• Exceeded margin and EPS expectations, delivering revenue near high end of range
  • Continued strength in cloud offerings across all strategic segments
  • Significant progress toward October 1st Automotive spin
  • Raise full-year EPS and operating margin guidance; Maintain full-year revenue guidance

BURLINGTON, Mass., Aug. 07, 2019 (GLOBE NEWSWIRE) -- Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results for its third fiscal quarter ended June 30, 2019.

ASC 606 Q3 2019 Performance Summary (1)

  • GAAP revenue of $449.2 million and GAAP earnings per diluted share of $0.03.
  • Non-GAAP revenue of $451.0 million and non-GAAP earnings per diluted share of $0.29.

ASC 605 Q3 2019 Performance Summary (1)

  • ASC 605 revenue of $458.3 million and earnings per diluted share of $0.04.
  • Non-GAAP revenue of $460.2 million and non-GAAP earnings per diluted share $0.31.

(1) As a reminder, effective October 1, 2018, Nuance adopted the ASC 606 revenue recognition standard using the modified retrospective approach. Under this adoption methodology, the Company does not recast its historical financials to reflect the implementation of ASC 606. Results will be presented for Q3 19 under both ASC 605 and 606 methodologies and all relevant year-over-year financial comparisons and trends will be on an ASC 605 basis only. In addition, due to the sale of the Imaging business, the Company is presenting results on a continuing operations basis, unless otherwise noted.

“Once again, we delivered on our strategic and financial objectives in the third quarter,” said Mark Benjamin, Chief Executive Officer at Nuance. “We generated solid revenue growth across each strategic business segment with better than expected margins, leading to better than anticipated results on the bottom line. Consistent with our strategic initiatives and ongoing effort to drive transformation and simplification, we exited, in an accelerated fashion, our non-core Subscription Revenue Services (SRS) business and made significant progress toward our Automotive spin. This is demonstrated by the announcement of the name of the new company, Cerence Inc., and the selection of the Board of Directors.”

Mr. Benjamin concluded, “Nuance’s solid performance in the first three quarters of the fiscal year gives us confidence to raise guidance again for full-year EPS and operating margins, while maintaining full-year revenue guidance. In addition, we are maintaining our annual ARR guidance of $245 million to $255 million, which represents approximately 35% growth from last year.”

ASC 605 Q3 2019 Performance Summary

ASC 605 Q3 2019 results for continuing operations include:

  • ASC 605 revenue of $458.3 million, compared to $449.4 million in the same period last year.
  • Non-GAAP revenue of $460.2 million, compared to $451.8 million in the same period last year.
  • Organic revenue growth of 3% compared to the same period last year.
  • Recurring revenue of $355.9 million, up 100 basis points year over year.
  • GAAP EPS of $0.04, compared to ($0.07) in the same period last year.
  • Non-GAAP EPS of $0.31, compared to $0.22 in the same period last year.
  • GAAP net income of $12.2 million, compared to ($20.7) million in the same period last year.
  • Non-GAAP net income of $88.9 million, compared to $64.0 million in the same period last year.
  • GAAP operating margin of 8.9%, compared to 4.7% in the same period last year.
  • Non-GAAP operating margin of 27.9%, compared to 23.4% in the same period last year.
  • Operating cash flows from continuing operations was $93.6 million, or 105% of non-GAAP net income, compared to $91.7 million, or 143% of non-GAAP income in the same period last year.

Capital Allocation

In the third quarter of 2019, Nuance repurchased a total of 1.7 million shares of its common stock, at an average price of $17.36 per share, for total consideration of $29.6 million. As of July 31, 2019, and since the beginning of the fiscal year, the Company has repurchased a total of 7.8 million shares of its common stock, at an average price of $15.56 per share, for an aggregate consideration of $120.9 million. There is $436.4 million still available under our existing authorization for share repurchases. Since May 2018, Nuance has repurchased approximately 5.9% of its shares outstanding for an average price of $14.71.

For a complete discussion of Nuance’s results and business outlook, please see the Company’s Prepared Remarks document available at http://www.nuance.com/earnings-results/.

