NUANCE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
September 30,
2020
|
|
|
(Unaudited)
|
|
|
|
|
(In thousands, except per
share amounts)
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
Cash and cash equivalents
|
$
|
235,757
|
|
|
$
|
301,233
|
|
|
Marketable securities
|
65,157
|
|
|
71,114
|
|
|
Accounts receivable, less allowances for doubtful accounts of $9,952 and $8,649
|
171,008
|
|
|
175,583
|
|
|
Prepaid expenses and other current assets
|
211,402
|
|
|
152,563
|
|
|
Current assets, discontinued operations
|
—
|
|
|
35,492
|
|
|
Total current assets
|
683,324
|
|
|
735,985
|
|
|
|
|
|
|
|
Land, building and equipment, net
|
145,687
|
|
|
137,299
|
|
|
Goodwill
|
2,157,500
|
|
|
2,120,495
|
|
|
Intangible assets, net
|
141,396
|
|
|
167,270
|
|
|
Right-of-use assets
|
89,162
|
|
|
104,839
|
|
|
Other assets
|
250,458
|
|
|
248,414
|
|
|
Long-term assets, discontinued operations
|
—
|
|
|
79,030
|
|
|
Total assets
|
$
|
3,467,527
|
|
|
$
|
3,593,332
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
Current liabilities:
|
|
|
Current portion of long-term debt
|
$
|
470,863
|
|
|
$
|
432,209
|
|
|
Contingent and deferred acquisition payments
|
1,552
|
|
|
4,224
|
|
|
Accounts payable
|
85,765
|
|
|
71,833
|
|
|
Accrued expenses and other current liabilities
|
187,394
|
|
|
199,254
|
|
|
Deferred revenue
|
248,075
|
|
|
249,484
|
|
|
Current liabilities, discontinued operations
|
—
|
|
|
29,138
|
|
|
Total current liabilities
|
993,649
|
|
|
986,142
|
|
|
Long-term debt
|
494,665
|
|
|
1,104,464
|
|
|
Deferred revenue, net of current portion
|
105,534
|
|
|
98,696
|
|
|
Deferred tax liabilities
|
7,885
|
|
|
70,116
|
|
|
Operating lease liabilities
|
89,936
|
|
|
103,996
|
|
|
Other liabilities
|
80,903
|
|
|
64,597
|
|
|
Long-term liabilities, discontinued operations
|
—
|
|
|
21,388
|
|
|
Total liabilities
|
1,772,572
|
|
|
2,449,399
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 16)
|
|
|
|
|
|
|
|
|
|
Mezzanine Equity
|
55,462
|
|
|
—
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
Common stock, $0.001 par value per share; 560,000 shares authorized; 315,496 and 286,703 shares issued and 311,745 and 282,952 shares outstanding, respectively
|
315
|
|
|
287
|
|
|
Additional paid-in capital
|
2,046,523
|
|
|
1,550,568
|
|
|
Treasury stock, at cost (3,751 shares)
|
(16,788)
|
|
|
(16,788)
|
|
|
Accumulated other comprehensive loss
|
(103,335)
|
|
|
(117,918)
|
|
|
Accumulated deficit
|
(287,222)
|
|
|
(272,216)
|
|
|
Total stockholders’ equity
|
1,639,493
|
|
|
1,143,933
|
|
|
Total liabilities and stockholders’ equity
|
$
|
3,467,527
|
|
|
$
|
3,593,332
|
|
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the three months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Total Stockholders' Equity
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
(In thousands)
|
|
Balance at March 31, 2021
|
289,248
|
|
|
$
|
289
|
|
|
$
|
1,507,519
|
|
|
(3,751)
|
|
|
$
|
(16,788)
|
|
|
$
|
(108,213)
|
|
|
$
|
(260,955)
|
|
|
$
|
1,121,852
|
|
|
Issuance of common stock under employee stock plans
|
1,130
|
|
|
1
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Cancellation of restricted stock, and repurchase of common stock at cost for employee tax withholding
|
(486)
|
|
|
—
|
|
|
(25,762)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,762)
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
20,906
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,906
|
|
|
Equity portion of convertible debt puttable
|
—
|
|
|
—
|
|
|
45,871
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,871
|
|
|
Redemption of Convertible Notes(a)
|
25,604
|
|
|
25
|
|
|
497,990
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
498,015
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,267)
|
|
|
(26,267)
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,878
|
|
|
—
|
|
|
4,878
|
|
|
Balance on June 30, 2021
|
315,496
|
|
|
$
|
315
|
|
|
$
|
2,046,523
|
|
|
(3,751)
|
|
|
$
|
(16,788)
|
|
|
$
|
(103,335)
|
|
|
$
|
(287,222)
|
|
|
$
|
1,639,493
|
|
For the nine months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Total Stockholders' Equity
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
(In thousands)
|
|
Balance at September 30, 2020
|
286,703
|
|
|
$
|
287
|
|
|
$
|
1,550,568
|
|
|
