   (924,475 )   (425,854 )
Cash flows from financing activities:
Payments of debt (1,626 ) (1,671 ) (6,605 ) (7,535 )
Proceeds from long-term debt, net of issuance costs 688,908 (2,553 ) 1,364,925 (2,553 )
Payments for repurchases of common stock - - (199,997 ) -
Proceeds from settlement of share-based derivatives, net - - 9,020 9,414
Payments of other long-term liabilities (380 ) (2,849 ) (8,525 ) (10,643 )
Excess tax benefits on employee equity awards 500 9,300 (3,583 ) 17,520
Proceeds from issuance of common stock from employee stock plans 8,884 14,955 27,747 36,667
Cash used to net share settle employee equity awards   (10,822 )   (6,881 )   (49,947 )   (36,908 )
Net cash provided by financing activities   685,464     10,301     1,133,035     5,962  
Effects of exchange rate changes on cash and cash equivalents   2,537     (13,331 )   978     (6,925 )
Net increase (decrease) in cash and cash equivalents 590,206 243 682,537 (69,406 )
Cash and cash equivalents at beginning of period   539,555     446,981     447,224     516,630  
Cash and cash equivalents at end of period $ 1,129,761   $ 447,224   $ 1,129,761   $ 447,224  
 
 
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Unaudited
   
Three months ended Twelve months ended
September 30 September 30
  2012       2011     2012       2011  
 
GAAP revenue $ 468,781 $ 367,041 $ 1,651,509 $ 1,318,741
Acquisition-related revenue adjustments: product and licensing 17,624 22,140 74,060 53,961
Acquisition-related revenue adjustments: professional services and hosting 2,775 7,844 5,864 15,429
Acquisition-related revenue adjustments: maintenance and support   908     2,510     6,632     5,807  
Non-GAAP revenue $ 490,088   $ 399,535   $ 1,738,065   $ 1,393,938  
 
GAAP cost of revenue $ 171,485 $ 136,685 $ 604,929 $ 499,824
Cost of revenue from amortization of intangible assets (15,300 ) (14,570 ) (60,034 ) (55,111 )
Cost of revenue adjustments: product and licensing (1,2) 2,002 2,680 8,135 9,487
Cost of revenue adjustments: professional services and hosting (1,2) (8,818 ) (7,300 ) (25,981 ) (26,864 )
Cost of revenue adjustments: maintenance and support (1,2)   (330 )   (641 )   (956 )   (2,186 )
Non-GAAP cost of revenue $ 149,039   $ 116,854   $ 526,093   $ 425,150  
 
GAAP gross profit $ 297,296 $ 230,356 $ 1,046,580 $ 818,917
Gross profit adjustments   43,753     52,325     165,392     149,871  
Non-GAAP gross profit $ 341,049   $ 282,681   $ 1,211,972   $ 968,788  
 
GAAP income from operations $ 46,618 $ 8,450 $ 126,186 $ 52,551
Gross profit adjustments 43,753 52,325 165,392 149,871
Research and development (1) 10,258 6,101 29,565 24,289
Sales and marketing (1) 18,187 10,516 54,281 43,264
General and administrative (1) 20,238 13,226 63,233 49,707
Amortization of intangible assets 24,391 22,998 95,416 88,219
Costs associated with IP collaboration agreements 5,250 5,250 21,000 19,750
Acquisition-related costs, net 12,374 7,956 58,746 21,866
Restructuring and other charges, net   1,466     17,519     8,268     22,862  
Non-GAAP income from operations $ 182,535   $ 144,341   $ 622,087   $ 472,379  
 
GAAP (benefit) provision for income taxes $ (95,992 ) $ 6,761 $ (141,833 ) $ (8,221 )
Non-cash taxes   97,741     (2,161 )   160,883     26,620  
Non-GAAP provision for income taxes $ 1,749   $ 4,600   $ 19,050   $ 18,399  
 
GAAP net income $ 117,641 $ (5,109 ) $ 207,135 $ 38,238
Acquisition-related adjustment - revenue (2) 21,307 32,494 86,556 75,197
Acquisition-related adjustment - cost of revenue (2) (2,336 ) (2,687 ) (8,700 ) (10,473 )
Acquisition-related costs, net 12,374 7,956 58,746 21,866
Cost of revenue from amortization of intangible assets 15,300 14,570 60,034 55,111
Amortization of intangible assets 24,391 22,998 95,416 88,219
Non-cash stock-based compensation (1) 58,165 37,791 174,581 147,296
Non-cash interest expense, net 10,709 2,986 35,497 12,510
Non-cash income taxes (97,741 ) 2,161 (160,883 ) (26,620 )
Costs associated with IP collaboration agreements 5,250 5,250 21,000 19,750
Change in fair value of share-based instruments (1,647 ) (2,386 ) (7,997 ) (13,230 )
Gain on non-controlling strategic equity interest - - (13,726 ) -
Restructuring and other charges, net   1,466     17,519     8,268     22,862  
Non-GAAP net income $ 164,879   $ 133,543   $ 555,927   $ 430,726  
 