Please refer to the “Discussion of Non-GAAP Financial Measures,” and “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 Remarks

Nuance will host a conference call today at 5:00 p.m. ET. To participate, please access the live webcast here, or dial (866) 393-4306 (US & Canada) or (734) 385-2616 (international) at least five minutes prior to start and reference code 4867239. A replay will be available approximately two hours after the call and can be accessed by dialing (855) 859-2056 (US & Canada) or (404) 537-3406 (international) and entering code 4867239.

Nuance will provide a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts additional detail for analyzing the results. The remarks will be available at http://investors.nuance.com/ and will not be read on the call.

About Nuance Communications, Inc.
Nuance Communications, Inc. (NASDAQ: NUAN) is the pioneer and leader in conversational AI innovations that bring intelligence to everyday work and life. The Company delivers solutions that understand, analyze and respond to human language to increase productivity and amplify human intelligence. With decades of domain and artificial intelligence expertise, Nuance works with thousands of organizations – in global industries that include healthcare, telecommunications, automotive, financial services, and retail – to create stronger relationships and better experiences for their customers and workforce. 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.

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,” "intends" 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: the ability to effect the separation and spin-off of our Auto business; our ability to successfully wind-down certain products or business lines; fluctuations in demand for our existing and future products; fluctuations in the mix of products and services sold in specific periods; further unanticipated costs resulting from the FY17 malware incident including potential costs associated with governmental investigations that may result from the incident; our ability to control and successfully manage our expenses and cash position; our ability to develop and execute in a timely manner our productivity and cost initiatives; the effects of competition, including pricing pressure, and changing business models in the markets and industries we serve; changes to economic conditions in the United States and internationally; the imposition of tariffs or other trade measures particularly between the United States and China; potential future impairment charges related to our reorganized business reporting units; fluctuating currency rates; possible quality issues in our products and technologies; our ability to successfully integrate operations and employees of acquired businesses; the ability to realize anticipated synergies from acquired businesses and to cut stranded costs related to divested businesses; and the other factors described in our most recent Form 10-K, Form 10-Q and other filings 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.

Discussion of non-GAAP Financial Measures
We believe that providing the non-GAAP ("Generally Accepted Accounting Principles") 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. The non- GAAP information included in this press release should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non- GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the 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, 2019 and 2018, our management has either included or excluded items in seven general categories, each of which is described below.

Acquisition-related revenue and cost of revenue.
We provide supplementary non-GAAP financial measures of revenue that include revenue that we would have recognized but for the purchase accounting treatment of acquisition 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:

  1. 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.
  2. Professional service fees and expenses. Professional service fees and expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities.
  3. 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.

Non-cash expenses.
We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; and (ii) non-cash interest. These items are further discussed as follows:

  1. 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.
  2. Non-cash interest. We exclude non-cash interest because we believe that excluding this expense 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. Non-cash interest expense will continue in future periods.

Other expenses.
We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, 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, and losses from extinguishing our convertible debt. Other items such as consulting and professional services fees related to assessing strategic alternatives and our transformation programs, implementation of the new revenue recognition standard (ASC 606), and expenses associated with the malware incident and remediation thereof are also excluded.

Non-GAAP income tax provision.
Effective Q2 2017, we changed our method of calculating our non-GAAP income tax provision. Under the prior method, we calculated our non-GAAP tax provision using a cash tax method to reflect the estimated amount we expected to pay or receive in taxes related to the period, which is equivalent to our GAAP current tax provision. Under the new method, our non-GAAP income tax provision is determined based on our non- GAAP pre-tax income. The tax effect of each non-GAAP adjustment, if applicable, is computed based on the statutory tax rate of the jurisdiction to which the adjustment relates. Additionally, as our non-GAAP profitability is higher based on the non-GAAP adjustments, we adjust the GAAP tax provision to remove valuation allowances and related effects based on the higher level of reported non-GAAP profitability. We also exclude from our non-GAAP tax provision certain discrete tax items as they occur, which in fiscal year 2018 also includes certain impacts from the Tax Cuts and Jobs Act of 2017.