(3,751)
|
|
|
$
|
(16,788)
|
|
|
$
|
(117,918)
|
|
|
$
|
(272,216)
|
|
|
$
|
1,143,933
|
|
|
Issuance of common stock under employee stock plans
|
4,892
|
|
|
5
|
|
|
8,363
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,368
|
|
|
Cancellation of restricted stock, and repurchase of common stock at cost for employee tax withholding
|
(1,703)
|
|
|
(2)
|
|
|
(72,535)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(72,537)
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
117,599
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,599
|
|
|
Equity portion of convertible debt puttable
|
—
|
|
|
—
|
|
|
(55,462)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55,462)
|
|
|
Redemption of Convertible Notes(a)
|
25,604
|
|
|
25
|
|
|
497,990
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
498,015
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,006)
|
|
|
(15,006)
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,583
|
|
|
—
|
|
|
14,583
|
|
|
Balance on June 30, 2021
|
315,496
|
|
|
$
|
315
|
|
|
$
|
2,046,523
|
|
|
(3,751)
|
|
|
$
|
(16,788)
|
|
|
$
|
(103,335)
|
|
|
$
|
(287,222)
|
|
|
$
|
1,639,493
|
|
NUANCE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
For the three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Noncontrolling Interests
|
|
Total Stockholders' Equity
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
(In thousands)
|
|
Balance at March 31, 2020
|
284,832
|
|
|
$
|
285
|
|
|
$
|
1,520,734
|
|
|
3,751
|
|
|
$
|
(16,788)
|
|
|
$
|
(130,077)
|
|
|
$
|
(264,933)
|
|
|
$
|
—
|
|
|
$
|
1,109,221
|
|
|
Issuance of common stock under employee stock plans
|
474
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
Cancellation of restricted stock, and repurchase of common stock at cost for employee tax withholding
|
(181)
|
|
|
—
|
|
|
(3,510)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,510)
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
20,551
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,662
|
|
|
—
|
|
|
16,662
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,395
|
|
|
—
|
|
|
—
|
|
|
7,395
|
|
|
Balance on June 30, 2020
|
285,125
|
|
|
$
|
285
|
|
|
$
|
1,537,785
|
|
|
3,751
|
|
|
$
|
(16,788)
|
|
|
$
|
(122,682)
|
|
|
$
|
(248,271)
|
|
|
$
|
—
|
|
|
$
|
1,150,329
|
|
For the nine months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional Paid-In Capital
|
|
Treasury Stock
|
|
Accumulated Other Comprehensive Loss
|
|
Accumulated Deficit
|
|
Noncontrolling Interests
|
|
Total Stockholders' Equity
|
|
|
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
Balance at September 30, 2019
|
289,680
|
|
|
$
|
290
|
|
|
$
|
2,597,889
|
|
|
3,751
|
|
|
$
|
(16,788)
|
|
|
$
|
(132,773)
|
|
|
$
|
(293,612)
|
|
|
$
|
18,144
|
|
|
$
|
2,173,150
|
|
|
|
|
Cerence spin-off
|
—
|
|
|
—
|
|
|
(922,567)
|
|
|
—
|
|
|
—
|
|
|
12,331
|
|
|
—
|
|
|
(18,144)
|
|
|
(928,380)
|
|
|
|
|
Issuance of common stock under employee stock plans
|
7,194
|
|
|
7
|
|
|
7,263
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,270
|
|
|
|
|
Cancellation of restricted stock, and repurchase of common stock at cost for employee tax withholding
|
(2,292)
|
|
|
(2)
|
|
|
(40,115)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40,117)
|
|
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
110,644
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
110,644
|
|
|
|
|
Repurchase and retirement of common stock
|
(9,457)
|
|
|
(10)
|
|
|
(169,208)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(169,218)
|
|
|
|
|
Repurchases of convertible notes (a)
|
—
|
|
|
—
|
|
|
(46,121)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(46,121)
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45,341
|
|
|
—
|
|
|
45,341
|
|
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,240)
|
|
|
—
|
|
|
—
|
|
|
(2,240)
|
|
|
|
|
Balance on June 30, 2020
|
285,125
|
|
|
$
|
285
|
|
|
$
|
1,537,785
|
|
|
3,751
|
|
|
$
|
(16,788)
|
|
|
$
|
(122,682)
|
|
|
$
|
(248,271)
|
|
|
$
|
—
|
|
|
$
|
1,150,329
|
|
|
|
__________
(a)According to ASC 470-20, cash consideration paid to repurchase and retire our convertible notes was first allocated to debt component based on the actual fair value on the trading date, and the remaining consideration was allocated to additional paid-in-capital.
