Nuance Announces Fiscal 2012 and Fourth Quarter Results

  Nuance Announces Fiscal 2012 and Fourth Quarter Results

   32% Operating Cash Flow Growth and 25% Revenue Growth in FY 12 Driven by
                      Strength in Mobile and Healthcare

Business Wire

BURLINGTON, Mass. -- November 19, 2012

Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results
for its fiscal 2012 and fourth quarter, ended September 30, 2012.

Nuance reported GAAP revenue of $1,651.5 million in fiscal 2012, a 25.2%
increase over GAAP revenue of $1,318.7 million in fiscal 2011. Nuance reported
non-GAAP revenue of $1,738.1 million, which includes $86.6 million in revenue
lost to accounting treatment in conjunction with acquisitions. Fiscal 2012
non-GAAP revenue grew 24.7% over non-GAAP revenue of $1,393.9 million in
fiscal 2011.

In fiscal 2012, Nuance recognized GAAP net income of $207.1 million, or $0.65
per diluted share, compared with GAAP net income of $38.2 million, or $0.12
per diluted share, in fiscal 2011. In fiscal 2012, Nuance reported non-GAAP
net income of $555.9 million, or $1.73 per diluted share, compared to non-GAAP
net income of $430.7 million, or $1.36 per diluted share, in fiscal 2011.
Nuance’s fiscal 2012 non-GAAP operating margin was 35.8%, up from 33.9% in
fiscal 2011. Nuance reported cash flow from operations of $473.0 million in
fiscal 2012, a 32.3% increase over $357.4 million in fiscal 2011. Nuance ended
fiscal 2012 with a balance of cash and cash equivalents of $1,129.8 million.

Nuance reported GAAP revenue of $468.8 million in the fourth quarter of fiscal
2012, a 27.7% increase over GAAP revenue of $367.0 million in the fourth
quarter of fiscal 2011. Nuance reported non-GAAP revenue of $490.1 million,
which includes $21.3 million in revenue lost to accounting treatment in
conjunction with acquisitions. Fourth quarter fiscal 2012 non-GAAP revenue
grew 22.7% over non-GAAP revenue of $399.5 million in the same quarter last
year.

In the fourth quarter of fiscal 2012, Nuance recognized GAAP net income of
$117.6 million, or $0.36 per diluted share, compared with GAAP net loss of
($5.1) million, or ($0.02) per share, in the fourth quarter of fiscal 2011. In
the fourth quarter of fiscal 2012, Nuance reported non-GAAP net income of
$164.9 million, or $0.51 per diluted share, compared to non-GAAP net income of
$133.5 million, or $0.42 per diluted share, in the fourth quarter of fiscal
2011. Nuance’s fourth quarter fiscal 2012 non-GAAP operating margin was 37.2%,
up from 36.1% in the fourth quarter of fiscal 2011. Nuance reported cash flow
from operations of $141.5 million in the fourth quarter of fiscal 2012, a
44.5% increase over $97.9 million in the fourth quarter of fiscal 2011.

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 measures.

“In fiscal 2012, Nuance delivered its strongest year ever, led by 25% revenue
growth and 32% operating cash flow growth,” said Tom Beaudoin, Nuance
executive vice president and CFO. “Design wins and partnerships with global
leaders such as Cerner, Intel and Samsung are extending Nuance technology into
new solutions and expanding our addressable markets. Across our markets,
Nuance’s ability to deliver customized voice and natural language solutions
that understand user intent drove record bookings in fiscal 2012 and continues
to drive unprecedented customer interest, positioning us well for growth in
fiscal 2013.”