Contact Information

For Press 
Richard Mack 
Nuance Communications, Inc. 
Tel: 781-565-5000 
Email: richard.mack@nuance.com
 
For Investors 
Tracy Krumme 
Nuance Communications, Inc. 
Tel: 781-565-4334 
Email: tracy.krumme@nuance.com

Financial Tables Follow

       
Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
       
  Three Months Ended June 30,
   2019   2019   2018 
  (ASC 606) (ASC 605) (ASC 605)
Revenues:      
Hosting and professional services $  260,902  $  268,845  $  253,610 
Product and licensing    121,809     127,388     132,762 
Maintenance and support    66,486     62,099     63,077 
  Total revenues    449,197     458,332     449,449 
       
Cost of revenues:      
Hosting and professional services    154,397     160,952     165,578 
Product and licensing    19,207     17,711     13,969 
Maintenance and support    8,192     8,407     9,612 
Amortization of intangible assets    8,895     8,895     12,172 
  Total cost of revenues    190,691     195,965     201,331 
       
Gross profit    258,506     262,367     248,118 
       
Operating expenses:      
Research and development    67,598     67,598     69,427 
Sales and marketing    72,229     73,832     77,820 
General and administrative    46,421     46,421     49,666 
Amortization of intangible assets    16,496     16,496     19,856 
Acquisition-related costs, net    1,154     1,154     4,916 
Restructuring and other charges, net    16,118     16,118     5,342 
  Total operating expenses    220,016     221,619     227,027 
       
Income from operations    38,490     40,748     21,091 
       
Other expenses, net    (21,445)    (21,445)    (32,252)
       
Income (loss) before income taxes    17,045     19,303     (11,161)
       
Provision for income taxes     7,786     7,136     9,559 
       
Net income (loss) from continuing operations    9,259     12,167     (20,720)
Net income from discontinued operations    -     -     6,683 
Net income (loss) $  9,259  $  12,167  $  (14,037)
       
Net income (loss) per common share - basic:      
Continuing operations $  0.03  $  0.04  $  (0.07)
Discontinued operations    -     -     0.02 
Total net income (loss) per basic common share $  0.03  $  0.04  $  (0.05)
       
Net income (loss) per common share - diluted:      
Continuing operations $  0.03  $  0.04  $  (0.07)
Discontinued operations    -     -     0.02 
Total net income (loss) per diluted common share $  0.03  $  0.04  $  (0.05)
       
Weighted average common shares outstanding:      
Basic    285,942     285,942     292,663 
Diluted    288,648     288,648     292,663 
       

 

Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
        
   Nine Months Ended June 30,
    2019   2019   2018 
   (ASC 606) (ASC 605) (ASC 605)
Revenues:       
Hosting and professional services  $  771,601  $  800,780  $  785,038 
Product and licensing     377,349     386,851     387,956 
Maintenance and support     203,484     183,338     189,872 
  Total revenues     1,352,434     1,370,969     1,362,866 
        
Cost of revenues:       
Hosting and professional services     471,204     474,506     517,362 
Product and licensing     61,897     48,956     41,867 
Maintenance and support     24,919     25,181     28,616 
Amortization of intangible assets     27,700     27,700     38,744 
  Total cost of revenues     585,720     576,343     626,589 
        
Gross profit     766,714     794,626     736,277 
        
Operating expenses:       
Research and development     201,774     201,774     202,211 
Sales and marketing     223,343     224,366     233,237 
General and administrative     130,892     130,892     174,622 
Amortization of intangible assets     50,426     50,426     57,094 
Acquisition-related costs, net     6,223     6,223     12,837 
Restructuring and other charges, net     60,668     60,668     27,792 
Impairment of goodwill     -      -      137,907 
  Total operating expenses     673,326     674,349     845,700 
        
Income (loss) from operations     93,388     120,277     (109,423)
        
Other expenses, net     (79,365)    (79,365)    (98,390)
        
Income (loss) before income taxes     14,023     40,912     (207,813)
        
Provision (benefit) for income taxes      7,814     17,843     (67,417)
        
Net (loss) income from continuing operations     6,209     23,069     (140,396)
Net income from discontinued operations     99,472     120,919     15,534 
Net income (loss)  $  105,681  $  143,988  $  (124,862)
        
Net income (loss) per common share - basic:       
Continuing operations  $  0.02  $  0.08  $  (0.48)
Discontinued operations     0.35     0.42     0.05 
Total net income (loss) per basic common share  $  0.37  $  0.51  $  (0.43)
        
Net income (loss) per common share - diluted:       
Continuing operations  $  0.02  $  0.08  $  (0.48)
Discontinued operations     0.35     0.42     0.05 
Total net income (loss) per diluted common share  $  0.37  $  0.50  $  (0.43)
        