Non-GAAP diluted net income per share $ 0.51   $ 0.42   $ 1.73   $ 1.36  
 
Diluted weighted average common shares outstanding   322,424     319,198     320,822     315,960  
 
 
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
       
Three months ended Twelve months ended
September 30 September 30
  2012     2011     2012     2011  
 

(1) Non-Cash Stock-Based Compensation

Cost of product and licensing $ 19 $ 7 $ 137 $ 36
Cost of professional services and hosting 9,133 7,300 26,409 27,814
Cost of maintenance and support 330 641 956 2,186
Research and development 10,258 6,101 29,565 24,289
Sales and marketing 18,187 10,516 54,281 43,264
General and administrative   20,238     13,226     63,233     49,707  
Total $ 58,165   $ 37,791   $ 174,581   $ 147,296  
 

(2) Acquisition-Related Revenue and Cost of Revenue

Revenue $ 21,307 $ 32,494 $ 86,556 $ 75,197
Cost of product and licensing (2,021 ) (2,687 ) (8,272 ) (9,523 )
Cost of professional services and hosting   (315 )   -     (428 )   (950 )
Total $ 18,971   $ 29,807   $ 77,856   $ 64,724  
 
 
Nuance Communications, Inc.
Supplemental Financial Information – GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
                   

Healthcare

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
  2011   2011   2011   2011   2011   2012   2012   2012   2012   2012
GAAP Revenue $ 117.4 $ 120.7 $ 135.4 $ 141.7 $ 515.2 $ 145.1 $ 149.7 $ 184.5 $ 189.3 $ 668.6
Adjustment $ 0.4 $ 0.3 $ 3.9 $ 7.0 $ 11.6 $ 0.2 $ 0.2 $ 0.0 $ 0.4 $ 0.8
Non-GAAP Revenue $ 117.8 $ 121.0 $ 139.3 $ 148.7 $ 526.8 $ 145.3 $ 149.9 $ 184.5 $ 189.7 $ 669.4
 

Mobile & Consumer

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
  2011   2011   2011   2011   2011   2012   2012   2012   2012   2012
GAAP Revenue $ 86.1 $ 93.1 $ 91.6 $ 107.9 $ 378.7 $ 103.4 $ 110.3 $ 126.0 $ 143.2 $ 483.0
Adjustment $ 1.6 $ 0.6 $ 1.5 $ 10.9 $ 14.6 $ 5.1 $ 4.8 $ 6.4 $ 9.0 $ 25.3
Non-GAAP Revenue $ 87.7 $ 93.7 $ 93.1 $ 118.7 $ 393.3 $ 108.5 $ 115.1 $ 132.4 $ 152.2 $ 508.3
 

Enterprise

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
  2011   2011   2011   2011   2011   2012   2012   2012   2012   2012
GAAP Revenue $ 71.1 $ 72.3 $ 68.5 $ 79.9 $ 291.8 $ 72.2 $ 79.6 $ 74.1 $ 89.1 $ 315.0
Adjustment $ 1.4 $ 1.7 $ 1.4 $ 0.1 $ 4.6 $ 3.6 $ 11.8 $ 0.4 $ 1.2 $ 17.0
Non-GAAP Revenue $ 72.5 $ 74.0 $ 69.9 $ 80.0 $ 296.4 $ 75.8 $ 91.4 $ 74.5 $ 90.3 $ 332.0
 

Imaging

Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
  2011   2011   2011   2011   2011   2012   2012   2012   2012   2012
GAAP Revenue $ 29.2 $ 32.9 $ 33.4 $ 37.6 $ 133.0 $ 39.9 $ 50.7 $ 47.1 $ 47.2 $ 184.9
Adjustment $ 10.0 $ 10.4 $ 9.4 $ 14.6 $ 44.4 $ 12.5 $ 10.6 $ 9.7 $ 10.7 $ 43.5
Non-GAAP Revenue $ 39.3 $ 43.3 $ 42.8 $ 52.1 $ 177.4 $ 52.4 $ 61.3 $ 56.8 $ 57.9 $ 228.4
 
 
 
Schedules may not add due to rounding.




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