Highlights from the quarter include:

  *Healthcare – For Nuance’s healthcare solutions, fiscal 2012 non-GAAP
    revenue was $669.4 million, up 27.1%, and fourth quarter non-GAAP revenue
    was $189.7 million, up 27.6%, from the corresponding periods last year.
    During the fourth quarter, new bookings included large eScription, Dragon
    Medical and radiology contracts. Key healthcare customers included
    Beaumont, Franciscan Health System, Kettering Healthcare, Maine Medical
    Center, Memorial Healthcare, Mt. Sinai, Poudre Valley Health System,
    Providence Healthcare, Swedish Health Services, U.S. Army Medical Command,
    Veterans Health Administration, and Zwanger Pesiri.
  *Mobile & Consumer – For  Nuance’s mobile and consumer solutions, fiscal
    2012 non-GAAP revenue was $508.3 million, up 29.2%, and fourth quarter
    non-GAAP revenue was $152.2 million, up 28.2%, from the corresponding
    periods last year. Key mobile customers, new bookings or design wins in
    the quarter included Acer, Amazon, Audi, Delphi, Ford, Garmin, Huawei,
    Intel, Metro PCS, Movistar Spain, Nissan, Samsung, Telefonica Spain, and
    ZTE.
  *Enterprise – For Nuance’s enterprise solutions, fiscal 2012 non-GAAP
    revenue was $332.0 million, up 12.0%, and fourth quarter non-GAAP revenue
    was $90.3 million, up 12.9%, from the corresponding periods last year. Key
    enterprise customers in the quarter included Australia Department of Human
    Services, Bradesco, C Spire, Cigna, Citigroup, Geico, Metro PCS, Telstra,
    UK Department for Work and Pensions, UK HM Revenue & Customs, USAA, USAir,
    and Vonage.
  *Imaging – For Nuance’s document imaging solutions, fiscal 2012 revenue was
    $228.4 million, up 28.7%, and fourth quarter non-GAAP revenue was $57.9
    million, up 11.1%, from the corresponding periods last year. Key imaging
    customers in the quarter included Amazon, Canon, Deloitte, EMC, Humanware,
    JP Morgan, Ricoh, and Xerox.

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, November 19,
2012 at 5:00 EST 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) 234-9960 at least five minutes prior to the call and
referencing code 267082. 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 267082.

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.

Safe Harbor and Forward-Looking Statements

Statements in this document regarding continued growth in fiscal 2012 and
Nuance 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 Nuance’s existing and future products;
economic conditions in the United States and abroad; Nuance’s ability to
control and successfully manage its expenses and cash position; the effects of
competition, including pricing pressure; possible defects in Nuance’s products
and technologies; the ability of Nuance to successfully integrate operations
and employees of acquired businesses; the ability to realize anticipated
synergies from acquired businesses; and the other factors described in
Nuance’s annual report on Form 10-K for the fiscal year ended September 30,
2011 and Nuance’s quarterly reports on Form 10-Q filed with the Securities and
Exchange Commission. Nuance disclaims any obligation to update any
forward-looking statements as a result of developments occurring after the
date of this document.

The information included in this press release should not be viewed as a
substitute for full GAAP financial statements.

Discussion of Non-GAAP Financial Measures

Management utilizes a number of different financial measures, both GAAP and
non-GAAP, in analyzing and assessing the overall performance of the business,
for making operating decisions and for forecasting and planning for future
periods. Our annual financial plan is prepared both on a GAAP and non-GAAP
basis, and the non-GAAP annual financial plan is approved by our board of
directors. Continuous budgeting and forecasting for revenue and expenses are
conducted on a consistent non-GAAP basis (in addition to GAAP) and actual
results on a non-GAAP basis are assessed against the annual financial plan.
The board of directors and management utilize these non-GAAP measures and
results (in addition to the GAAP results) to determine our allocation of
resources. In addition and as a consequence of the importance of these
measures in managing the business, we use non-GAAP measures and results in the
evaluation process to establish 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 revenue and earnings per share.
Consistent with this approach, we believe that disclosing non-GAAP revenue and
non-GAAP earnings per share to the readers of our financial statements
provides such readers with useful supplemental data that, while not a
substitute for GAAP revenue and earnings per share, allows for greater
transparency in the review of our financial and operational performance. In
assessing the overall health of the business during the three and twelve
months ended September 30, 2012 and 2011, and, in particular, in evaluating
our revenue and earnings per share, our management has either included or
excluded items in six general categories, each of which is described below.