Weighted average common shares outstanding:       
Basic     285,064     285,064     292,703 
Diluted     288,153     288,153     292,703 
        

 

Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
        
        
   June 30, 2019 September 30, 2018
   (ASC 606) (ASC 605) (ASC 605)
ASSETS Unaudited Unaudited  
Current assets:      
 Cash and cash equivalents $  536,377 $  536,377 $  315,963
 Marketable securities    136,986    136,986    135,579
 Accounts receivable, net    313,599    340,210    347,873
 Prepaid expenses and other current assets    193,795    128,174    94,814
 Current assets held for sale    -    -    34,402
 Total current assets    1,180,757    1,141,747    928,631
        
Marketable securities    12,796    12,796    21,932
Land, building and equipment, net    138,466    138,466    153,452
Goodwill    3,242,693    3,242,693    3,247,105
Intangible assets, net    372,934    372,934    450,001
Other assets    241,271    119,809    141,761
Long-term assets held for sale    -    -    359,497
 Total assets $  5,188,917 $  5,028,445 $  5,302,379
        
LIABILITIES AND STOCKHOLDERS' EQUITY      
        
Current liabilities:      
 Contingent and deferred acquisition payments$  17,122 $  17,122 $  14,211
 Accounts payable    95,272    95,272    80,912
 Accrued expenses and other current liabilities   245,012    245,304    269,339
 Deferred revenue    310,586    346,777    330,689
 Current liabilities held for sale    -    -    69,013
 Total current liabilities    667,992    704,475    764,164
        
Long-term debt    1,923,716    1,923,716    2,185,361
Deferred revenue, net of current portion    410,897    430,779    434,316
Other liabilities    143,314    122,036    143,524
Long-term liabilities held for sale    -    -    57,518
 Total liabilities    3,145,919    3,181,006    3,584,884
        
Stockholders' equity    2,042,998    1,847,439    1,717,496
 Total liabilities and stockholders' equity $  5,188,917 $  5,028,445 $  5,302,379
        

 

         
Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
  Three Months Ended Nine Months Ended
  June 30,  June 30, 
   2019   2018   2019   2018 
  (ASC 606) (ASC 605) (ASC 606) (ASC 605)
Cash flows from operating activities:        
Net income (loss) from continuing operations $  9,259  $  (20,720) $  6,209  $  (140,396)
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization    38,133     48,096     121,438     142,341 
Stock-based compensation    35,932     33,499     100,143     101,466 
Non-cash interest expense    12,325     11,896     37,011     37,091 
Deferred tax benefit    (6,160)    (693)    (18,975)    (90,836)
Loss on extinguishment of debt    -     -     910     - 
Impairment of goodwill    -     -     -     137,907 
Impairment of fixed assets    -     -     -     1,780 
Other    (1,456)    315     (651)    894 
Changes in operating assets and liabilities, excluding effects of acquisitions:        
Accounts receivable    (19,903)    18,389     5,011     (1,426)
Prepaid expenses and other assets    (83)    3,448     (20,116)    (18,933)
Accounts payable    12,020     (1,067)    15,260     (3,646)
Accrued expenses and other liabilities    16,314     (5,085)    8,329     (889)
Deferred revenue    (2,743)    3,615     38,270     92,075 
Net cash provided by operating activities - continuing operations    93,638     91,693     292,839     257,428 
Net cash provided by operating activities - discontinued operations    -     7,965     4,355     37,595 
Net cash provided by operating activities    93,638     99,658     297,194     295,023 
Cash flows from investing activities:        
Capital expenditures    (8,809)    (13,639)    (32,243)    (38,965)
Proceeds from disposition of businesses, net of transaction fees    2,998     -     407,043     - 
Payments for business and asset acquisitions, net of cash acquired    (549)    (96,457)    (3,102)    (109,225)
Purchases of marketable securities and other investments    (137,167)    (65,651)    (256,332)    (158,645)
Proceeds from sales and maturities of marketable securities and other investments    145,253     64,404     262,914     259,677 
Net cash provided by (used in) investing activities    1,726     (111,343)    378,280     (47,158)
Cash flows from financing activities:        
Repayment and redemption of debt    -     -     (300,000)    (331,172)
Payments for repurchase of common stock    (29,614)    (111,979)    (120,935)    (111,979)
Acquisition payments with extended payment terms    -     (3,842)    -     (20,769)
Proceeds from issuance of common stock from employee stock plans    -     -     8,643     9,359 
Payments for taxes related to net share settlement of equity awards    (4,371)    (7,846)    (42,562)    (51,852)
Other financing activities    (232)    (427)    (1,442)    (1,073)
Net cash used in financing activities    (34,217)    (124,094)    (456,296)    (507,486)
Effects of exchange rate changes on cash and cash equivalents    454     (1,604)    1,236     (1,419)
Net increase (decrease) in cash and cash equivalents    61,601     (137,383)    220,414     (261,040)
Cash and cash equivalents at beginning of period    474,776     468,642     315,963     592,299 
Cash and cash equivalents at end of period $  536,377  $  331,259  $  536,377  $  331,259 
         

