Reports Record Net New Bookings and Cash Flow From Operations
for Fiscal Year 2016
Nuance Communications, Inc. (NASDAQ: NUAN) today announced
financial results for its fiscal 2016 and fourth quarter, ended
September 30, 2016. In fiscal 2016 Nuance saw improvement across
numerous key metrics as the business continued to transition toward
recurring revenue models, executed on transformation initiatives,
and positioned the company for future long-term growth.
Nuance delivered a strong fourth quarter and ended fiscal 2016
with excellent performance and momentum as demonstrated by the
following:
- Delivered record net new bookings in
the quarter of $516.9 million, up 45% compared to Q4 15, and for
the year $1,502.3 million, up 4% compared to FY15;
- Reported strong non-GAAP revenue of
$512.4 million in Q4 16 and $1,979.6 million in FY16 and GAAP
revenue of $506.2 million in Q4 16 and $1,948.9 million in
FY16;
- Increased recurring revenue both for
the quarter and the year to 70% of total revenue, an increase of
400 basis points year over year from FY15, on both a non-GAAP and
GAAP basis;
- Delivered non-GAAP operating margin of
28.5% and GAAP operating margin of 7.1% for FY16;
- Generated Q4 16 non-GAAP diluted EPS of
$0.41 and FY16 non-GAAP diluted EPS of $1.52 and Q4 16 GAAP diluted
EPS of $0.06 and FY16 GAAP diluted EPS of $(0.04); and,
- Delivered record Cash Flow From
Operations (CFFO) for FY16 of $565.8 million, up 16% from
FY15.
Fourth Quarter of Fiscal 2016 PerformanceIn the fourth
quarter of fiscal 2016, Nuance reported GAAP revenue of $506.2
million, compared to $504.1 million a year ago. Nuance reported
non-GAAP revenue of $512.4 million, which includes revenue lost to
accounting treatment in conjunction with acquisitions, compared to
$513.3 million in the fourth quarter of fiscal 2015. In the fourth
quarter of 2016, total recurring revenue represented 70% of total
revenue, compared to 68% a year ago, on both a GAAP and non-GAAP
basis. In the fourth quarter of fiscal 2016, Nuance reported net
new bookings of $516.9 million, up 45% from $357.4 million a year
ago.
In the fourth quarter of fiscal 2016, Nuance reported GAAP net
income of $18.5 million, or $0.06 per diluted share, compared to
GAAP net loss of $(11.0) million, or $(0.04) per basic share, in
the fourth quarter of fiscal 2015. Nuance reported non-GAAP net
income of $118.6 million, or $0.41 per diluted share, flat from
non-GAAP net income of $129.6 million, or $0.41 per diluted share,
in the fourth quarter of fiscal 2015. Nuance’s fourth quarter
fiscal 2016 GAAP operating margin was 9.0% up from 5.7% in the
fourth quarter of fiscal 2015. Nuance’s fourth quarter fiscal 2016
non-GAAP operating margin was 29.9%, down from 30.2% in the fourth
quarter of fiscal 2015. Nuance reported cash flow from operations
of $138.9 million in the fourth quarter of fiscal 2016, down 8%
from $151.6 million in the fourth quarter of fiscal 2015.
“Nuance delivered strong performance for the fourth quarter and
fiscal year across key financial metrics including net new
bookings, revenue, recurring revenue, earnings, and deferred
revenue,” said Dan Tempesta, Nuance’s CFO. “We remained focused on
our cost discipline and transitioning the business toward recurring
revenue models while strengthening our competitive position in
important markets through our investments in innovation and
additional offerings. We believe last year’s groundwork positions
us well for organic growth in fiscal 2017 and beyond.”
Fiscal Year 2016 PerformanceIn fiscal 2016, Nuance
reported GAAP revenue of $1,948.9 million, up from $1,931.1 million
in fiscal 2015. Nuance reported non-GAAP revenue of $1,979.6
million, which includes revenue lost to accounting treatment in
conjunction with acquisitions, up from non-GAAP revenue of $1,979.1
million in fiscal 2015. In fiscal 2016, total recurring revenue
represented 70% of total revenue, compared to 66% in fiscal 2015,
on both a GAAP and non-GAAP basis. In fiscal 2016, Nuance reported
net new bookings of $1,502.3 million, up 4% from $1,450.4 million
in fiscal 2015.