Acquisition-Related Revenue and Cost of Revenue.

The Company provides supplementary non-GAAP financial measures of revenue,
which include revenue related to acquisitions, primarily from Swype and
Equitrac for the three months ended September 30, 2012, and primarily from
Equitrac, Loquendo, eCopy and Swype for the twelve months ended September 30,
2012, that would otherwise have been recognized but for the purchase
accounting treatment of these transactions. Non-GAAP revenue also includes
revenue that the Company would have otherwise recognized had the Company not
acquired intellectual property and other assets from the same customer.
Because GAAP accounting requires the elimination of this revenue, GAAP results
alone do not fully capture all of the Company’s economic activities. These
non-GAAP adjustments are intended to reflect the full amount of such revenue.
The Company includes non-GAAP revenue and cost of revenue to allow for more
complete comparisons to the financial results of historical operations,
forward-looking guidance and the financial results of peer companies. The
Company believes these adjustments are useful to management and investors as a
measure of the ongoing performance of the business because, although we cannot
be certain that customers will renew their contracts, the Company historically
has experienced high renewal rates on maintenance and support agreements and
other customer contracts. Additionally, although acquisition-related revenue
adjustments are non-recurring with respect to past acquisitions, the Company
generally will incur these adjustments in connection with any future
acquisitions.

Acquisition-Related Costs, Net.

In recent years, the Company has completed a number of acquisitions, which
result in operating expenses which would not otherwise have been incurred. The
Company provides supplementary non-GAAP financial measures, which exclude
certain transition, integration and other acquisition-related expense items
resulting from acquisitions, to allow more accurate comparisons of the
financial results to historical operations, forward-looking guidance and the
financial results of less acquisitive peer companies. The Company considers
these types of costs and adjustments, to a great extent, to be unpredictable
and dependent on a significant number of factors that are outside of the
control of the Company. Furthermore, the Company does not consider these
acquisition-related costs and adjustments to be related to the organic
continuing operations of the acquired businesses and are generally not
relevant to assessing or estimating the long-term performance of the acquired
assets. In addition, the size, complexity and/or volume of past acquisitions,
which often drives the magnitude of acquisition-related costs, may not be
indicative of the size, complexity and/or volume of future acquisitions. By
excluding acquisition-related costs and adjustments from our non-GAAP
measures, management is better able to evaluate the Company's ability to
utilize its existing assets and estimate the long-term value that acquired
assets will generate for the Company. The Company believes that providing a
supplemental non-GAAP measure which excludes these items allows management and
investors to consider the ongoing operations of the business both with, and
without, such expenses.

These acquisition-related costs are included in the following categories: (i)
transition and integration costs; (ii) professional service fees; and (iii)
acquisition-related adjustments. Although these expenses are not recurring
with respect to past acquisitions, the Company generally will incur these
expenses in connection with any future acquisitions. These categories are
further discussed as follows:

(i) Transition and integration costs. Transition and integration costs include
retention payments, transitional employee costs, earn-out payments treated as
compensation expense, as well as the costs of integration-related services
provided by third parties.

(ii) Professional service fees. Professional service fees include 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.

The Company excludes the amortization of acquired intangible assets from
non-GAAP expense and income measures. These amounts are inconsistent in amount
and frequency and are significantly impacted by the timing and size of
acquisitions. Providing a supplemental measure which excludes these charges
allows management and investors to evaluate results “as-if” the acquired
intangible assets had been developed internally rather than acquired and,
therefore, provides a supplemental measure of performance in which the
Company’s acquired intellectual property is treated in a comparable manner to
its internally developed intellectual property. Although the Company excludes
amortization of acquired intangible assets from its non-GAAP expenses, the
Company believes that it is important for investors to understand that such
intangible assets contribute to revenue generation. Amortization of intangible
assets that relate to past acquisitions will recur in future periods until
such intangible assets have been fully amortized. Future acquisitions may
result in the amortization of additional intangible assets.

Costs Associated with IP Collaboration Agreement.

