Investor relations

Latest news

Press Releases

<< Back

Nuance Announces Second Quarter 2018 Results

Delivers Organic Revenue Growth, Non-GAAP Revenue and Earnings in Line with Guidance, and Strong Cash Flow from Operations

  • GAAP revenue of $514.2 million, up 3% over prior year
  • Non-GAAP revenue of $518.3 million, up 1% over prior year
  • Organic revenue growth of 1% over the prior year
  • GAAP EPS of $(0.56); non-GAAP diluted EPS of $0.27
  • Cash flow from operations of $109.3 million, or 138% of non-GAAP net income

BURLINGTON, Mass., May 09, 2018 (GLOBE NEWSWIRE) -- Nuance Communications, Inc. (NASDAQ:NUAN) today announced financial results for its second quarter fiscal year 2018, the three months ending March 31, 2018.

“We are pleased with the progress in our business and first-half results, especially the early returns from our investments and focus on our growth businesses,” said Dan Tempesta, Nuance’s chief financial officer. “This strategy is producing measurable results, driving organic revenue growth for the second sequential quarter and producing non-GAAP revenue and EPS in line with our guidance for the quarter.”

During the quarter, Nuance made progress in key vertical industries and growth businesses, including:

  • Next-generation automotive interface and user experience offerings showcased with Daimler and Toyota;
  • Significant, continued growth in the Dragon Medical cloud platform;
  • Introduction of new core engine capabilities that include AI, voice recognition and text-to-speech capabilities for human-like dialog for Enterprise customers;
  • Enhancements to its voice biometrics offerings leveraging deep neural networks; and,
  • New design wins for Nuance’s AI and virtual assistant offerings with key customers, including AT&T, BMW, Cisco, Ford, Geely and Wells Fargo.  

“In just a few weeks, my conviction about the potential of this company has been affirmed. There is real momentum in the core business, making it an exciting opportunity to step in at this pivotal moment,” said Mark Benjamin, Nuance’s chief executive officer. “A top priority is to work with the team to take a comprehensive look at Nuance’s entire portfolio, so we can quickly make smart choices on how to accelerate our momentum in growth businesses, deliver innovations for customers, and generate value for our shareholders.”

Second Quarter Performance Highlights  

On a GAAP basis:

  • GAAP revenue of $514.2 million, up 3% compared to $499.6 million a year ago, with 71% of total GAAP revenue as recurring revenue, compared to 74% a year ago.
  • The Company recognized a goodwill impairment of $137.9 million in the quarter related to two businesses, Subscriber Revenue Services (SRS) and Devices, which affected GAAP results.  
  • GAAP net loss of $(164.1) million, or $(0.56) per share, compared to a loss of $(33.8) million, or $(0.12) per share, in the second quarter of fiscal year 2017.
  • GAAP operating margin of (25.1)%, compared to 6.3% in the second quarter of fiscal year 2017. 
  • Cash flow from operations of $109.3 million in the second quarter of fiscal year 2018, compared to $125.4 million in the second quarter of fiscal year 2017.

On a Non-GAAP basis:

  • Non‑GAAP revenue of $518.3 million, up 1%, compared to $511.1 million in the second quarter of fiscal year 2017.
  • Organic revenue growth of 1% compared to the prior year, led by 8% growth in Healthcare and 12% growth in Automotive.
  • Net new bookings of $376.6 million, down 8%, from $410.4 million a year ago.
  • Non-GAAP recurring revenue of 71% of­ total non-GAAP revenue, compared to 75% a year ago. 
  • Non-GAAP net income of $79.1 million, or $0.27 per diluted share, compared to non-GAAP net income of $92.8 million, or $0.32 per diluted share, in the second quarter of fiscal year 2017. 
  • Non‑GAAP operating margin of 24.4%, down from 30.6% in the second quarter of fiscal year 2017.
  • Cash flow from operations as a percentage of non-GAAP net income was 138% of non-GAAP net income.

Company Discusses Changes in Business and Outlook

Beginning this quarter, the Company is reporting results in five segments: Healthcare, Enterprise, Automotive, Imaging and Other. The Other segment includes Nuance’s Subscriber Revenue Services (SRS) and Devices businesses. Nuance’s Enterprise segment now includes Dragon TV solutions. The changes to Nuance’s reporting segments are part of the Company’s ongoing actions to simplify the business, more efficiently address its best market opportunities and improve transparency for shareholders.

