Nuance Announces First Quarter Fiscal 2013 Results

  Nuance Announces First Quarter Fiscal 2013 Results

 37% Operating Cash Flow Growth and 29% Revenue Growth Driven by Strength in
                            Mobile and Healthcare

Business Wire

BURLINGTON, Mass. -- February 7, 2013

Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results
for its first quarter fiscal 2013, ended December 31, 2012.

Nuance reported GAAP revenue of $462.3 million in the first quarter fiscal
2013, a 28.2% increase over GAAP revenue of $360.6 million in the first
quarter of fiscal 2012. Nuance reported non-GAAP revenue of $492.4 million,
which includes $30.1 million in revenue lost to accounting treatment in
conjunction with acquisitions. First quarter fiscal 2013 non-GAAP revenue grew
28.9% over non-GAAP revenue of $382.0 million in the first quarter of fiscal
2012.

In the first quarter of fiscal 2013, Nuance recognized GAAP net loss of
($22.1) million, or ($0.07) per share, compared with GAAP net income of $9.3
million, or $0.03 per diluted share, in the first quarter of fiscal 2012. In
the first quarter of fiscal 2013, Nuance reported non-GAAP net income of
$113.0 million, or $0.35 per diluted share, compared to non-GAAP net income of
$108.5 million, or $0.34 per diluted share, in the first quarter of fiscal
2012. Nuance’s first quarter fiscal 2013 non-GAAP operating margin was 29.2%,
down from 32.5% in the first quarter of fiscal 2012. Nuance reported cash flow
from operations of $122.9 million in the first quarter of fiscal 2013, a 37.3%
increase over $89.5 million in the first quarter of fiscal 2012. Nuance ended
the first quarter of fiscal 2013 with a balance of cash and cash equivalents
of $961.1 million.

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 the first quarter, Nuance delivered 37% operating cash flow growth and 29%
revenue growth,” said Tom Beaudoin, Nuance executive vice president and CFO.
“Across our markets, Nuance’s ability to deliver customized voice and natural
language solutions that understand user intent continues to drive
unprecedented customer interest, positioning us for growth throughout the
remainder of fiscal 2013. We are focused on leveraging our recent investments
in products, sales and implementation teams, as we work to capitalize on our
market opportunity.”

Highlights from the quarter include:

  *Healthcare – For Nuance’s healthcare solutions, first quarter fiscal 2013
    non-GAAP revenue was $217.4 million, up 49.6% from the first quarter of
    fiscal 2012. During the first quarter, bookings included large eScription,
    Dragon Medical, radiology and coding contracts. Key healthcare customers
    included AHS, Atlanta, Bassett Healthcare, Christiana Care, Dolby, HCA,
    Novant Health, Palmetto Health, PeaceHealth, UMass and University of
    Missouri.
  *Mobile & Consumer – For  Nuance’s mobile and consumer solutions, first
    quarter fiscal 2013 non-GAAP revenue was $131.7 million, up 21.4% from the
    first quarter of fiscal 2012. Key mobile customers, new bookings or design
    wins in the quarter included Amazon, Apple, BMW, Comcast, DoCoMo, Huawei,
    Kyocera, LGE, Oi, OnStar, Panasonic, Pantech, Prosodie, Renault, Samsung,
    Sony and ZTE.
  *Enterprise – For Nuance’s enterprise solutions, first quarter fiscal 2013
    non-GAAP revenue was $83.7 million, up 10.4% from the first quarter of
    fiscal 2012. Key enterprise customers in the quarter included Australian
    Department of Immigration and Citizenship, Bank of America, Barclay Card,
    Caremark, Century Link, CVS, Disney, Energex, FedEx, Health Care Service
    Corporation, HM Revenue & Customs, Huntington Bank, ICICI Prudential, ING,
    Moshi Moshi, Paypal, Royal Bank of Scotland, Skatteverket, Spansion,
    T-Systems, TD Bank, Telstra, USAA and Wells Fargo.
  *Imaging – For Nuance’s document imaging solutions, first quarter fiscal
    2013 revenue was $59.6 million, up 13.7% from the first quarter of fiscal
    2012. Key imaging customers in the quarter included Canon, Deloitte, EMC,
    First Bank, Gibson Dunn & Crutcher, and Husky Oil.