In fiscal 2016, Nuance recognized GAAP net loss of $(12.5)
million, or $(0.04) per share, compared to GAAP net loss of
$(115.0) million, or $(0.36) per share, in fiscal 2015. In fiscal
2016, Nuance reported non-GAAP net income of $454.4 million, or
$1.52 per diluted share, compared to $411.6 million, or $1.27 per
diluted share, in fiscal 2015. Nuance’s fiscal 2016 GAAP operating
margin was 7.1%, up from 2.8% in fiscal 2015. Nuance’s fiscal 2016
non-GAAP operating margin was 28.5%, compared to 26.2% in fiscal
2015. Nuance reported cash flow from operations of $565.8 million
in fiscal 2016, compared to $487.6 million in fiscal 2015. Nuance
ended fiscal 2016 with total deferred revenue of $736.1 million, up
10% compared to $668.2 million a year ago. Nuance ended fiscal 2016
with $608.1 million in cash, cash equivalents and marketable
securities.
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.
Conference Call and Prepared RemarksNuance 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.
Nuance will host an investor conference call today that will
begin at 5:00 p.m. ET and will include only 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
800-288-8961 or 612-332-0636 at least five minutes prior to the
call and referencing code 405327. 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 405327.
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 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.
Definitions of Bookings and Net New BookingsBookings
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 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.
Definitions of Non-GAAP Organic Revenue GrowthOrganic
revenue growth is calculated by comparing current period non-GAAP
revenue to non-GAAP revenue from the corresponding prior-year
period. For purposes of this calculation, prior period non-GAAP
revenue is adjusted to include revenue from companies acquired by
Nuance as if we had owned the acquired businesses in all periods
presented. Non-GAAP organic revenue growth on a constant currency
basis is calculated using current period non-GAAP revenue for
entities reporting in currencies other than United States dollars,
excluding United States dollar denominated transactions recorded in
those entities, converted into United States dollars using the
average exchange rates from the prior year period rather than the
actual exchange rates in effect during the current period.
Safe Harbor and Forward-Looking StatementsStatements 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; changes to economic conditions in the United States and
internationally; fluctuating currency rates, our ability to control
and successfully manage our expenses and cash position; our ability
to execute our formal transformation program to reduce costs and
optimize processes; the effects of competition, including pricing
pressure; 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 annual report on
Form 10-K for the fiscal year ended September 30, 2015, as
supplemented by our current report on Form 8-K filed on May 11,
2016, our quarterly reports, and other reports we have filed with
the Securities and Exchange Commission. We disclaim any obligation
to update any forward-looking statements as a result of
developments occurring after the date of this document.
Discussion of Non-GAAP Financial MeasuresWe 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
twelve months ended September 30, 2016 and 2015, 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.We provide
supplementary non-GAAP financial measures of revenue, which include
revenue related to acquisitions, primarily from Notable Solutions
and Quantim for the three and twelve months ended September 30,
2016 that we would have recognized but for the purchase accounting
treatment of these 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 in connection with
acquisition activities, and disputes and regulatory matters related
to acquired entities.
(iii) Acquisition-related adjustments. Acquisition-related
adjustments include 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.
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,
we have 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, we 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, we consider 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 our
normal, organic, continuing operating activities, and are therefore
presenting this supplemental information to show the results
excluding these expenses. We do not exclude from our non-GAAP
results the corresponding revenue, if any, generated from these
collaboration efforts. Although our 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 the
collaboration agreement and have incentives based on those results.
Costs associated with the research and development portion of the
agreements have been excluded from research and development expense
and costs for extending the marketing exclusivity period are
excluded from sales and marketing expense.