In the second quarter, as noted, the Company recorded goodwill impairments of $137.9 associated with its SRS and Devices businesses. An impairment of $102.8 million for the SRS business is the result of reduced demand for the Company’s services among mobile carriers, primarily in India and Brazil, due to dramatic shifts in their business models. An impairment of $35.1 for the Devices business is the result of an impairment evaluation, conducted in conjunction with the reorganization of Nuance’s reporting segments, that found the carrying value of this business exceeded its estimated fair value.

Due primarily to the significant changes in Nuance’s SRS business and outlook, the Company revised its fiscal year 2018 growth estimates to 2% to 4% organic growth from 3% to 5% organic growth. Despite these changes, the Company is reiterating its expectation for 5% to 7% growth in net new bookings in fiscal year 2018.

For a complete discussion on Nuance’s second quarter 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.

Conference Call and Prepared Remarks

Nuance provides 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.

Nuance will host an investor conference call today that will begin at 5:00 p.m. ET and will include brief comments followed by questions and answers. To access the live broadcast, please visit the Investor Relations section of Nuance’s website at http://investors.nuance.com. The call can also be heard by dialing 800-230-1074 or 612-234-9960 at least five minutes prior to the call and referencing code 448075. A replay will be available within 24 hours of the announcement via the webcast link at http://investors.nuance.com or by dialing 800-475-6701 or 320-365-3844 and using the access code 448075.

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 can 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,” or “estimates” or similar expressions) should also be considered to be forward-looking statements.  There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including but not limited to: fluctuations in demand for our existing and future products; further unanticipated costs resulting from the FY17 malware incident including potential costs associated with litigation or 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; uncertainties associated with the transition of our chief executive officer; the imposition of tariffs or other trade measures particularly between the United States and China; potential future impairment charges related to our newly 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 conversion rate of bookings into revenue; the ability to realize anticipated synergies from acquired businesses; and the other factors described in our Form 10-Q for the period ended December 31, 2017.  We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

Definitions of Bookings and Net New Bookings
Bookings. Bookings represent the estimated gross revenue value of transactions at the time of contract execution, except for maintenance and support offerings. For fixed price contracts, the bookings value represents the gross total contract value.  For contracts where revenue is based on transaction volume, the bookings value represents the contract price multiplied by the estimated future transaction volume during the contract term, whether or not such transaction volumes are guaranteed under a minimum commitment clause. Actual results could be different than our initial estimates.  The maintenance and support bookings value represents the amounts billed in the period the customer is invoiced. Because of the inherent estimates required to determine bookings and the fact that the actual resultant revenue may differ from our initial bookings estimates, we consider bookings one indicator of potential future revenue and not as an arithmetic measure of backlog.

Net new bookings. Net new bookings represents the estimated revenue value at the time of contract execution from new contractual arrangements or the estimated revenue value incremental to the portion of value that will be renewed under pre-existing arrangements.  Constant currency for net new bookings is calculated using current period net new bookings denominated in currencies other than United States dollars, converted into United States dollars using the average exchange rate for those currencies from the prior year period rather than the actual exchange rate in effect during the current period.

Discussion of non-GAAP Financial Measures

We believe that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. 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 Generally Accepted Accounting Principles (“GAAP”) and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the non-GAAP annual financial plan. The board of directors and management utilize these non-GAAP measures and results (in addition to the GAAP results) to determine our allocation of resources. In addition, and as a consequence of the importance of these measures in managing the business, we use non-GAAP measures and results in the evaluation process to establish management’s compensation. For example, our annual bonus program payments are based upon the achievement of consolidated non-GAAP revenue and consolidated non-GAAP earnings per share financial targets. We consider the use of non-GAAP revenue helpful in understanding the performance of our business, as it excludes the purchase accounting impact on acquired deferred revenue and other acquisition-related adjustments to revenue. We also consider the use of non-GAAP earnings per share helpful in assessing the organic performance of the continuing operations of our business. By organic performance we mean performance as if we had owned an acquired business in the same period a year ago. By constant currency organic performance, we mean performance excluding the effect of current foreign currency rate fluctuations.  By continuing operations, we mean the ongoing results of the business excluding certain unplanned costs. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and six months ended March 31, 2018 and 2017, 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:

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

(ii)  Professional service fees and expenses. Professional service fees and expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and 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.
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:

(i) Stock-based compensation. Because of varying valuation methodologies, subjective assumptions and the variety of award types, we believe that excluding stock-based compensation allows for more accurate comparisons of operating results to peer companies, as well as to times in our history when stock-based compensation was more or less significant as a portion of overall compensation than in the current period. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and the options and restricted awards granted are influenced by the Company’s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods.