In order to gain access to a third party's extensive speech recognition
technology and natural language and semantic processing technology, Nuance has
entered into three IP collaboration agreements, with terms ranging between
five and six years. Depending on the agreement, some or all intellectual
property derived from these collaborations will be jointly owned by the two
parties. For the majority of the developed intellectual property, Nuance will
have sole rights to commercialize such intellectual property for periods
ranging between two to six years, depending on the agreement. For non-GAAP
purposes, Nuance considers these long-term contracts and the resulting
acquisitions of intellectual property from this third-party over the
agreements’ terms to be an investing activity, outside of its normal, organic,
continuing operating activities, and is therefore presenting this supplemental
information to show the results excluding these expenses. Nuance does not
exclude from its non-GAAP results the corresponding revenue, if any, generated
from these collaboration efforts. Although the Company's 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 these collaboration agreements and
have incentives based on those results.

Non-Cash Expenses.

The Company provides non-GAAP information relative to the following non-cash
expenses: (i)stock-based compensation; (ii) certain accrued interest; and
(iii) certain accrued income taxes. These items are further discussed as
follows:

(i) Stock-based compensation. Because of varying available valuation
methodologies, subjective assumptions and the variety of award types, the
Company believes that the exclusion of stock-based compensation allows for
more accurate comparisons of operating results to peer companies, as well as
to times in the Company’s history when stock-based compensation was more or
less significant as a portion of overall compensation than in the current
period. The Company evaluates performance both with and without these measures
because compensation expense related to stock-based compensation is 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 the Company’s
control. The expense related to stock-based awards is generally not
controllable in the short-term and can vary significantly based on the timing,
size and nature of awards granted. As such, the Company does not include such
charges in operating plans. Stock-based compensation will continue in future
periods.

(ii and iii) Certain accrued interest and income taxes. The Company also
excludes certain accrued interest and certain accrued income taxes because the
Company believes that excluding these non-cash expenses provides senior
management, as well as other users of the financial statements, with a
valuable perspective on the cash-based performance and health of the business,
including the current near-term projected liquidity. These non-cash expenses
will continue in future periods.

Other Expenses.

The Company excludes certain other expenses that are the result of unplanned
events to measure operating performance and current and future liquidity both
with and without these expenses; and therefore, by providing this information,
the Company believes management and the users of the financial statements are
better able to understand the financial results of what the Company considers
to be its organic, continuing operations. Included in these expenses are items
such as restructuring charges, asset impairments and other charges (credits),
net. These events are unplanned and arise outside of the ordinary course of
continuing operations. These items also include adjustments from changes in
fair value of share-based instruments relating to the issuance of our common
stock with security price guarantees payable in cash, and gains or losses on
non-controlling strategic equity interests.

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           $ 209,227     $ 179,177     $ 740,726       $ 607,358
licensing
Professional
services and            196,886       132,063       673,943         509,141
hosting
Maintenance and        62,668      55,801      236,840       202,242   
support
Total revenues         468,781     367,041     1,651,509     1,318,741 
                                                                  
Cost of revenues:
Product and             21,713        17,651        74,837          65,601
licensing
Professional
services and            122,153       93,052        424,733         341,055
hosting
Maintenance and         12,319        11,412        45,325          38,057
support
Amortization of        15,300      14,570      60,034        55,111    
intangible assets
Total cost of          171,485     136,685     604,929       499,824   
revenues
                                                                  
Gross profit           297,296     230,356     1,046,580     818,917   
                                                                  
Operating expenses:
Research and            63,311        49,479        225,441         179,377
development
Sales and marketing     101,298       80,622        369,205         306,439
General and             47,838        43,332        163,318         147,603
administrative
Amortization of         24,391        22,998        95,416          88,219
intangible assets
Acquisition-related     12,374        7,956         58,746          21,866
costs, net
Restructuring and      1,466       17,519      8,268         22,862    
other charges, net
Total operating        250,678     221,906     920,394       766,366   
expenses
                                                                  
Income from             46,618        8,450         126,186         52,551
operations
                                                                  