 

         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands)
Unaudited
         
   
  Three Months Ended June 30,
   2019   2018 
  ASC 606 Adjustments ASC 605 ASC 605
         
GAAP revenues $  449,197  $  9,135  $  458,332  $  449,449 
Acquisition-related revenue adjustments: professional services and hosting    1,219     21     1,240     1,378 
Acquisition-related revenue adjustments: product and licensing    622     (14)    608     927 
Acquisition-related revenue adjustments: maintenance and support    6     15     21     31 
Non-GAAP revenues $  451,045  $  9,156  $  460,201  $  451,785 
         
GAAP cost of revenues $  190,691  $  5,274  $  195,965  $  201,331 
Cost of revenues from amortization of intangible assets    (8,895)    -     (8,895)  (12,172)
Cost of revenues adjustments: professional services and hosting (1)    (7,280)    -     (7,280)    (6,790)
Cost of revenues adjustments: product and licensing (1)    (197)    -     (197)    (114)
Cost of revenues adjustments: maintenance and support (1)    (583)    -     (583)    (551)
Cost of revenues adjustments: Other    (28)    -     (28)    (229)
Non-GAAP cost of revenues $  173,708  $  5,274  $  178,982  $  181,475 
         
GAAP gross profit $  258,506  $  3,861  $  262,367  $  248,118 
Gross profit adjustments    18,831     21     18,852     22,192 
Non-GAAP gross profit $  277,337  $  3,882  $  281,219  $  270,310 
         
GAAP income from operations $  38,490  $  2,258  $  40,748  $  21,091 
Gross profit adjustments    18,831     21     18,852     22,192 
Research and development (1)    10,262     -     10,262     8,034 
Sales and marketing (1)    7,593     -     7,593     8,461 
General and administrative (1)    10,017     -     10,017     9,549 
Acquisition-related costs, net    1,154     -     1,154     4,916 
Amortization of intangible assets    16,496     -     16,496     19,856 
Restructuring and other charges, net    16,118     -     16,118     5,342 
Other    6,963     -     6,963     6,442 
Non-GAAP income from operations $  125,924  $  2,279  $  128,203  $  105,883 
         
GAAP income (loss) before income taxes $  17,045  $  2,258  $  19,303  $  (11,161)
Gross profit adjustments    18,831     21     18,852     22,192 
Research and development (1)    10,262     -     10,262     8,034 
Sales and marketing (1)    7,593     -     7,593     8,461 
General and administrative (1)    10,017     -     10,017     9,549 
Acquisition-related costs, net    1,154     -     1,154     4,916 
Amortization of intangible assets    16,496     -     16,496     19,856 
Restructuring and other charges, net    16,118     -     16,118     5,342 
Non-cash interest expense  12,325     -   12,325   11,896 
Other (4)    5,069     -     5,069     6,642 
Non-GAAP income before income taxes $  114,910  $  2,279  $  117,189  $  85,727 
         
         
(4) Includes approximately $4 million and $43 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and nine months ended June 30, 2018, respectively.
         