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, February 7,
2013 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)
230-1085 or (612) 234-9960 at least five minutes prior to the call and
referencing code 279312. 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 279312.

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 2013 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,
2012 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 months ended
December 31, 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 SafeCom, Quantim
and JA Thomas for the three months ended December 31, 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 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.

Financial Tables Follow

Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
                                                         
                                              Three months ended
                                              December 31,
                                              2012          2011
                                                            
Revenues:
Product and licensing                         $ 197,900     $ 164,734
Professional services and hosting               200,305       139,582
Maintenance and support                        64,063      56,327  
Total revenues                                 462,268     360,643 
                                                            
Cost of revenues:
Product and licensing                           26,309        18,764
Professional services and hosting               125,156       90,154
Maintenance and support                         14,797        11,020
Amortization of intangible assets              16,310      14,934  
Total cost of revenues                         182,572     134,872 
                                                            
Gross profit                                   279,696     225,771 
                                                            
Operating expenses:
Research and development                        68,721        52,054
Sales and marketing                             117,135       90,397
General and administrative                      44,784        31,315
Amortization of intangible assets               25,426        23,203
Acquisition-related costs, net                  15,733        14,611
Restructuring and other charges, net           1,667       2,864   
Total operating expenses                       273,466     214,444 
                                                            
Income from operations                          6,230         11,327
                                                            
Other expense, net                             (36,887 )    (11,396 )
                                                            
Loss before income taxes                        (30,657 )     (69     )
                                                            
Benefit from income taxes                      (8,561  )    (9,409  )
                                                            
Net (loss) income                             $ (22,096 )   $ 9,340   
                                                            
Net income per share:
Basic                                         $ (0.07   )   $ 0.03    
Diluted                                       $ (0.07   )   $ 0.03    
                                                            
Weighted average common shares outstanding:
Basic                                          312,571     304,011 
Diluted                                        312,571     320,536 
                                                            

Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
                                                        
                                                            
                                                            
ASSETS                                  December 31, 2012   September 30, 2012
                                        Unaudited
                                                            
Current assets:
       Cash and cash equivalents        $    961,088        $     1,129,761
       Accounts receivable, net              382,400              381,417
       Prepaid expenses and other           220,186             190,128
       current assets
       Total current assets                  1,563,674            1,701,306
                                                            
Land, building and equipment, net            128,730              116,134
Goodwill                                     3,234,620            2,955,477
Intangible assets, net                       1,019,554            906,538
Other assets                                153,190             119,585
       Total assets                     $    6,099,768      $     5,799,040
                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                            
Current liabilities:
       Current portion of long-term     $    4,919          $     148,542
       debt
       Redeemable convertible                -                    231,552
       debentures
       Contingent and deferred               29,113               49,685
       acquisition payments
       Accounts payable and accrued          306,336              328,374
       expenses
       Deferred revenue                     248,908             206,610
       Total current liabilities             589,276              964,763
                                                            
Long-term portion of debt                    2,330,078            1,735,811
Deferred revenue, net of current             127,372              108,481
portion
Other liabilities                           270,781             243,279
       Total liabilities                    3,317,507           3,052,334
                                                            
Equity component of currently               -                   18,430
redeemable convertible debentures
Stockholders' equity                        2,782,261           2,728,276
                                                            
       Total liabilities and            $    6,099,768      $     5,799,040
       stockholders' equity
                                                            

Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
                                                 Three months ended
                                                  December 31,
                                                  2012           2011
                                                                  