Other expense, net     (24,969 )    (6,798  )    (60,884   )    (22,534   )
                                                                  
Income before           21,649        1,652         65,302          30,017
income taxes
                                                                  
(Benefit) provision    (95,992 )    6,761       (141,833  )    (8,221    )
for income taxes
                                                                  
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          190,128             88,804
assets
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          49,685               23,783
payments
Accounts payable and accrued                 328,374              258,777
expenses
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             108,481              90,382
portion
Other liabilities                           243,279             183,450
Total liabilities                           3,052,334           1,601,922
                                                            
Equity component of currently               18,430              -
redeemable convertible debentures
Stockholders' equity                        2,728,276           2,493,371
                                                            
Total liabilities and stockholders'    $     5,799,040      $     4,095,293
equity
                                                                  


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        $ 117,641       $ (5,109  )     $ 207,135       $ 38,238
(loss)
Adjustments to
reconcile net
income to net
cash provided
by operating
activities:
Depreciation
and                 47,665          45,214          187,183         170,933
amortization
Stock-based         58,165          37,791          174,581         147,296
compensation
Non-cash
interest            10,709          2,986           35,497          12,510
expense
Non-cash
restructuring       -               11,725          -               11,725
and other
expense
Deferred tax
(benefit)           (92,347   )     (8,163  )       (151,547  )     (43,890  )
provision
Gain on
non-controlling     -               -               (13,726   )     -
strategic
equity interest
Other               504             12,233          4,016           16,492
Changes in
operating
assets and
liabilities,
net of effects
from
acquisitions:
Accounts            (21,880   )     (21,851 )       (55,210   )     (25,530  )
receivable
Prepaid
expenses and        14,861          5,302           13,881          (11,793  )
other assets
Accounts            153             1,806           22,645          (8,193   )
payable
Accrued
expenses and        (2,796    )     3,175           8,939           (6,775   )
other
liabilities
Deferred           8,781         12,795        39,605        56,398   
revenue
Net cash
provided by        141,456       97,904        472,999       357,411  
operating
activities
Cash flows from
investing
activities:
Capital             (10,901   )     (10,640 )       (62,910   )     (34,907  )
expenditures
Payments for
business and
technology          (229,128  )     (88,991 )       (884,945  )     (409,005 )
acquisitions,
net of cash
acquired
Purchases of
marketable
securities and      -               -               (15,156   )     (10,776  )
other
investments
Proceeds from
sales and
maturities of
marketable          778             5,000           31,789          11,650
securities and
other
investments
Change in
restricted cash    -             -             6,747         17,184   
balance
Net cash used
in investing       (239,251  )    (94,631 )      (924,475  )    (425,854 )
activities
Cash flows from
financing
activities:
Payments of         (1,626    )     (1,671  )       (6,605    )     (7,535   )
debt
Proceeds from
long-term debt,     688,908         (2,553  )       1,364,925       (2,553   )
net of issuance
costs
Payments for
repurchases of      -               -               (199,997  )     -
common stock
Proceeds from
settlement of
share-based         -               -               9,020           9,414
derivatives,
net
Payments of
other long-term     (380      )     (2,849  )       (8,525    )     (10,643  )
liabilities
Excess tax
benefits on         500             9,300           (3,583    )     17,520
employee equity
awards
Proceeds from
issuance of
common stock        8,884           14,955          27,747          36,667
from employee
stock plans
Cash used to
net share          (10,822   )    (6,881  )      (49,947   )    (36,908  )
settle employee
equity awards
Net cash
provided by        685,464       10,301        1,133,035     5,962    
financing
activities
Effects of
exchange rate
changes on cash    2,537         (13,331 )      978           (6,925   )
and cash
equivalents
Net increase
(decrease) in       590,206         243             682,537         (69,406  )
cash and cash
equivalents
Cash and cash
equivalents at     539,555       446,981       447,224       516,630  
beginning of
period
Cash and cash
equivalents at    $ 1,129,761    $ 447,224      $ 1,129,761    $ 447,224  
end of period
                                                                             