 

          
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands)
Unaudited
          
    
   Nine Months Ended June 30,
    2019   2018 
   ASC 606 Adjustments ASC 605 ASC 605
          
GAAP revenues  $  1,352,434  $  18,535  $  1,370,969  $  1,362,866 
Acquisition-related revenue adjustments: professional services and hosting     3,671     78     3,749     3,672 
Acquisition-related revenue adjustments: product and licensing     1,051     1,007     2,058     7,599 
Acquisition-related revenue adjustments: maintenance and support     263     (101)    162     224 
Non-GAAP revenues  $  1,357,419  $  19,519  $  1,376,938  $  1,374,361 
          
GAAP cost of revenues  $  585,720  $  (9,377) $  576,343  $  626,589 
Cost of revenues from amortization of intangible assets     (27,700)    -     (27,700)    (38,744)
Cost of revenues adjustments: professional services and hosting (1)     (20,093)    -     (20,093)    (20,474)
Cost of revenues adjustments: product and licensing (1)     (593)    -     (593)    (492)
Cost of revenues adjustments: maintenance and support (1)     (730)    -     (730)    (1,770)
Cost of revenues adjustments: Other     (411)    10     (401)    (370)
Non-GAAP cost of revenues  $  536,193  $  (9,367) $  526,826  $  564,739 
          
GAAP gross profit  $  766,714  $  27,912  $  794,626  $  736,277 
Gross profit adjustments     54,512     974     55,486     73,345 
Non-GAAP gross profit  $  821,226  $  28,886  $  850,112  $  809,622 
          
GAAP income (loss) from operations  $  93,388  $  26,889  $  120,277  $  (109,423)
Gross profit adjustments     54,512     974     55,486     73,345 
Research and development (1)     26,912     -     26,912     24,798 
Sales and marketing (1)     24,488     -     24,488     25,997 
General and administrative (1)     27,327     -     27,327     27,935 
Acquisition-related costs, net     6,223     -     6,223     12,837 
Amortization of intangible assets     50,426     -     50,426     57,094 
Restructuring and other charges, net     60,668     -     60,668     27,792 
Impairment of goodwill     -     -     -     137,907 
Other     12,646     (53)    12,593     49,705 
Non-GAAP income from operations  $  356,590  $  27,810  $  384,400  $  327,987 
          
GAAP income (loss) before income taxes  $  14,023  $  26,889  $  40,912  $  (207,813)
Gross profit adjustments     54,512     974     55,486     73,345 
Research and development (1)     26,912     -     26,912     24,798 
Sales and marketing (1)     24,488     -     24,488     25,997 
General and administrative (1)     27,327     -     27,327     27,935 
Acquisition-related costs, net     6,223     -     6,223     12,837 
Amortization of intangible assets     50,426     -     50,426     57,094 
Restructuring and other charges, net     60,668     -     60,668     27,792 
Impairment of goodwill     -     -     -     137,907 
Non-cash interest expense   37,011     -   37,011   37,091 
Other (4)     12,111     (68)    12,043     49,742 
Non-GAAP income before income taxes  $  313,701  $  27,795  $  341,496  $  266,725 
          
          
(4) Includes approximately $4 million and $43 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and nine months ended June 30, 2018, respectively.
          

 

         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands, except per share amounts)
Unaudited
         
   
  Three Months Ended June 30,
   2019   2018 
  ASC 606 Adjustments ASC 605 ASC 605
         
GAAP provision (benefit) for income taxes $  7,786  $  (650) $  7,136  $  9,559 
Income tax effect of Non-GAAP adjustments    22,299     (161)    22,138     28,002 
Removal of valuation allowance and other items    1,138     (1,779)    (641)    (15,874)
Removal of discrete items (3)    (343)    -     (343)    - 
Non-GAAP provision for income taxes $  30,880  $  (2,590) $  28,290  $  21,687 
         
GAAP net income (loss) from continuing operations $  9,259  $  2,908  $  12,167  $  (20,720)
Acquisition-related adjustment - revenues (2)    1,848     21     1,869     2,336 
Acquisition-related costs, net    1,154     -     1,154     4,916 
Cost of revenue from amortization of intangible assets    8,895     -     8,895     12,172 
Amortization of intangible assets    16,496     -     16,496     19,856 
Restructuring and other charges, net    16,118     -     16,118     5,342 
Stock-based compensation (1)    35,932     -     35,932     33,499 
Non-cash interest expense    12,325     -     12,325     11,896 
Adjustment to income tax expense    (23,094)    1,940     (21,154)    (12,128)
Other (4)    5,090     -     5,090     6,870 
Non-GAAP net income  $  84,023  $  4,869  $  88,892  $  64,039 
         