Non-Cash Expenses.We provide 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 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) and (iii) Certain accrued interest and income taxes. We
also exclude certain accrued interest and certain accrued income
taxes because we believe 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.We exclude certain other expenses that result
from unplanned events 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 events are unplanned and arise outside of the
ordinary course of continuing operations. These items include
losses from extinguishing our convertible debt and adjustments from
changes in fair value of share-based instruments relating to
issuing our common stock with security price guarantees payable in
cash. Other items such as consulting and professional services fees
related to assessing strategic alternatives and our transformation
program, and gains or losses on non-controlling strategic equity
interests, are also excluded.
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.
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,
2016 2015 2016 2015
Revenues: Product and licensing $
178,540 $ 189,345 $ 669,227 $ 696,290 Professional services and
hosting 245,667 234,552 955,329 919,479 Maintenance and support
81,997 80,222 324,347
315,367 Total revenues 506,204
504,119 1,948,903 1,931,136
Cost of revenues: Product and licensing 21,359 23,341
86,379 91,839 Professional services and hosting 159,785 157,413
626,168 618,633 Maintenance and support 13,581 13,333 54,077 54,424
Amortization of intangible assets 15,799
17,108 62,876 63,646 Total cost
of revenues 210,524 211,195
829,500 828,542 Gross profit
295,680 292,924 1,119,403
1,102,594
Operating expenses: Research and
development 65,618 73,530 271,130 306,867 Sales and marketing
101,427 107,093 390,866 410,877 General and administrative 41,704
45,896 168,473 187,263 Amortization of intangible assets 27,792
26,104 108,021 104,630 Acquisition-related costs, net 8,740 677
17,166 14,379 Restructuring and other charges, net 4,967
10,966 25,224 23,669
Total operating expenses 250,248
264,266 980,880 1,047,685
Income from operations 45,432 28,658 138,523 54,909 Other
expense, net (37,619 ) (28,553 ) (136,784 )
(135,381 ) Income (loss) before income taxes 7,813
105 1,739 (80,472 ) (Benefit) provision for income taxes
(10,661 ) 11,132 14,197
34,538 Net income (loss) $ 18,474 $ (11,027 )
$ (12,458 ) $ (115,010 )
Net income (loss) per share:
Basic $ 0.07 $ (0.04 ) $ (0.04 ) $ (0.36 ) Diluted $ 0.06
$ (0.04 ) $ (0.04 ) $ (0.36 )
Weighted average
common shares outstanding: Basic 283,139
309,281 292,129 317,028 Diluted
289,371 309,281 292,129
317,028
Nuance Communications, Inc.Condensed
Consolidated Balance Sheets(in thousands)Unaudited
ASSETS September
30, 2016 September 30, 2015 Current assets: Cash and cash
equivalents $ 481,620 $ 479,449 Marketable securities 98,840 57,237
Accounts receivable, net 380,004 373,162 Prepaid expenses and other
current assets 78,126 76,777 Total current assets
1,038,590 986,625 Marketable securities 27,632 32,099 Land,
building and equipment, net 185,169 186,007 Goodwill 3,508,879
3,378,334 Intangible assets, net 762,220 796,285 Other assets