Cash flows from operating activities:
Net (loss) income                                 $ (22,096   )   $ 9,340
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization                       50,429          45,835
Stock-based compensation                            45,271          32,787
Non-cash interest expense                           9,986           7,699
Deferred tax benefit                                (4,077    )     (12,720  )
Other                                               (1,925    )     583
Changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable                                 8,815           (23,931  )
Prepaid expenses and other assets                   (9,104    )     1,074
Accounts payable                                    (18,692   )     10,757
Accrued expenses and other liabilities              9,241           (6,852   )
Deferred revenue                                   55,100        24,961   
Net cash provided by operating activities          122,948       89,533   
Cash flows from investing activities:
Capital expenditures                                (15,104   )     (25,658  )
Payments for business and technology                (446,192  )     (111,785 )
acquisitions, net of cash acquired
Proceeds from sales and maturities of               456             20,759
marketable securities and other investments
Change in restricted cash balances                 -             6,747    
Net cash used in investing activities              (460,840  )    (109,937 )
Cash flows from financing activities:
Payments of debt                                    (144,835  )     (1,665   )
Proceeds from long-term debt, net of issuance       352,611         676,500
costs
Payments for repurchases of common stock            -               (199,997 )
(Payments for) proceeds from settlement of          (177      )     348
share-based derivatives, net
Payments of other long-term liabilities             (1,012    )     (2,649   )
Excess tax benefits on employee equity awards       4,974           -
Proceeds from issuance of common stock from         1,906           7,234
employee stock plans
Cash used to net share settle employee equity      (43,859   )    (33,001  )
awards
Net cash provided by financing activities          169,608       446,770  
Effects of exchange rate changes on cash and       (389      )    (4       )
cash equivalents
Net (decrease) increase in cash and cash            (168,673  )     426,362
equivalents
Cash and cash equivalents at beginning of          1,129,761     447,224  
period
Cash and cash equivalents at end of period        $ 961,088      $ 873,586  
                                                                  

Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Unaudited
                                                    Three months ended
                                                     December 31
                                                     2012         2011
                                                                   
GAAP revenue                                         $ 462,268     $ 360,643
Acquisition-related revenue adjustments: product       20,430        18,332
and licensing
Acquisition-related revenue adjustments:               7,063         952
professional services and hosting
Acquisition-related revenue adjustments:              2,656       2,122   
maintenance and support
Non-GAAP revenue                                     $ 492,417    $ 382,049 
                                                                   
GAAP cost of revenue                                 $ 182,572     $ 134,872
Cost of revenue from amortization of intangible        (16,310 )     (14,934 )
assets
Cost of revenue adjustments: product and licensing     1,983         2,228
(1,2)
Cost of revenue adjustments: professional services     (2,088  )     (4,406  )
and hosting (1,2)
Cost of revenue adjustments: maintenance and          (2,103  )    (45     )
support (1,2)
Non-GAAP cost of revenue                             $ 164,054    $ 117,715 
                                                                   
GAAP gross profit                                    $ 279,696     $ 225,771
Gross profit adjustments                              48,667      38,563  
Non-GAAP gross profit                                $ 328,363    $ 264,334 
                                                                   
GAAP income from operations                          $ 6,230       $ 11,327
Gross profit adjustments                               48,667        38,563
Research and development (1)                           8,860         5,883
Sales and marketing (1)                                16,847        11,817
General and administrative (1)                         14,873        10,544
Amortization of intangible assets                      25,426        23,203
Costs associated with IP collaboration agreements      5,250         5,250
Acquisition-related costs, net                         15,733        14,611
Restructuring and other charges, net                  1,667       2,864   
Non-GAAP income from operations                      $ 143,553    $ 124,062 
                                                                   
GAAP benefit from income taxes                       $ (8,561  )   $ (9,409  )
Non-cash taxes                                        14,766      15,709  
Non-GAAP provision for income taxes                  $ 6,205      $ 6,300   
                                                                   