(ii) 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. These items include losses from extinguishing our convertible debt.  Other items such as consulting and professional services fees related to assessing strategic alternatives and our transformation program, 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
 
Richard Mack
Nuance Communications, Inc.
Tel: 781-565-5000
Email:richard.mack@nuance.com
 
 
Suzanne DuLong
Nuance Communications, Inc.
Tel: 781-565-5077
Email:suzanne.dulong@nuance.com
 

Financial Tables Follow

               
               
Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
               
    Three months ended   Six months ended
    March 31,   March 31,
      2018       2017       2018       2017  
                                 
Revenues:                                
Professional services and hosting   $ 274,574     $ 258,690     $ 533,601     $ 512,107  
Product and licensing     161,284       159,258       323,094       311,010  
Maintenance and support     78,366       81,625       159,174       164,114  
Total revenues     514,224       499,573       1,015,869       987,231  
                                 
Cost of revenues:                                
Professional services and hosting     181,051       164,170       353,579       329,062  
Product and licensing     18,966       18,790       38,035       37,168  
Maintenance and support     14,191       13,240       28,432       26,838  
Amortization of intangible assets     14,780       17,218       30,136       32,760  
Total cost of revenues     228,988       213,418       450,182       425,828  
                                 
Gross profit     285,236       286,155       565,687       561,403  
                                 
Operating expenses:                                
Research and development     74,185       66,232       147,551       132,554  
Sales and marketing     94,187       93,674       196,147       195,190  
General and administrative     74,288       41,518       127,180       81,308  
Amortization of intangible assets     22,670       27,912       45,734       55,771  
Acquisition-related costs, net     2,360       5,379       7,921       14,405  
Restructuring and other charges, net     8,948       19,911       23,749       26,614  
Impairment of goodwill     137,907       -       137,907       -  
Total operating expenses     414,545       254,626       686,189       505,842  
                                 
(Loss) income from operations     (129,309 )     31,529       (120,502 )     55,561  
Other expenses, net     (32,200 )     (56,196 )     (66,300 )     (93,803 )
Loss before income taxes     (161,509 )     (24,667 )     (186,802 )     (38,242 )
Provision (benefit) for income taxes     2,544       9,141       (75,977 )     19,494  
Net loss   $ (164,053 )   $ (33,808 )   $ (110,825 )   $ (57,736 )
                                 
Net loss per share:                                
Basic   $ (0.56 )   $ (0.12 )   $ (0.38 )   $ (0.20 )
Diluted   $ (0.56 )   $ (0.12 )   $ (0.38 )   $ (0.20 )
                                 
Weighted average common shares outstanding:                                
Basic     294,103       291,021       292,720       289,976  
Diluted     294,103       291,021       292,720       289,976  
                                 
                                 

 

Nuance Communications, Inc.  
Condensed Consolidated Balance Sheets  
(in thousands)  
Unaudited  
             
ASSETS   March 31, 2018   September 30, 2017  
                 
Current assets:              
  Cash and cash equivalents   $ 468,642   $ 592,299  
  Marketable securities     153,008     251,981  
  Accounts receivable, net     411,648     395,392  
  Prepaid expenses and other current assets     107,929     88,269  
  Total current assets     1,141,227     1,327,941  
                 
Marketable securities     27,087     29,844  
Land, building and equipment, net     172,521     176,548  
Goodwill     3,472,849     3,590,608  
Intangible assets, net     596,060     664,474  
Other assets     147,016     142,508  
  Total assets   $ 5,556,760   $ 5,931,923  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY              
                 
Current liabilities:              
  Current portion of long-term debt   $ -   $ 376,121  
  Contingent and deferred acquisition payments     20,926     28,860  
  Accounts payable, accrued expenses and other current liabilities     307,447     340,505  
  Deferred revenue     413,126     366,042  
  Total current liabilities     741,499     1,111,528  
                 
Long-term debt     2,311,484     2,241,283  
Deferred revenue, net of current portion     469,575     423,929  
Other liabilities     140,520     223,801  
  Total liabilities     3,663,078     4,000,541  
                 
Stockholders' equity     1,893,682     1,931,382  
  Total liabilities and stockholders' equity   $ 5,556,760   $ 5,931,923  
                 
                 

 

Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
 
    Three months ended   Six months ended
    March 31,   March 31,
      2018       2017       2018       2017  
                                 
Cash flows from operating activities:                                
Net loss   $ (164,053 )   $ (33,808 )   $ (110,825 )   $ (57,736 )
Adjustments to reconcile net loss to net cash provided by operating activities:                                
Depreciation and amortization     52,740       58,638       107,055       116,644  
Stock-based compensation     33,749       40,348       71,735       79,478  
Non-cash interest expense     11,854       13,732       25,195       26,771  
Deferred tax provision (benefit)     6,895       3,637       (90,331 )     5,643  
Loss on extinguishment of debt     -       18,565       -       18,565  
Impairment of goodwill     137,907       -       137,907       -  
Impairment of fixed asset     434       10,944       1,780       10,944  
Other     1,294       487       579       2,342  
Changes in operating assets and liabilities, excluding effects of acquisitions:                                
Accounts receivable     23,925       8,282       (12,415 )     (1,431 )
Prepaid expenses and other assets     (3,087 )     3,704       (22,059 )     (12,295 )
Accounts payable     8,083       20,244       (3,773 )     (1,000 )
Accrued expenses and other liabilities     2,131       (16,420 )     5,230       (10,579 )
Deferred revenue     (2,612 )     (2,919 )     85,287       72,988  
Net cash provided by operating activities     109,260       125,434       195,365       250,334  
Cash flows from investing activities:                                
Capital expenditures     (12,783 )     (7,388 )     (25,326 )     (18,787 )
Payments for business and asset acquisitions, net of cash acquired     (4,120 )     (50,041 )     (12,768 )     (72,990 )
Purchases of marketable securities and other investments     (60,547 )     (81,054 )     (92,994 )     (153,851 )
Proceeds from sales and maturities of marketable securities and other investments     35,468       59,553       195,273       69,658  
Net cash (used in) provided by investing activities     (41,982 )     (78,930 )     64,185       (175,970 )
Cash flows from financing activities:                                
Repayment and redemption of debt     -       (634,055 )     (331,172 )     (634,055 )
Proceeds from issuance of long-term debt, net of issuance costs     -       343,959       -       838,959  
Payments for repurchase of common stock     -       (99,077 )     -       (99,077 )
Acquisition payments with extended payment terms     (47 )     -       (16,927 )     -  
Proceeds from issuance of common stock from employee stock plans     9,354       8,553       9,360       8,598  
Payments for taxes related to net share settlement of equity awards     (5,389 )     (2,993 )     (44,006 )     (43,353 )
Other financing activities     (582 )     (119 )     (647 )     (206 )
Net cash provided by (used in) financing activities     3,336       (383,732 )     (383,392 )     70,866  
Effects of exchange rate changes on cash and cash equivalents     (433 )     1,261       185       (1,210 )
Net increase (decrease) in cash and cash equivalents     70,181       (335,967 )     (123,657 )     144,020  
Cash and cash equivalents at beginning of period     398,461       961,607       592,299       481,620  
Cash and cash equivalents at end of period   $ 468,642     $ 625,640     $ 468,642     $ 625,640  
                                 
                                 

 

Nuance Communications, Inc.  
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations  
(in thousands)  
Unaudited  
   
    Three months ended   Six months ended  
    March 31,   March 31,  
      2018       2017       2018       2017    
                                   
GAAP revenues   $ 514,224     $ 499,573     $ 1,015,869     $ 987,231    
Acquisition-related revenue adjustments: professional services and hosting     1,020       2,817       2,295       5,250    
Acquisition-related revenue adjustments: product and licensing     2,934       8,313       8,781       14,029    
Acquisition-related revenue adjustments: maintenance and support     136       394       194       605    
Non-GAAP revenues   $ 518,314     $ 511,097     $ 1,027,139     $ 1,007,115    
                                   
GAAP cost of revenues   $ 228,988     $ 213,418     $ 450,182     $ 425,828    
Cost of revenues from amortization of intangible assets     (14,780 )     (17,218 )     (30,136 )     (32,760 )  
Cost of revenues adjustments: professional services and hosting (1)     (6,322 )     (8,080 )     (13,729 )     (16,490 )  
Cost of revenues adjustments: product and licensing (1)     (112 )     (102 )     (378 )     (194 )  
Cost of revenues adjustments: maintenance and support (1)     (885 )     (1,010 )     (2,089 )     (1,987 )  
Non-GAAP cost of revenues   $ 206,889     $ 187,008     $ 403,850     $ 374,397    
                                   