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
(Unaudited)
|
|
|
(In thousands)
|
|
Cash flows from operating activities:
|
|
|
|
|
Net (loss) income from continuing operations
|
$
|
(6,579)
|
|
|
$
|
19,402
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
Depreciation
|
24,538
|
|
|
22,352
|
|
|
Amortization
|
46,447
|
|
|
45,777
|
|
|
Stock-based compensation
|
104,436
|
|
|
95,023
|
|
|
Non-cash interest expense
|
33,487
|
|
|
37,269
|
|
|
Deferred tax benefit
|
(5,465)
|
|
|
(58,284)
|
|
|
Loss on extinguishment of debt
|
17,054
|
|
|
18,656
|
|
|
Other
|
5,503
|
|
|
3,853
|
|
|
Changes in operating assets and liabilities, excluding effects of acquisitions:
|
|
|
|
|
Accounts receivable
|
4,289
|
|
|
15,656
|
|
|
Prepaid expenses and other assets
|
(28,087)
|
|
|
3,213
|
|
|
Accounts payable
|
15,808
|
|
|
(13,626)
|
|
|
Accrued expenses and other liabilities
|
(17,020)
|
|
|
(80,532)
|
|
|
Deferred revenue
|
(6,091)
|
|
|
21,415
|
|
|
Net cash provided by operating activities - continuing operations
|
188,320
|
|
|
130,174
|
|
|
Net cash provided by operating activities - discontinued operations
|
9,141
|
|
|
43,539
|
|
|
Net cash provided by operating activities
|
197,461
|
|
|
173,713
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Capital expenditures
|
(44,806)
|
|
|
(45,550)
|
|
|
Proceeds from disposition of businesses, net of transaction fees
|
9,885
|
|
|
—
|
|
|
Purchases of marketable securities and other investments
|
(78,485)
|
|
|
(157,976)
|
|
|
Proceeds from sales and maturities of marketable securities and other investments
|
84,403
|
|
|
290,584
|
|
|
Payments for business and asset acquisitions, net of cash acquired
|
(45,425)
|
|
|
—
|
|
|
Other
|
878
|
|
|
1,374
|
|
|
Net cash (used in) provided by investing activities
|
(73,550)
|
|
|
88,432
|
|
|
Cash flows from financing activities:
|
|
|
|
|
Repurchase and redemption of debt
|
(121,787)
|
|
|
(513,642)
|
|
|
Net distribution from Cerence upon the spin-off
|
—
|
|
|
139,090
|
|
|
Payments for repurchase of common stock
|
—
|
|
|
(169,218)
|
|
|
Proceeds from issuance of common stock from employee stock plans
|
8,368
|
|
|
7,204
|
|
|
Proceeds from the revolving credit facility
|
—
|
|
|
230,000
|
|
|
Repayment of the revolving credit facility
|
—
|
|
|
(230,000)
|
|
|
Payments for taxes related to net share settlement of equity awards
|
(74,896)
|
|
|
(39,968)
|
|
|
Other financing activities
|
(4,623)
|
|
|
(2,840)
|
|
|
Net cash used in financing activities
|
(192,938)
|
|
|
(579,374)
|
|
|
Effects of exchange rate changes on cash and cash equivalents
|
3,551
|
|
|
(3,177)
|
|
|
Net decrease in cash and cash equivalents
|
(65,476)
|
|
|
(320,406)
|
|
|
Cash and cash equivalents at beginning of period
|
301,233
|
|
|
560,961
|
|
|
Cash and cash equivalents at end of period
|
$
|
235,757
|
|
|
$
|
240,555
|
|
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Presentation
Nuance Communications, Inc. ("we", "Nuance", "our", "us", or the "Company") is a pioneer and leader in conversational and cognitive artificial intelligence ("AI") innovations that bring intelligence to everyday work and life. Our solutions and technologies can understand, analyze and respond to human language to increase productivity and amplify human intelligence. Our solutions are used by businesses in the healthcare, financial services, telecommunications and travel industries, among others. We had three reportable segments as of June 30, 2021: Healthcare, Enterprise, and Other. See Note 18 for a description of each of these segments.
Although we believe the disclosures included herein are adequate to ensure that the condensed consolidated financial statements are fairly presented, certain information and footnote disclosures to the financial statements have been condensed or omitted in accordance with the rules and regulations of the SEC. Accordingly, the condensed consolidated financial statements and the footnotes included herein should be read in conjunction with the audited financial statements and the footnotes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year or any future period.
On April 11, 2021, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Microsoft Corporation ("Microsoft"). Subject to the terms and conditions of the Merger Agreement, Microsoft has agreed to acquire Nuance for $56.00 per share in an all-cash transaction. Pursuant to the Merger Agreement, a wholly-owned subsidiary of Microsoft will merge with and into Nuance ("the Merger") with Nuance surviving as a wholly-owned subsidiary of Microsoft. As a result of the Merger, we will cease to be a publicly traded company. We have agreed to various customary covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the effective time of the Merger. We do not believe these restrictions will prevent us from meeting our debt service obligations, ongoing costs of operations, working capital needs, or capital expenditure requirements. The transaction is currently intended to close by December 31, 2021. Consummation of the Merger is subject to certain conditions, including the satisfaction of certain regulatory approvals and other customary closing conditions.
For additional information related to the Merger Agreement, please refer to the definitive proxy statement previously filed with the SEC and other relevant materials in connection with the transaction that we will file with the SEC and which will contain important information about Nuance and the Merger.
As more fully described in Note 11, during the third quarter of fiscal year 2021, our common stock price exceeded 130% of the applicable conversion price for each of our convertible debentures for at least 20 trading days during the 30 consecutive trading days ending June 30, 2021. As a result, the holders of our 1.25% 2025 Debentures, 1.5% 2035 Debentures, and 1.0% 2035 Debentures have the right to convert all or any portion of their debentures between July 1, 2021 and September 30, 2021. Additionally, the holders of the 1.5% 2035 Debentures will have the right to redeem the notes in November 2021. All three convertible notes with a total net book value of $470.9 million were included within current liabilities as of June 30, 2021.