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:            17,624        22,140        74,060          53,961
product and
licensing
Acquisition-related
revenue
adjustments:            2,775         7,844         5,864           15,429
professional
services and
hosting
Acquisition-related
revenue
adjustments:           908         2,510       6,632         5,807     
maintenance and
support
Non-GAAP revenue      $ 490,088    $ 399,535    $ 1,738,065    $ 1,393,938 
                                                                  
GAAP cost of          $ 171,485     $ 136,685     $ 604,929       $ 499,824
revenue
Cost of revenue
from amortization       (15,300 )     (14,570 )     (60,034   )     (55,111   )
of intangible
assets
Cost of revenue
adjustments:            2,002         2,680         8,135           9,487
product and
licensing (1,2)
Cost of revenue
adjustments:
professional            (8,818  )     (7,300  )     (25,981   )     (26,864   )
services and
hosting (1,2)
Cost of revenue
adjustments:           (330    )    (641    )    (956      )    (2,186    )
maintenance and
support (1,2)
Non-GAAP cost of      $ 149,039    $ 116,854    $ 526,093      $ 425,150   
revenue
                                                                  
GAAP gross profit     $ 297,296     $ 230,356     $ 1,046,580     $ 818,917
Gross profit           43,753      52,325      165,392       149,871   
adjustments
Non-GAAP gross        $ 341,049    $ 282,681    $ 1,211,972    $ 968,788   
profit
                                                                  
GAAP income from      $ 46,618      $ 8,450       $ 126,186       $ 52,551
operations
Gross profit            43,753        52,325        165,392         149,871
adjustments
Research and            10,258        6,101         29,565          24,289
development (1)
Sales and marketing     18,187        10,516        54,281          43,264
(1)
General and             20,238        13,226        63,233          49,707
administrative (1)
Amortization of         24,391        22,998        95,416          88,219
intangible assets
Costs associated
with IP                 5,250         5,250         21,000          19,750
collaboration
agreements
Acquisition-related     12,374        7,956         58,746          21,866
costs, net
Restructuring and      1,466       17,519      8,268         22,862    
other charges, net
Non-GAAP income       $ 182,535    $ 144,341    $ 622,087      $ 472,379   
from operations
                                                                  
GAAP (benefit)
provision for         $ (95,992 )   $ 6,761       $ (141,833  )   $ (8,221    )
income taxes
Non-cash taxes         97,741      (2,161  )    160,883       26,620    
Non-GAAP provision    $ 1,749      $ 4,600      $ 19,050       $ 18,399    
for income taxes
                                                                  
GAAP net income       $ 117,641     $ (5,109  )   $ 207,135       $ 38,238
Acquisition-related
adjustment -            21,307        32,494        86,556          75,197
revenue (2)
Acquisition-related
adjustment - cost       (2,336  )     (2,687  )     (8,700    )     (10,473   )
of revenue (2)
Acquisition-related     12,374        7,956         58,746          21,866
costs, net
Cost of revenue
from amortization       15,300        14,570        60,034          55,111
of intangible
assets
Amortization of         24,391        22,998        95,416          88,219
intangible assets
Non-cash
stock-based             58,165        37,791        174,581         147,296
compensation (1)
Non-cash interest       10,709        2,986         35,497          12,510
expense, net
Non-cash income         (97,741 )     2,161         (160,883  )     (26,620   )
taxes
Costs associated
with IP                 5,250         5,250         21,000          19,750
collaboration
agreements
Change in fair
value of                (1,647  )     (2,386  )     (7,997    )     (13,230   )
share-based
instruments
Gain on
non-controlling         -             -             (13,726   )     -
strategic equity
interest
Restructuring and      1,466       17,519      8,268         22,862    
other charges, net
Non-GAAP net income   $ 164,879    $ 133,543    $ 555,927      $ 430,726   
                                                                  
Non-GAAP diluted
net income per        $ 0.51       $ 0.42       $ 1.73         $ 1.36      
share
                                                                  