Non-GAAP diluted net income per share $  0.29    $  0.31  $  0.22 
         
Diluted weighted average common shares outstanding    288,648       288,648     294,909 
         
         
(3) As a result of the Tax Cuts and Jobs Act of 2017 (‘TCJA’), for the nine months ended June 30, 2018, we recorded a tax benefit of approximately $87.0 million related to remeasuring certain deferred tax assets and liabilities at the lower rates, offset in part by a $2.0 million provision for the deemed repatriation of foreign cash and earnings. For the three months ended June 30, 2018, we recorded a benefit of $0.5 million as we revised our estimates of the timing and amounts of the temporary differences.
(4) Includes approximately $4 million and $43 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and nine months ended June 30, 2018, respectively.
         

 

          
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands, except per share amounts)
Unaudited
          
    
   Nine Months Ended June 30,
    2019   2018 
   ASC 606 Adjustments ASC 605 ASC 605
          
GAAP provision (benefit) for income taxes  $  7,814  $  10,029  $  17,843  $  (67,417)
Income tax effect of Non-GAAP adjustments     83,568     (71)    83,497     97,232 
Removal of valuation allowance and other items     (15,397)    (6,168)    (21,565)    (53,840)
Removal of discrete items (3)     910     -      910     91,069 
Non-GAAP provision for income taxes  $  76,895  $  3,790  $  80,685  $  67,044 
          
GAAP net income (loss) from continuing operations  $  6,209  $  16,860  $  23,069  $  (140,396)
Acquisition-related adjustment - revenues (2)     4,985     984     5,969     11,495 
Acquisition-related costs, net     6,223     -     6,223     12,837 
Cost of revenue from amortization of intangible assets     27,700     -     27,700     38,744 
Amortization of intangible assets     50,426     -     50,426     57,094 
Restructuring and other charges, net     60,668     -     60,668     27,792 
Impairment of goodwill     -     -     -     137,907 
Stock-based compensation (1)     100,143     -     100,143     101,466 
Non-cash interest expense     37,011     -     37,011     37,091 
Adjustment to income tax expense     (69,081)    6,239     (62,842)    (134,461)
Other (4)     12,515     (62)    12,453     50,111 
Non-GAAP net income   $  236,799  $  24,021  $  260,820  $  199,680 
          
Non-GAAP diluted net income per share  $  0.82    $  0.91  $  0.67 
          
Diluted weighted average common shares outstanding     288,153       288,153     298,983 
          
          
(3) As a result of the Tax Cuts and Jobs Act of 2017 (‘TCJA’), for the nine months ended June 30, 2018, we recorded a tax benefit of approximately $87.0 million related to remeasuring certain deferred tax assets and liabilities at the lower rates, offset in part by a $2.0 million provision for the deemed repatriation of foreign cash and earnings. For the three months ended June 30, 2018, we recorded a benefit of $0.5 million as we revised our estimates of the timing and amounts of the temporary differences.
(4) Includes approximately $4 million and $43 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and nine months ended June 30, 2018, respectively.
          

 

Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
            
 Three Months Ended June 30, Nine Months Ended June 30,
  2019   2019  2018  2019  2019  2018
 (ASC 606) (ASC 605) (ASC 605) (ASC 606) (ASC 605) (ASC 605)
(1) Stock-based compensation           
Cost of professional services and hosting$  7,280  $  7,280 $  6,790 $  20,093 $  20,093 $  20,474
Cost of product and licensing   197     197    114    593    593    492
Cost of maintenance and support   583     583    551    730    730    1,770
Research and development   10,262     10,262    8,034    26,912    26,912    24,798
Sales and marketing   7,593     7,593    8,461    24,488    24,488    25,997
General and administrative   10,017     10,017    9,549    27,327    27,327    27,935
Total$  35,932  $  35,932 $  33,499 $  100,143 $  100,143 $  101,466
            
(2) Acquisition-related revenue           
Revenues$  1,848  $  1,869 $  2,336 $  4,985 $  5,969 $  11,495
  Total $  1,848  $  1,869 $  2,336 $  4,985 $  5,969 $  11,495