Should any holders elect to convert, the principal amount of the convertible debentures would be payable in cash, and any amount payable in excess of the principal amount would be paid in cash or shares of our common stock at our election. During the third quarter of fiscal year 2021, holders of our 1.5% 2035 Debentures exercised their right to convert $118.3 million notional amount for $118.3 million in cash and 3.5 million shares of common stock. Additionally, during the third quarter of fiscal year 2021, we induced the exchange of $457.0 million notional amount of our 1.0% 2035 Debentures for $5.0 million in cash and 18.9 million shares of common stock, and $64.9 million notional amount of our 1.5% 2035 Debentures for $0.5 million in cash and 3.2 million shares of common stock. As part of these redemptions, we transferred non-cash consideration in the form of shares of common stock valued at $1,002.2 million for the 1.0% 2035 Debentures and $358.8 million for the 1.5% 2035 Debentures. As of June 30, 2021, $219.5 million in aggregate principal amount of the 1.0% 2035 Debentures and $44.1 million in aggregate principal amount of the 1.5% 2035 Debentures remained outstanding.
Our convertible debentures are actively traded in the open market. The 1.25% 2025 Debentures trade at a price consistently in excess of their conversion values. Therefore, we believe that it is uneconomic, and thus unlikely, for the holders of the 1.25% 2025 Debentures to early exercise their conversion rights. In the event that holders of any of our debentures presented an amount for settlement that exceeded our then available sources of liquidity, we may need to obtain additional financing, which we believe would be available to us based upon our assessment of the prevailing market and business conditions and our experience of successful capital raising activities.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2. Summary of Significant Accounting Policies
Recently Adopted Accounting Standards
Internal-Use Software
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15, "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract", which became effective for us during the first quarter of fiscal year 2021. The guidance requires that implementation costs related to a hosting arrangement that is a service contract be capitalized and amortized over the term of the hosting arrangement, starting when the module or component of the hosting arrangement is ready for its intended use. The guidance is applied retrospectively to each period presented. The implementation did not have a material impact on our condensed consolidated financial statements.
Current Expected Credit Losses
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which became effective for us during the first quarter of fiscal year 2021. The guidance requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financial assets using a forward-looking approach, taking into consideration historical experience, current conditions, and supportable forecasts that impact collectibility. The implementation did not have a material impact on our condensed consolidated financial statements.
Issued Accounting Standards Not Yet Adopted
From time to time, new accounting pronouncements are issued by the FASB and are adopted by us as of the specified effective dates. Unless otherwise discussed, such pronouncements did not have or will not have a significant impact on our consolidated financial position, results of operations or cash flows, or do not apply to our operations.
Convertible Notes
In August 2020, the FASB issued ASU 2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity," which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The new guidance eliminates two of the three models in Accounting Standards Codification ("ASC") 470-202 that require separating embedded conversion features from convertible instruments. As a result, only conversion features accounted for under the substantial premium model in ASC 470-20 and those that require bifurcation in accordance with ASC 815-153 will be accounted for separately. For contracts in an entity’s own equity, the new guidance eliminates some of the requirements in ASC 815-404 for equity classification. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation and requires enhanced disclosures about the terms of convertible instruments and contracts in an entity’s own equity. The guidance will be effective for annual periods beginning after December 15, 2021, and interim periods therein. Early adoption is permitted for all entities for fiscal periods beginning after December 15, 2020, including interim periods within the same fiscal year. Entities are allowed to adopt the guidance using either the modified or full retrospective approach. We are currently assessing the provisions of the guidance and the impact on our condensed consolidated financial statements.
3. Revenue Recognition
We derive revenue from the following sources: (1) hosting services, (2) software licenses, including royalties, (3) maintenance and support ("M&S"), (4) professional services, and (5) sale of hardware. Revenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction including mandatory government charges that are passed through to our customers. We account for a contract when both parties have approved and committed to the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and the collectibility of the consideration is probable.
The majority of our arrangements with customers typically contain multiple products and services. We account for individual products and services separately if they are distinct, that is, if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We recognize revenue after applying the following five steps:
•identification of the contract, or contracts, with a customer;
•identification of the performance obligations in the contract, including whether they are distinct within the context of the contract;
•determination of the transaction price, including the constraint on variable consideration;
•allocation of the transaction price to the performance obligations in the contract; and
•recognition of revenue when, or as, performance obligations are satisfied.
We allocate the transaction price of the arrangement based on the relative estimated standalone selling price ("SSP") of each distinct performance obligation. In determining SSP, we maximize observable inputs and consider a number of data points, including:
•the pricing of standalone sales (in the instances where available);
•the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis;
•contractually stated prices for deliverables that are intended to be sold on a standalone basis; and
•other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type.
We only include estimated amounts of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. We reduce transaction prices for estimated returns and other allowances that represent variable consideration under ASU No. 2014-09, "Revenue from Contracts with Customers: Topic 606" ("ASC 606"), which we estimate based on historical return experience and other relevant factors and record a reduction to revenue and accounts receivable. Other forms of contingent revenue or variable consideration are infrequent.
Revenue is recognized when control of these products and services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We assess the timing of the transfer of products or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. In accordance with the practical expedient in ASC 606-10-32-18, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of financing to either the customer or us, no financing component is deemed to exist. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to receive or provide financing from or to customers. We do not consider set-up fees nor other upfront fees paid by our customers to represent a financing component.
Certain products are sold through distributors or resellers. Certain distributors and resellers have been granted right of return and selling incentives which are accounted for as variable consideration when estimating the amount of revenue to be recognized. Returns and credits are estimated at the contract inception and updated at the end of each reporting period as additional information becomes available. In accordance with the practical expedient in ASC 606-10-10-4, we apply a portfolio approach to estimate the variable consideration associated with this group of customers.