138,980 132,559 Total assets $ 5,661,470 $ 5,511,909
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Current portion of long-term debt $ - $ 4,834
Contingent and deferred acquisition payments 9,468 15,651 Accounts
payable and accrued expenses 332,258 281,190 Deferred revenue
349,173 324,709 Total current liabilities 690,899
626,384 Long-term portion of debt 2,433,152 2,103,079
Deferred revenue, net of current portion 386,960 343,452 Other
liabilities 219,129 173,742 Total liabilities
3,730,140 3,246,657 Stockholders' equity
1,931,330 2,265,252 Total liabilities and stockholders'
equity $ 5,661,470 $ 5,511,909
Nuance
Communications, Inc.Consolidated Statements of Cash Flows(in
thousands)Unaudited Three months ended Twelve months ended
September 30, September 30, 2016 2015 2016 2015
Cash
flows from operating activities: Net income (loss) $ 18,474 $
(11,027 ) $ (12,458 ) $ (115,010 ) Adjustments to reconcile net
income (loss) to net cash provided by operating activities:
Depreciation and amortization 58,381 58,753 231,474 230,645
Stock-based compensation 40,871 56,804 163,828 176,776 Non-cash
interest expense 13,061 7,300 47,105 29,378 Deferred tax (benefit)
provision (18,494 ) 9,161 (12,014 ) 16,690 Loss on extinguishment
of debt - - 4,851 17,714 Other (586 ) 4,203 (575 ) 9,843 Changes in
operating assets and liabilities, net of effects from acquisitions:
Accounts receivable 2,076 (9,333 ) 25,450 41,657 Prepaid expenses
and other assets 2,881 10,778 (9,645 ) (3,931 ) Accounts payable
13,165 11,429 38,206 (3,218 ) Accrued expenses and other
liabilities 9,276 (4,952 ) 27,826 (48,118 ) Deferred revenue
(237 ) 18,491 61,747 135,151
Net cash provided by operating activities 138,868
151,607 565,795 487,577
Cash flows from investing activities: Capital
expenditures (13,460 ) (9,880 ) (54,883 ) (58,039 ) Payments for
business and technology acquisitions, net of cash acquired (144,569
) (1,244 ) (172,763 ) (83,278 ) Purchases of marketable securities
and other investments (81,389 ) (33,932 ) (117,640 ) (148,697 )
Proceeds from sales and maturities of marketable securities and
other investments 16,031 34,386
82,285 83,867 Net cash used in investing
activities (223,387 ) (10,670 ) (263,001 )
(206,147 )
Cash flows from financing activities:
Payments of debt - (1,208 ) (511,844 ) (261,051 ) Proceeds from
issuance of long-term debt, net of issuance costs (502 ) (2,988 )
959,358 253,224 Payments for repurchase of common stock - (60,076 )
(699,472 ) (298,279 ) Net payments on other long-term liabilities
(51 ) (620 ) (1,371 ) (3,003 ) Payments for settlement of other
share-based derivatives, net - - - (340 ) Proceeds from issuance of
common stock from employee stock plans 8,389 13,441 16,850 25,776
Cash used to net share settle employee equity awards (1,589
) (4,287 ) (68,636 ) (57,560 ) Net cash
provided by (used in) financing activities 6,247
(55,738 ) (305,115 ) (341,233 ) Effects of
exchange rate changes on cash and cash equivalents 837
(2,866 ) 4,492 (7,978 ) Net
(decrease) increase in cash and cash equivalents (77,435 ) 82,333
2,171 (67,781 ) Cash and cash equivalents at beginning of period
559,055 397,116 479,449
