Nuance Communications, Inc. (NASDAQ:NUAN) today announced
preliminary results for its first quarter of fiscal 2018 and
provided updates on executive leadership.
Strong Preliminary Q1 2018 ResultsBased on
preliminary financial data, Nuance expects fiscal first quarter
GAAP revenues to be between $500.0 million and $503.0 million and
non-GAAP revenues to be between $507.0 million and $510.0
million. The company expects fiscal first quarter GAAP
earnings per share to be between $0.15 and $0.18 and non-GAAP
earnings per share to be between $0.26 and $0.27, which includes
approximately a $0.27 and $0.02 per share benefit to GAAP and
non-GAAP earnings, respectively, for the estimated impact from new
U.S. federal tax legislation.
These GAAP and non-GAAP revenue and earnings per share
preliminary ranges are above the guidance ranges previously
provided on November 28, 2017, for fiscal first quarter
results. The Company’s expected outperformance against
previous non-GAAP guidance is primarily due to revenue strength
across Healthcare, Automotive and Imaging. Additionally, net
new bookings in the quarter are expected to be strong, up
approximately 10% year-over-year and owed to continued growth in
Automotive, Enterprise, and Dragon Medical. Cash flow from
operations is expected to be approximately $85.0 million.
These preliminary expectations are subject to revision until the
Company reports final first quarter fiscal 2018 results on February
8, 2018. (Please see today’s separate advisory for details.)
Imaging Division Leadership, Al Monserrat Named EVP and
GMAl Monserrat, an accomplished technology veteran and the
former CEO of RES Software, has joined the Company as an executive
vice president and the general manager of its Imaging business. Mr.
Monserrat has more than 25 years of broad technology and software
experience, and a proven track record for developing successful
strategies that result in expanded market opportunities, improved
go-to-market execution, and accelerated revenue growth. Prior to
serving as the CEO of RES, a leader in automated and secure digital
workspaces that was recently acquired by Ivanti, Mr. Monserrat held
numerous leadership roles at Citrix, including Senior Vice
President of Global Sales and Services, Vice President of Global
Channels, Sales Operations, and Emerging Products; and Vice
President and General Manager of Citrix’s North American
business.
“With years of technology and software experience, Al has
successfully led the strategic transformation of numerous
businesses, resulting in accelerated growth, market expansion, and
improved go-to-market capabilities. We are pleased to welcome
Al to our team as we mark this new chapter for our Imaging
business,” said Paul Ricci, chairman and CEO, Nuance.
Mobile Division Reorganization and Leadership
UpdateNuance announced that it is reorganizing its Mobile
division to improve efficiency and better serve customers.
Nuance’s Mobile Communications Service Provider (CSP) business will
be merged into the Enterprise division, reporting to Robert
Weideman, EVP and GM, and forming a consolidated focus on the
Company’s business in the telecommunications market. And, as
previously announced, the Company is moving forward with
establishing its Automotive business as a separate, reportable
segment and business line. In addition, Bob Schassler,
Executive Vice President and General Manager, Mobile division, has
resigned from the Company.
CEO Succession PlanningThe Nuance Board of
Directors confirmed that Paul Ricci will retire as CEO on or before
March 31, 2018. The Search Committee has advanced its
selection process and intends to appoint a new CEO on or before
that date. In light of Mr. Ricci’s expected retirement as CEO, the
Board will not nominate him for election as a director at the 2018
annual meeting of shareholders.
About Nuance Communications, Inc.Nuance
Communications, Inc. 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.
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: finalizing our quarterly accounting close,
including completion of account reconciliations and reviews by
financial management and final analysis of the impact of the
recently enacted Tax Cut and Jobs Act of 2017; finalizing our
calculation of weighted average shares outstanding; finalizing the
preparation of our statement of cash flows; finalizing the
preparation, valuation procedures and financial management review
of our net new bookings during the quarter; our ability to finalize
the selection process for, and negotiating mutually acceptable
employment terms with, a successor CEO within the stated timeframe;
and, the other factors described in our annual report on Form 10-K
for the fiscal year ended September 30, 2017 and our other
subsequent reports 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.
Definitions of Bookings and Net New
BookingsCertain supplemental data provided in the
announcement are based upon internal Nuance definitions that are
important for the reader to understand.
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 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 months ended December 31, 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, which include revenue related to acquisitions,
primarily TouchCommerce, NSI and mCarbon, for the three months
ended December 31, 2017, 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 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 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. 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.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.
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.
Contact Information
Richard MackNuance Communications, Inc.Tel: 781-565-5000Email:
richard.mack@nuance.com
Financial Table Follows
|
Nuance Communications, Inc. |
Reconciliation of Supplemental Financial
Information |
GAAP and non-GAAP Revenue and Net Income per Share
Guidance |
(in thousands, except per share amounts) |
Unaudited |
|
|
Three months endedDecember 31,
2017 |
|
Low |
|
High |
GAAP
revenue |
$ |
500,000 |
|
|
$ |
503,000 |
|
Acquisition-related adjustment - revenue |
7,000 |
|
|
7,000 |
|
Non-GAAP
revenue |
$ |
507,000 |
|
|
$ |
510,000 |
|
|
|
|
|
GAAP net income
per share |
$ |
0.15 |
|
|
$ |
0.18 |
|
Acquisition-related adjustment - revenue |
0.02 |
|
|
0.02 |
|
Acquisition-related costs, net |
0.02 |
|
|
0.02 |
|
Cost of
revenue from amortization of intangible assets |
0.05 |
|
|
0.05 |
|
Amortization of intangible assets |
0.08 |
|
|
0.08 |
|
Non-cash
stock-based compensation |
0.13 |
|
|
0.13 |
|
Non-cash
interest expense |
0.05 |
|
|
0.05 |
|
Adjustment to income tax expense1 |
(0.33 |
) |
|
(0.35 |
) |
Restructuring and other charges, net |
0.05 |
|
|
0.05 |
|
Other |
0.04 |
|
|
0.04 |
|
Non-GAAP net
income per share |
$ |
0.26 |
|
|
$ |
0.27 |
|
|
|
|
|
Shares used in
computing GAAP and non-GAAP net income per share: |
|
|
|
Weighted
average common shares: basic |
292,000 |
|
|
292,000 |
|
Weighted
average common shares: diluted |
296,000 |
|
|
296,000 |
|
|
|
|
|
|
|
1 In December 2017, Congress passed the
Tax Cut and Jobs Act of 2017 (the “Act”). We are currently
assessing the tax accounting resulting from the Act and expect this
new legislation to have a material impact on our GAAP tax
results. We have currently estimated our GAAP tax provision
for the first quarter of fiscal 2018 to be benefited by
approximately $80 million driven by a revaluation of certain
deferred tax assets and liabilities using the updated federal
tax rates, offset in part by a one-time repatriation tax on non-US
cash and earnings. Our evaluation of the tax accounting
remains in process and this benefit may be subject to material
change as we finalize our results for the first quarter of fiscal
2018.
Nuance Communications (NASDAQ:NUAN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Nuance Communications (NASDAQ:NUAN)
Historical Stock Chart
From Apr 2023 to Apr 2024