Reimbursements for out-of-pocket costs generally include, but are not limited to, costs related to transportation, lodging and meals. Revenue from reimbursed out-of-pocket costs is accounted for as variable consideration.
Shipping and handling activities are not considered a contract performance obligation. We record shipping and handling costs billed to customers as revenue with offsetting costs recorded as cost of revenue.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Performance Obligations
Hosting
Hosting services, which allow our customers to use the hosted software over the contract period without taking possession of the software, are provided on a usage basis as consumed or on a fixed fee subscription basis. Our hosting contract terms generally range from one to five years.
As each day of providing services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, we have determined that our hosting services arrangements are a single performance obligation comprised of a series of distinct services. These services include variable consideration, which is typically a function of usage. We recognize revenue as each distinct service period is performed (i.e., recognized as incurred).
Subscription-based revenue represents a single promise to stand-ready to provide access to our hosting services. Revenue is recognized over time on a ratable basis over the hosting contract term, which generally ranges from one to five years.
Software Licenses
On-premise software licenses sold with non-distinct professional services to customize and/or integrate the underlying software are accounted for as a combined performance obligation. Revenue from the combined performance obligation is recognized over time based upon the progress towards completion of the project, which is measured based on the labor hours already incurred to date as compared to the total estimated labor hours.
Revenue from distinct on-premise software licenses, which do not require professional services to customize and/or integrate the software license, is recognized at the point in time when the software is made available to the customer and control is transferred.
Revenue from software licenses sold on a royalty basis, where the license of intellectual property is the predominant item to which the royalty relates, is recognized in the period the usage occurs in accordance with the practical expedient in ASC 606-10-55-65(A).
Maintenance and Support
Our M&S contracts generally include telephone support and the right to receive unspecified upgrades and updates on a when-and-if available basis. M&S revenue is recognized over time on a ratable basis over the contract period because we transfer control evenly by providing a stand-ready service.
Professional Services
Revenue from distinct professional services, including training, is recognized over time based upon the progress towards completion of the project, which is measured based on the labor hours already incurred to date as compared to the total estimated labor hours.
Hardware
Hardware revenue is recognized at the point in time when control is transferred to the customer, which is typically upon delivery.
Significant Judgments
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Our license contracts often include professional services to customize and/or integrate the licenses into the customer’s environment. Judgment is required to determine whether the license is considered distinct and accounted for separately, or not distinct and accounted for together with professional services.
Judgments are required to determine the SSP for each distinct performance obligation. When SSP is directly observable, we estimate SSP based upon the historical transaction prices, adjusted for geographic considerations, customer classes, and customer relationship profiles. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs. We may have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
information such as the size of the customer and geographic region in determining SSP. Determining SSP for performance obligations which we never sell separately also requires significant judgment. In estimating the SSP for such performance obligations, we consider the likely price that would have resulted from established pricing practices had the deliverable been offered separately and the prices a customer would likely be willing to pay.
From time to time, we may enter into arrangements with third party suppliers to resell products or services. In such cases, we evaluate whether we are the principal (i.e. report revenues on a gross basis) or agent (i.e. report revenues on a net basis). In doing so, we first evaluate whether we control the good or service before it is transferred to the customer. If we control the good or service before it is transferred to the customer, we are the principal; if not, we are the agent. Generally, we control a promised good or service before transferring that good or service to the customer and act as the principal to the transaction. Determining whether we control the good or service before it is transferred to the customer may require judgment.
Disaggregated Revenue
We disaggregate revenue from contracts with customers by reportable segment and products and services as this presentation depicts the timing, risks and uncertainty of our revenue streams, which is also in line with how we manage our businesses, assess performance, and determine management compensation. Our disaggregated revenue from continuing operations is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Hosting and professional services
|
|
Product and licensing
|
|
Maintenance and support
|
|
Total
|
|
Hosting and professional services
|
|
Product and licensing
|
|
Maintenance and support
|
|
Total
|
|
Healthcare
|
$
|
124,108
|
|
|
$
|
39,508
|
|
|
$
|
31,583
|
|
|
$
|
195,199
|
|
|
$
|
95,120
|
|
|
$
|
30,405
|
|
|
$
|
34,560
|
|
|
$
|
160,085
|
|
|
Enterprise
|
80,167
|
|
|
26,455
|
|
|
30,484
|
|
|
137,106
|
|
|
83,859
|
|
|
16,746
|
|
|
29,787
|
|
|
130,392
|
|
|
Other
|
3,944
|
|
|
318
|
|
|
15
|
|
|
4,277
|
|
|
6,576
|
|
|
1,555
|
|
|
12
|
|
|
8,143
|
|
|
Total revenues
|
$
|
208,219
|
|
|
$
|
66,281
|
|
|
$
|
62,082
|
|
|
$
|
336,582
|
|
|
$
|
185,555
|
|
|
$
|
48,706
|
|
|
$
|
64,359
|
|
|
$
|
298,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Hosting and professional services
|
|
Product and licensing
|
|
Maintenance and support
|
|
Total
|
|
Hosting and professional services
|
|
Product and licensing
|
|
Maintenance and support
|
|
Total
|
|
Healthcare
|
$
|
352,506
|
|
|
$
|
155,616
|
|
|
$
|
98,301
|
|
|
$
|
606,423
|
|
|
$
|
277,193
|
|
|
$
|
165,463
|
|
|
$
|
102,221
|
|
|
$
|
544,877
|
|
|
Enterprise
|
234,648
|
|
|
80,798
|
|
|
90,809
|
|
|
406,255
|
|
|
242,334
|
|
|
74,741
|
|
|
88,934
|
|
|
406,009
|
|
|
Other
|
14,878
|
|
|
1,714
|
|
|
42
|
|
|
16,634
|
|
|
22,096
|
|
|
3,080
|
|
|
(9)
|
|
|
25,167
|
|
|
Total revenues
|
$
|
602,032
|
|
|
$
|
238,128
|
|
|
$
|
189,152
|
|
|
$
|
1,029,312
|
|
|
$
|
541,623
|
|
|
$
|
243,284
|
|
|
$
|
191,146
|
|
|
$
|
976,053
|
|
Hardware revenue comprised approximately $6.4 million and $20.1 million of total product and licensing revenue for the three and nine months ended June 30, 2021, respectively, and $5.7 million and $20.5 million of total product and licensing revenue for the three and nine months ended June 30, 2020, respectively.