Diluted weighted
average common         322,424     319,198     320,822       315,960   
shares outstanding
                                                                              


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        $ 19         $ 7          $ 137         $ 36
licensing
Cost of professional         9,133        7,300        26,409        27,814
services and hosting
Cost of maintenance and      330          641          956           2,186
support
Research and development     10,258       6,101        29,565        24,289
Sales and marketing          18,187       10,516       54,281        43,264
General and                 20,238     13,226     63,233      49,707  
administrative
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          (2,021 )     (2,687 )     (8,272  )     (9,523  )
licensing
Cost of professional        (315   )    -          (428    )    (950    )
services and hosting
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         $ 117.4   $ 120.7   $ 135.4   $ 141.7   $ 515.2   $ 145.1   $ 149.7   $ 184.5   $ 189.3   $ 668.6
Revenue
Adjustment   $ 0.4     $ 0.3     $ 3.9     $ 7.0     $ 11.6    $ 0.2     $ 0.2     $ 0.0     $ 0.4     $ 0.8
Non-GAAP     $ 117.8   $ 121.0   $ 139.3   $ 148.7   $ 526.8   $ 145.3   $ 149.9   $ 184.5   $ 189.7   $ 669.4
Revenue
                                                                                                       
Mobile &     Q1        Q2        Q3        Q4        FY        Q1        Q2        Q3        Q4        FY
Consumer
              2011     2011     2011     2011     2011     2012     2012     2012     2012     2012
GAAP         $ 86.1    $ 93.1    $ 91.6    $ 107.9   $ 378.7   $ 103.4   $ 110.3   $ 126.0   $ 143.2   $ 483.0
Revenue
Adjustment   $ 1.6     $ 0.6     $ 1.5     $ 10.9    $ 14.6    $ 5.1     $ 4.8     $ 6.4     $ 9.0     $ 25.3
Non-GAAP     $ 87.7    $ 93.7    $ 93.1    $ 118.7   $ 393.3   $ 108.5   $ 115.1   $ 132.4   $ 152.2   $ 508.3
Revenue
                                                                                                       
Enterprise   Q1        Q2        Q3        Q4        FY        Q1        Q2        Q3        Q4        FY
              2011     2011     2011     2011     2011     2012     2012     2012     2012     2012
GAAP         $ 71.1    $ 72.3    $ 68.5    $ 79.9    $ 291.8   $ 72.2    $ 79.6    $ 74.1    $ 89.1    $ 315.0
Revenue
Adjustment   $ 1.4     $ 1.7     $ 1.4     $ 0.1     $ 4.6     $ 3.6     $ 11.8    $ 0.4     $ 1.2     $ 17.0
Non-GAAP     $ 72.5    $ 74.0    $ 69.9    $ 80.0    $ 296.4   $ 75.8    $ 91.4    $ 74.5    $ 90.3    $ 332.0
Revenue
                                                                                                       
Imaging      Q1        Q2        Q3        Q4        FY        Q1        Q2        Q3        Q4        FY
              2011     2011     2011     2011     2011     2012     2012     2012     2012     2012
GAAP         $ 29.2    $ 32.9    $ 33.4    $ 37.6    $ 133.0   $ 39.9    $ 50.7    $ 47.1    $ 47.2    $ 184.9
Revenue
Adjustment   $ 10.0    $ 10.4    $ 9.4     $ 14.6    $ 44.4    $ 12.5    $ 10.6    $ 9.7     $ 10.7    $ 43.5
Non-GAAP     $ 39.3    $ 43.3    $ 42.8    $ 52.1    $ 177.4   $ 52.4    $ 61.3    $ 56.8    $ 57.9    $ 228.4
Revenue
                                                                                                       
                                                                                                       
                                                                                                       
Schedules may not add due to rounding.

Contact:

For Investors
Nuance Communications, Inc.
Kevin Faulkner, 408-992-6100
kevin.faulkner@nuance.com
or
For Press and Investors
Nuance Communications, Inc.
Richard Mack, 781-565-5000
richard.mack@nuance.com
 
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