547,230 Cash and cash equivalents at end of period $
481,620 $ 479,449 $ 481,620 $ 479,449
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, 2016 2015 2016 2015
GAAP revenues $
506,204 $ 504,119 $ 1,948,903 $ 1,931,136 Acquisition-related
revenue adjustments: product and licensing 3,710 6,026 20,095
32,923 Acquisition-related revenue adjustments: professional
services and hosting 2,534 2,843 10,212 13,142 Acquisition-related
revenue adjustments: maintenance and support -
332 383 1,868
Non-GAAP
revenues $ 512,448 $ 513,320 $ 1,979,593 $
1,979,069
GAAP cost of revenues $ 210,524 $
211,195 $ 829,500 $ 828,542 Cost of revenues from amortization of
intangible assets (15,799 ) (17,108 ) (62,876 ) (63,646 ) Cost of
revenues adjustments: product and licensing (1,2) (90 ) 140 (376 )
1,020 Cost of revenues adjustments: professional services and
hosting (1,2) (7,429 ) (10,494 ) (30,129 ) (29,734 ) Cost of
revenues adjustments: maintenance and support (1) (1,064 )
(1,413 ) (4,138 ) (3,989 )
Non-GAAP cost of
revenues $ 186,142 $ 182,320 $ 731,981 $
732,193
GAAP gross profit $ 295,680 $ 292,924
$ 1,119,403 $ 1,102,594 Gross profit adjustments 30,626
38,076 128,209 144,282
Non-GAAP gross profit $ 326,306 $ 331,000
$ 1,247,612 $ 1,246,876
GAAP income
from operations $ 45,432 $ 28,658 $ 138,523 $ 54,909 Gross
profit adjustments 30,626 38,076 128,209 144,282 Research and
development (1) 8,615 12,651 35,671 39,038 Sales and marketing (1)
12,041 18,134 49,064 50,310 General and administrative (1) 11,633
13,638 43,525 51,955 Amortization of intangible assets 27,792
26,104 108,021 104,630 Costs associated with IP collaboration
agreements - 2,000 4,000 10,500 Acquisition-related costs, net
8,740 677 17,166 14,379 Restructuring and other charges, net 4,967
10,966 25,224 23,669 Other 3,156 4,341
15,145 24,933
Non-GAAP income from
operations $ 153,002 $ 155,245 $ 564,548 $
518,605
GAAP (benefit) provision for income
taxes $ (10,661 ) $ 11,132 $ 14,197 $ 34,538 Non-cash taxes
20,550 (6,621 ) 12,080
(15,199 )
Non-GAAP provision for income taxes $ 9,889
$ 4,511 $ 26,277 $ 19,339
GAAP net
income (loss) $ 18,474 $ (11,027 ) $ (12,458 ) $ (115,010 )
Acquisition-related adjustment - revenues (2) 6,244 9,201 30,690
47,933 Acquisition-related adjustment - cost of revenues (2) 1 (614
) (925 ) (2,770 ) Acquisition-related costs, net 8,740 677 17,166
14,379 Cost of revenue from amortization of intangible assets
15,799 17,108 62,876 63,646 Amortization of intangible assets
27,792 26,104 108,021 104,630 Restructuring and other charges, net
4,967 10,966 25,224 23,669 Non-cash stock-based compensation (1)
40,871 56,804 163,828 176,776 Non-cash interest expense 13,061
7,300 47,105 29,378 Non-cash income taxes (20,550 ) 6,621 (12,080 )
15,199 Costs associated with IP collaboration agreements - 2,000
4,000 10,500 Change in fair value of share-based instruments - -
(61 ) 204 Loss on extinguishment of debt - - 4,851 17,714 Other
3,156 4,507 16,180
25,362
Non-GAAP net income $ 118,555 $ 129,647
$ 454,417 $ 411,610
Non-GAAP diluted
net income per share $ 0.41 $ 0.41 $ 1.52
$ 1.27
Diluted weighted average common shares
outstanding 289,371 317,443
298,292 323,940 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, 2016 2015 2016 2015