Contract Acquisition Costs
We are required to capitalize certain contract acquisition costs under ASC 606. The capitalized costs primarily relate to paid commissions and other direct, incremental costs to acquire customer contracts. In accordance with the practical expedient in ASC 606-10-10-4, we apply a portfolio approach to estimate contract acquisition costs for groups of customer contracts. We elect to apply the practical expedient in ASC 340-40-25-4 and will expense contract acquisition costs as incurred where the expected period of benefit is one year or less. Sales commissions paid on renewal maintenance and support are not commensurate with sales commissions paid on the initial maintenance and support contract. Contract acquisition costs are deferred and amortized on a straight-line basis over the period of benefit, which we have estimated to be between one and five years. The period of benefit was determined based on an average customer contract term, expected contract renewals, changes in technology and our ability to retain customers including canceled contracts. Contract acquisition costs are classified as current or noncurrent assets based on when the expense will be recognized. The current and noncurrent portions of contract acquisition costs are included in Prepaid expenses and other current assets, and Other assets, respectively. As of June 30, 2021, we had $36.5 million of current contract acquisition costs from continuing operations and $72.0 million of noncurrent contract
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
acquisition costs from continuing operations. As of September 30, 2020, we had $20.9 million of current contract acquisition costs from continuing operations and $51.6 million of noncurrent contract acquisition costs from continuing operations. Commission expense is primarily included in sales and marketing expense on the consolidated statements of operations. We had amortization expense related to contract acquisition costs from continuing operations of $5.4 million and $14.8 million for the three and nine months ended June 30, 2021, respectively, and $4.3 million and $11.9 million for the three and nine months ended June 30, 2020, respectively. There was no impairment related to commission costs capitalized.
Capitalized Contract Costs
We capitalize incremental costs incurred to fulfill our contracts that (1) relate directly to the contract, (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (3) are expected to be recovered through revenue generated under the contract. Our capitalized costs consist primarily of setup costs, such as costs to stand-up, customize, and develop applications for each customer. These costs are incurred to satisfy our stand-ready obligation to provide access to our connected offerings. The contract costs are expensed to cost of revenue as we satisfy our stand-ready obligation over the contract term, which we estimate to be between one and five years. The contract term estimation was determined based on an average customer contract term, expected contract renewals, changes in technology, and our ability to retain customers including canceled contracts. We classify capitalized contract costs as current or noncurrent based on the timing of when we expect to recognize the expense. The current and noncurrent portions of capitalized contract fulfillment costs are included in Prepaid expenses and other current assets, and Other assets, respectively. As of June 30, 2021, we had $23.7 million of short-term contract costs from continuing operations included with Prepaid expenses and other current assets and $34.5 million of long-term costs from continuing operations included within Other assets. As of September 30, 2020, we had $18.0 million of short-term contract costs from continuing operations included with Prepaid expenses and other current assets and $30.7 million of long-term costs from continuing operations included within Other assets.
Trade Accounts Receivable and Contract Balances
We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e. only the passage of time is required before payment is due). We present such receivables in Accounts receivable, net in our consolidated balance sheets at their net estimated realizable value. We maintain an allowance for doubtful accounts to provide for the estimated amount of receivables that may not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and other applicable factors.
Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
Contract assets include unbilled amounts from long-term contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not solely subject to the passage of time. The current and noncurrent portions of contract assets are included in Prepaid expenses and other current assets, and Other assets. As of June 30, 2021, we had $75.6 million of current contract assets from continuing operations and $84.2 million of noncurrent contract assets from continuing operations. As of September 30, 2020, we had $48.7 million of current contract assets from continuing operations and $107.4 million of noncurrent contract assets from continuing operations. The table below shows significant changes in contract assets of continuing operations (dollars in thousands):
|
|
|
|
|
|
|
|
|
Contract assets
|
|
Balance as of September 30, 2020
|
$
|
156,142
|
|
|
Revenues recognized but not billed
|
304,916
|
|
|
Amounts reclassified to accounts receivable
|
(301,285)
|
|
|
Balance at June 30, 2021
|
$
|
159,773
|
|
Our contract liabilities, or Deferred revenue, consist of advance payments and billings in excess of revenues recognized. We classify Deferred revenue as current or noncurrent based on when we expect to recognize the revenues. As of June 30, 2021, we had $353.6 million of Deferred revenue. The table below shows significant changes in Deferred revenue of continuing operations (dollars in thousands):
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
Balance as of September 30, 2020
|
$
|
348,180
|
|
|
Amounts bill but not recognized
|
591,493
|
|
|
Revenue recognized
|
(586,064)
|
|
|
Balance at June 30, 2021
|
$
|
353,609
|
|
Remaining Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2021 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within One Year
|
|
Two to Four Years
|
|
Greater than Four Years
|
|
Total
|
|
Total revenue
|
$
|
731,514
|
|
|
$
|
953,956
|
|
|
$
|
34,927
|
|
|
$
|
1,720,397
|
|
The table above includes fixed backlogs and does not include variable backlog derived from contingent usage-based activities, such as royalties and usage-based hosting revenue.