GAAP gross profit   $ 285,236     $ 286,155     $ 565,687     $ 561,403    
Gross profit adjustments     26,189       37,934       57,602       71,315    
Non-GAAP gross profit   $ 311,425     $ 324,089     $ 623,289     $ 632,718    
                                   
GAAP (loss) income from operations   $ (129,309 )   $ 31,529     $ (120,502 )   $ 55,561    
Gross profit adjustments     26,189       37,934       57,602       71,315    
Research and development (1)     8,396       8,398       18,092       16,888    
Sales and marketing (1)     8,366       11,018       19,042       22,987    
General and administrative (1)     9,668       11,740       18,405       20,932    
Acquisition-related costs, net     2,360       5,379       7,921       14,405    
Amortization of intangible assets     22,670       27,912       45,734       55,771    
Restructuring and other charges, net     8,948       19,911       23,749       26,614    
Impairment of goodwill       137,907         -          137,907         -     
Other (4)       31,212         2,721         43,176         5,711    
Non-GAAP income from operations   $   126,407     $   156,542     $   251,126     $   290,184    
                                   
GAAP loss before income taxes   $   (161,509 )   $   (24,667 )   $   (186,802 )   $   (38,242 )  
Gross profit adjustments       26,189         37,934         57,602         71,315    
Research and development (1)       8,396         8,398         18,092         16,888    
Sales and marketing (1)       8,366         11,018         19,042         22,987    
General and administrative (1)       9,668         11,740         18,405         20,932    
Acquisition-related costs, net       2,360         5,379         7,921         14,405    
Amortization of intangible assets       22,670         27,912         45,734         55,771    
Restructuring and other charges, net       8,948         19,911         23,749         26,614    
Impairment of goodwill       137,907         -         137,907         -    
Non-cash interest expense     11,854       13,732       25,195       26,771    
Loss on extinguishment of debt       -        18,565         -        18,565    
Other (4)       31,212         2,721         43,176         5,711    
Non-GAAP income before income taxes   $   106,061     $   132,643     $   210,021     $   241,717    
                                   
(4) Includes approximately $28 million and $38 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 six months ended March 31, 2018, respectively.  
                   

 

                 
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands, except per share amounts)
Unaudited
                 
    Three months ended   Six months ended
    March 31,   March 31,
      2018       2017       2018       2017  
                                 
                                 
GAAP provision (benefit) for income taxes   $ 2,544     $ 9,141     $ (75,977 )   $ 19,494  
Income tax effect of Non-GAAP adjustments     37,069       50,658       69,230       93,289  
Removal of valuation allowance and other items     (20,540 )     (18,254 )     (34,083 )     (39,001 )
Removal of discrete items (3)     7,874       (1,675 )     91,069       (1,732 )
Non-GAAP provision for income taxes   $ 26,947     $ 39,870     $ 50,239     $ 72,050  
                                 
GAAP net loss   $ (164,053 )   $ (33,808 )   $ (110,825 )   $ (57,736 )
Acquisition-related adjustment - revenues (2)     4,090       11,524       11,270       19,884  
Acquisition-related costs, net     2,360       5,379       7,921       14,405  
Cost of revenue from amortization of intangible assets     14,780       17,218       30,136       32,760  
Amortization of intangible assets     22,670       27,912       45,734       55,771  
Restructuring and other charges, net     8,948       19,911       23,749       26,614  
Loss on extinguishment of debt     -       18,565       -       18,565  
Impairment of goodwill     137,907       -       137,907       -  
Stock-based compensation (1)     33,749       40,348       71,735       79,478  
Non-cash interest expense     11,854       13,732       25,195       26,771  
Adjustment to income tax expense     (24,403 )     (30,729 )     (126,216 )     (52,556 )
Other (4)     31,212       2,721       43,176       5,711  
Non-GAAP net income    $ 79,114     $ 92,773     $ 159,782     $ 169,667  
                                 
Non-GAAP diluted net income per share   $ 0.27     $ 0.32     $ 0.53     $ 0.58  
                                 
Diluted weighted average common shares outstanding     296,449       293,072       299,822       293,331  
                                 
(3) As a result of the Tax Cuts and Jobs Act of 2017 (‘TCJA’), for the six months ended March 31, 2018,  we record 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 March 31, 2018, we recorded a tax expense of approximately $10.0 million, as we revised our estimates of the deferred tax benefit, offset by a cash tax benefit of $12.0 million based on recent IRS guidance regarding the mandatory one-time repatriation tax, reducing the original $14.0 million tax expense recorded in the first quarter of 2018.