(1) Non-cash
stock-based compensation
Cost of product and licensing $ 90 $ 185 $ 376 $ 516 Cost of
professional services and hosting 7,428 10,783 31,054 30,968 Cost
of maintenance and support 1,064 1,413 4,138 3,989 Research and
development 8,615 12,651 35,671 39,038 Sales and marketing 12,041
18,134 49,064 50,310 General and administrative 11,633
13,638 43,525 51,955
Total $ 40,871 $ 56,804 $ 163,828 $ 176,776
(2)
Acquisition-related revenue and cost of revenue
Revenues $ 6,244 $ 9,201 $ 30,690 $ 47,933 Cost of product and
licensing - (325 ) - (1,536 ) Cost of professional services and
hosting 1 (289 ) (925 ) (1,234 ) Total
$ 6,245 $ 8,587 $ 29,765 $ 45,163
Nuance Communications, Inc.Supplemental Financial
Information – GAAP to Non-GAAP Reconciliations, continued(in
millions)Unaudited
Perpetual Product and
Licensing Revenue Q1 Q2 Q3
Q4 FY Q1 Q2 Q3 Q4
FY 2015 2015 2015 2015
2015 2016 2016 2016 2016
2016 GAAP Revenue $ 117.0 $ 121.3 $ 108.1 $ 115.9 $ 462.1 $
115.2 $ 88.0 $ 80.9 $ 99.5 $ 383.6 Adjustment 2.2 4.6
3.6 2.4 13.0 2.0 2.2 1.4
1.0 6.6 Non-GAAP Revenue $ 119.2 $ 125.9 $ 111.7 $
118.3 $ 475.2 $ 117.2 $ 90.2 $ 82.3 $ 100.5 $ 390.2
Recurring Product and Licensing Revenue
Q1 Q2 Q3 Q4 FY Q1
Q2 Q3 Q4 FY 2015 2015
2015 2015 2015 2016 2016
2016 2016 2016 GAAP Revenue $ 52.7 $ 53.2 $
54.7 $ 73.5 $ 234.1 $ 63.9 $ 70.6 $ 72.1 $ 79.1 $ 285.6 Adjustment
8.4 4.6 3.5 3.6 20.1 4.0
3.5 3.3 2.7 13.5 Non-GAAP Revenue $
61.1 $ 57.8 $ 58.2 $ 76.9 $ 254.0 $ 67.9 $ 74.1 $ 75.3 $ 81.7 $
299.1
Professional Services Revenue
Q1 Q2 Q3 Q4 FY Q1
Q2 Q3 Q4 FY 2015 2015
2015 2015 2015 2016 2016
2016 2016 2016 GAAP Revenue $ 54.8 $ 51.2 $
51.2 $ 52.9 $ 210.0 $ 49.7 $ 55.6 $ 61.2 $ 58.7 $ 225.2 Adjustment
0.4 0.4 0.4 0.3 1.5 0.3
0.4 0.3 0.2 1.1 Non-GAAP Revenue $ 55.2
$ 51.6 $ 51.6 $ 53.2 $ 211.5 $ 50.0 $ 55.9 $ 61.5 $ 58.9 $ 226.3
Hosting Revenue Q1 Q2
Q3 Q4 FY Q1 Q2 Q3
Q4 FY 2015 2015 2015 2015
2015 2016 2016 2016 2016
2016 GAAP Revenue $ 171.4 $ 173.3 $ 183.1 $ 181.7 $ 709.5 $
177.4 $ 184.6 $ 181.1 $ 187.0 $ 730.2 Adjustment 3.4
2.9 2.8 2.4 11.5 2.3 2.5
2.0 2.3 9.1 Non-GAAP Revenue $ 174.8 $ 176.2 $ 185.9
$ 184.2 $ 721.2 $ 179.7 $ 187.1 $ 183.2 $ 189.3 $ 739.2
Maintenance and Support Revenue Q1
Q2 Q3 Q4 FY Q1 Q2
Q3 Q4 FY 2015 2015 2015
2015 2015 2016 2016 2016
2016 2016 GAAP Revenue $ 78.2 $ 76.1 $ 80.9 $ 80.2 $
315.4 $ 79.9 $ 79.9 $ 82.5 $ 82.0 $ 324.3 Adjustment 0.6
0.5 0.4 0.3 1.8 0.2 0.1
0.0 0.0 0.4 Non-GAAP Revenue $ 78.8 $ 76.6 $
81.3 $ 80.6 $ 317.1 $ 80.2 $ 80.0 $ 82.5 $ 82.0 $ 324.7
Total Recurring Revenues Q1 Q2
Q3 Q4 FY Q1 Q2 Q3
Q4 FY 2015 2015 2015 2015
2015 2016 2016 2016 2016
2016 GAAP Revenues $ 308.9 $ 307.5 $ 323.6 $ 340.5 $ 1,280.5
$ 326.1 $ 339.6 $ 339.7 $ 352.1 $ 1,357.4 Adjustment 12.7
8.1 6.8 6.5 34.1 6.4 6.2
5.3 5.0 22.9 Non-GAAP Revenues $ 321.7 $ 315.6
$ 330.4 $ 347.0 $ 1,314.7 $ 332.5 $ 345.8 $ 345.0 $ 357.1 $ 1,380.3
Schedules may not add due to rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161117006279/en/
Nuance Communications, Inc.For InvestorsChristine
Marchuska, 781-565-5000christine.marchuska@nuance.comorFor
MediaRichard Mack, 781-565-5000richard.mack@nuance.com
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