4. Disposition of Businesses
Disposition of Our Medical Transcription and EHR Implementation businesses
On November 17, 2020, we entered into a definitive agreement (the “Agreement”) to sell our medical transcription and electronic healthcare record ("EHR") implementation businesses (the "Business") to Assured Healthcare Partners and Aeries Technology Group (together, the “Buyer”). Pursuant to the Agreement, we sold and transferred, and the Buyer purchased and acquired, (a) the shares of certain subsidiaries through which we operate a portion of the Business and (b) certain assets used in or related to the Business; and the Buyer assumed certain liabilities related to such assets of the Business, subject to certain exclusions and indemnities as set forth in the Agreement.
On March 1, 2021, we completed the sale of the Business and received approximately $29.8 million in cash, subject to post-closing finalization of the adjustments set forth in the Agreement. As a result, we recorded a loss of $12.5 million, which is included within net income (loss) from discontinued operations. There are a number of working capital and other adjustments under the Agreement and related ancillary agreements. We do not believe that post-closing working capital adjustments under the Agreement, if any, will have a material impact on our results of operations.
For all periods presented, the Businesses' results of operations have been included within discontinued operations in our condensed consolidated financial statements.
Spin-off of Automotive
On October 1, 2019, we completed the spin-off of our Automotive business as an independent public company, Cerence, and a pro rata and tax-free distribution to our stockholders of all of the outstanding shares of Cerence owned by Nuance on October 1, 2019. The distribution was made in the amount of one share of Cerence common stock for every eight shares of Nuance common stock owned by Nuance’s stockholders of record as of 5:00 p.m. Eastern Time on September 17, 2019.
In connection with the spin-off, on September 30, 2019, we sold 1.8% of our equity interest in Cerence to a non-affiliated third party for a total cash consideration of $9.8 million. The difference between the consideration received and the carrying amount of the non-controlling interest was recognized in additional paid-in capital, which was subsequently derecognized as part of the spin-off transaction. Effective as of October 1, 2019, for all periods presented, the results of operations of our former Automotive business have been included within discontinued operations.
For the nine months ended June 30, 2020, we incurred cash payments of $13.3 million related to the separation and spin-off of our Automotive business, which have been presented as operating cash flows from discontinued operations.
The historical results of operations of Automotive have been included within discontinued operations in our condensed consolidated financial statements.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the results of the discontinued operations (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Medical Transcription and EHR Implementation
|
|
Medical Transcription and EHR Implementation
|
|
Major line items constituting net income of discontinued operations:
|
|
|
|
|
Revenue
|
$
|
—
|
|
|
$
|
39,778
|
|
|
Cost of revenue
|
—
|
|
|
23,882
|
|
|
Research and development
|
—
|
|
|
1,316
|
|
|
Sales and marketing
|
—
|
|
|
652
|
|
|
General and administrative
|
—
|
|
|
67
|
|
|
Amortization of intangible assets
|
—
|
|
|
3,291
|
|
|
|
|
|
|
|
Restructuring and other charges, net
|
—
|
|
|
49
|
|
|
|
|
|
|
|
Income from discontinued operations before income taxes
|
—
|
|
|
10,521
|
|
|
Benefit for income taxes
|
—
|
|
|
(3,880)
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
$
|
—
|
|
|
$
|
14,401
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
Depreciation
|
$
|
—
|
|
|
$
|
1,617
|
|
|
Amortization
|
$
|
—
|
|
|
$
|
3,348
|
|
|
Stock compensation
|
$
|
—
|
|
|
$
|
648
|
|
|
Capital expenditures
|
$
|
—
|
|
|
$
|
967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
Medical Transcription and EHR Implementation
|
|
Medical Transcription and EHR Implementation
|
|
Automotive
|
|
Total
|
|
|
|
|
|
Major line items constituting net (loss) income of discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
81,071
|
|
|
$
|
149,915
|
|
|
$
|
—
|
|
|
$
|
149,915
|
|
|
|
|
|
|
Cost of revenue
|
54,834
|
|
|
91,601
|
|
|
—
|
|
|
91,601
|
|
|
|
|
|
|
Research and development
|
2,535
|
|
|
5,082
|
|
|
—
|
|
|
5,082
|
|
|
|
|
|
|
Sales and marketing
|
1,964
|
|
|
2,198
|
|
|
—
|
|
|
2,198
|
|
|
|
|
|
|
General and administrative
|
66
|
|
|
399
|
|
|
—
|
|
|
399
|
|
|
|
|
|
|
Amortization of intangible assets
|
4,073
|
|
|
9,942
|
|
|
—
|
|
|
9,942
|
|
|
|
|
|
|
Acquisition-related costs, net
|
—
|
|
|
(51)