GAAP net (loss) income                               $ (22,096 )   $ 9,340
Acquisition-related adjustment - revenue (2)           30,149        21,406
Acquisition-related adjustment - cost of revenue       (2,483  )     (2,320  )
(2)
Acquisition-related costs, net                         15,733        14,611
Cost of revenue from amortization of intangible        16,310        14,934
assets
Amortization of intangible assets                      25,426        23,203
Non-cash stock-based compensation (1)                  45,271        32,787
Non-cash interest expense, net                         9,986         7,699
Non-cash income taxes                                  (14,766 )     (15,709 )
Costs associated with IP collaboration agreements      5,250         5,250
Change in fair value of share-based instruments        2,510         (5,520  )
Restructuring and other charges, net                  1,667       2,864   
Non-GAAP net income                                  $ 112,957    $ 108,545 
                                                                   
Non-GAAP diluted net income per share                $ 0.35       $ 0.34    
                                                                   
Diluted weighted average common shares outstanding    323,489     320,536 
                                                                   

Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations,
continued
(in thousands)
Unaudited
                                                                 
                                                      Three months ended
                                                      December 31
                                                      2012          2011
                                                                    
(1) Non-Cash Stock-Based Compensation
Cost of product and licensing                         $  185        $ 92
Cost of professional services and hosting                2,403        4,406
Cost of maintenance and support                          2,103        45
Research and development                                 8,860        5,883
Sales and marketing                                      16,847       11,817
General and administrative                              14,873     10,544 
Total                                                 $  45,271    $ 32,787 
                                                                    
(2) Acquisition-Related Revenue and Cost of
Revenue
Revenue                                               $  30,149     $ 21,406
Cost of product and licensing                            (2,168 )     (2,320 )
Cost of professional services and hosting               (315   )    -      
Total                                                 $  27,666    $ 19,086 
                                                                    

Nuance Communications, Inc.
Supplemental Financial Information – GAAP to Non-GAAP Reconciliations,
continued
(in millions)
Unaudited
                                                                
                                                                       
Healthcare          Q1         Q2        Q3        Q4        FY        Q1
                    2012       2012      2012      2012      2012      2013
GAAP Revenue        $  145.1   $ 149.7   $ 184.5   $ 189.3   $ 668.6   $ 204.7
Adjustment          $  0.2     $ 0.2     $ 0.0     $ 0.4     $ 0.8     $ 12.7
Non-GAAP Revenue    $  145.3   $ 149.9   $ 184.5   $ 189.7   $ 669.4   $ 217.4
                                                                       
Mobile &            Q1         Q2        Q3        Q4        FY        Q1
Consumer
                    2012       2012      2012      2012      2012      2013
GAAP Revenue        $  103.4   $ 110.3   $ 126.0   $ 143.2   $ 483.0   $ 128.8
Adjustment          $  5.1     $ 4.8     $ 6.4     $ 9.0     $ 25.3    $ 2.9
Non-GAAP Revenue    $  108.5   $ 115.1   $ 132.4   $ 152.2   $ 508.3   $ 131.7
                                                                       
Enterprise          Q1         Q2        Q3        Q4        FY        Q1
                    2012       2012      2012      2012      2012      2013
GAAP Revenue        $  72.2    $ 79.6    $ 74.1    $ 89.1    $ 315.0   $ 83.7
Adjustment          $  3.6     $ 11.8    $ 0.4     $ 1.2     $ 17.0    $ 0.0
Non-GAAP Revenue    $  75.8    $ 91.4    $ 74.5    $ 90.3    $ 332.0   $ 83.7
                                                                       
Imaging             Q1         Q2        Q3        Q4        FY        Q1
                    2012       2012      2012      2012      2012      2013
GAAP Revenue        $  39.9    $ 50.7    $ 47.1    $ 47.2    $ 184.9   $ 45.1
Adjustment          $  12.5    $ 10.6    $ 9.7     $ 10.7    $ 43.5    $ 14.5
Non-GAAP Revenue    $  52.4    $ 61.3    $ 56.8    $ 57.9    $ 228.4   $ 59.6
                                                                       
                                                                       
                                                                       
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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