Also for the three and six months ended March 31, 2018, we recorded a tax benefit of $8.5 million related to the impairment of deductible goodwill in Brazil.
 
(4) Includes approximately $28 million and $38 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 six months ended March 31, 2018, respectively.
                 
                 

 

         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
               
  Three months ended   Six months ended
  March 31,   March 31,
    2018       2017     2018     2017
                         
(1) Stock-based compensation                        
Cost of professional services and hosting $ 6,322     $ 8,080   $ 13,729   $ 16,490
Cost of product and licensing   112       102     378     194
Cost of maintenance and support   885       1,010     2,089     1,987
Research and development   8,396       8,398     18,092     16,888
Sales and marketing   8,366       11,018     19,042     22,987
General and administrative   9,668       11,740     18,405     20,932
Total $ 33,749     $ 40,348   $ 71,735   $ 79,478
                         
(2) Acquisition-related revenue and cost of revenue                        
Revenues $ 4,090     $ 11,524   $ 11,270   $ 19,884
Total $ 4,090     $ 11,524   $ 11,270   $ 19,884
                         
                         

 

Nuance Communications, Inc.
Supplemental Financial Information – GAAP to Non-GAAP Reconciliations, continued
(in millions)
Unaudited
                             
Hosting Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
  2017   2017   2017   2017   2017   2018   2018
GAAP Revenues   $ 193.3   $ 202.2   $ 189.4   $ 149.0   $ 733.8   $ 185.1   $ 194.4
Adjustment     2.3     2.7     3.1     2.0     10.1     1.2     1.0
Non-GAAP Revenues   $ 195.6   $ 204.8   $ 192.5   $ 150.9   $ 743.9   $ 186.3   $ 195.4
                             
Maintenance and Support Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
   2017    2017    2017    2017    2017    2018    2018
GAAP Revenues   $ 82.5   $ 81.6   $ 80.5   $ 82.5   $ 327.1   $ 80.8   $ 78.4
Adjustment     0.2     0.4     0.2     0.2     1.0     0.1     0.1
Non-GAAP Revenues   $ 82.7   $ 82.0   $ 80.7   $ 82.7   $ 328.1   $ 80.9   $ 78.5
                             
Perpetual Product and Licensing Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
   2017    2017    2017    2017    2017    2018    2018
GAAP Revenues   $ 78.7   $ 76.5   $ 73.5   $ 77.3   $ 306.0   $ 76.6   $ 73.0
Adjustment     0.7     0.5     0.9     0.4     2.4     0.4     0.3
Non-GAAP Revenues   $ 79.3   $ 77.0   $ 74.4   $ 77.7   $ 308.4   $ 76.9   $ 73.3
                             
Recurring Product and Licensing Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
   2017    2017    2017    2017    2017    2018    2018
GAAP Revenues   $ 73.1   $ 82.8   $ 80.8   $ 92.8   $ 329.4   $ 85.2   $ 88.3
Adjustment     5.1     7.8     5.0     6.1     24.1     5.4     2.7
Non-GAAP Revenues   $ 78.2   $ 90.6   $ 85.8   $ 98.9   $ 353.5   $ 90.7   $ 90.9
                             
Professional Services Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
   2017    2017    2017    2017    2017    2018    2018
GAAP Revenues   $ 60.1   $ 56.5   $ 62.1   $ 64.3   $ 243.1   $ 73.9   $ 80.2
Adjustment     0.2     0.1     0.1     0.1     0.5     0.1     -
Non-GAAP Revenues   $ 60.3   $ 56.7   $ 62.2   $ 64.4   $ 243.6   $ 74.0   $ 80.2
                             
Total Recurring Revenues   Q1   Q2   Q3   Q4   FY   Q1   Q2
   2017    2017    2017    2017    2017    2018    2018
GAAP Revenues   $ 353.0   $ 370.2   $ 354.5   $ 328.6   $ 1,406.4   $ 355.3   $ 365.0
Adjustment     7.5     11.4     8.7     8.2     35.9     6.9     3.9
Non-GAAP Revenues   $ 360.5   $ 381.7   $ 363.2   $ 336.8   $ 1,442.3   $ 362.2   $ 368.9
                             
Schedules may not add due to rounding.
                             

 

Primary Logo

Source: Nuance Communications, Inc.

    United States & Canada