|
|
|
—
|
|
|
(51)
|
|
|
|
|
|
|
Restructuring and other charges, net
|
8,847
|
|
|
202
|
|
|
7,386
|
|
|
7,588
|
|
|
|
|
|
|
Income (loss) from discontinued operations before income taxes
|
8,752
|
|
|
40,542
|
|
|
(7,386)
|
|
|
33,156
|
|
|
|
|
|
|
Provision (benefit) for income taxes
|
4,635
|
|
|
8,411
|
|
|
(1,194)
|
|
|
7,217
|
|
|
|
|
|
|
Loss on disposition
|
(12,544)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
Net (loss) income from discontinued operations
|
$
|
(8,427)
|
|
|
$
|
32,131
|
|
|
$
|
(6,192)
|
|
|
$
|
25,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
$
|
1,802
|
|
|
$
|
5,638
|
|
|
$
|
—
|
|
|
$
|
5,638
|
|
|
|
|
|
|
Amortization
|
$
|
4,073
|
|
|
$
|
10,116
|
|
|
$
|
—
|
|
|
$
|
10,116
|
|
|
|
|
|
|
Stock compensation
|
$
|
1,436
|
|
|
$
|
3,007
|
|
|
$
|
—
|
|
|
$
|
3,007
|
|
|
|
|
|
|
Capital expenditures
|
$
|
57
|
|
|
$
|
1,275
|
|
|
$
|
—
|
|
|
$
|
1,275
|
|
|
|
|
|
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the assets and liabilities of our Medical Transcription and EHR Implementation Businesses included within discontinued operations. (dollars in thousands):
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Major classes of assets of discontinued operations:
|
|
|
Accounts receivable, net
|
$
|
24,993
|
|
|
Prepaid expenses and other current assets
|
10,499
|
|
|
Land, building and equipment, net
|
6,129
|
|
|
Goodwill
|
13,217
|
|
|
Intangible assets, net
|
46,214
|
|
|
Right-of-use assets
|
5,437
|
|
|
Other noncurrent assets
|
8,033
|
|
|
Total assets
|
$
|
114,522
|
|
|
|
|
|
Major classes of liabilities of discontinued operations:
|
|
|
Accounts payable
|
$
|
3,289
|
|
|
Accrued expenses and other current liabilities
|
14,010
|
|
|
Deferred revenue
|
17,452
|
|
|
Operating lease liabilities
|
3,625
|
|
|
Other noncurrent liabilities
|
12,150
|
|
|
Total liabilities
|
$
|
50,526
|
|
5. Business Acquisitions
As part of our business strategy, we have acquired, and may acquire in the future, certain businesses and technologies primarily to expand our products and service offerings.
Fiscal Year 2021 Acquisitions
For the nine months ended June 30, 2021, we completed an acquisition in our Healthcare segment for total cash consideration of $45.2 million. As a result, we recognized goodwill of $27.8 million and intangible assets of $19.8 million related to technology with a useful life of 5.0 years. The results of operations of the acquired entity have been included within our consolidated statement of operations from the acquisition date. The acquisition was not material to our condensed consolidated financial statements.
Acquisition-Related Costs, net
Acquisition-related costs include costs related to business and asset acquisitions. These costs consist of (i) transition and integration costs, including retention payments, transitional employee costs and earn-out payments, and other costs related to integration activities; (ii) professional service fees, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities; and (iii) fair value adjustments to acquisition-related contingencies.
A summary of acquisition-related costs, net is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Transition and integration costs
|
$
|
1,624
|
|
|
$
|
880
|
|
|
$
|
2,838
|
|
|
$
|
3,701
|
|
|
Professional service fees
|
61
|
|
|
(80)
|
|
|
841
|
|
|
(1)
|
|
|
Acquisition-related adjustments
|
(986)
|
|
|
(42)
|
|
|
(986)
|
|
|
(44)
|
|
|
Total
|
$
|
699
|
|
|
$
|
758
|
|
|
$
|
2,693
|
|
|
$
|
3,656
|
|
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
6. Goodwill and Intangible Assets
The changes in the carrying amount of goodwill by reportable segment for the nine months ended June 30, 2021 are as follows (dollars in thousands):
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
Enterprise
|
|
Other
|
|
Total
|
|
Balance as of September 30, 2020
|
$
|
1,424,959
|
|
|
$
|
682,600
|
|
|
$
|
12,936
|
|
|
$
|
2,120,495
|
|
|
Acquisitions
|
27,780
|
|
|
—
|
|
|
—
|
|
|
27,780
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency translation
|
3,290
|
|
|
5,619
|
|
|
316
|
|
|
9,225
|
|
|
Balance at June 30, 2021
|
$
|
1,456,029
|
|
|
$
|
688,219
|
|
|
$
|
13,252
|
|
|
$
|
2,157,500
|
|
Other Intangible Assets
The changes in the carrying amount of intangible assets for the nine months ended June 30, 2021 are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
Intangible Assets
|
|
Balance at September 30, 2020
|
$
|
167,270
|
|
|
Acquisitions
|
19,840
|
|
|
Amortization
|
(46,447)
|
|
|
Effect of foreign currency translation
|
733
|
|
|
Balance at June 30, 2021
|
$
|
141,396
|
|
7. Financial Instruments and Hedging Activities
Derivatives Not Designated as Hedges
Forward Currency Contracts
We have operations in a number of international locations where currency exchange rates can be volatile. We utilize foreign currency forward contracts to mitigate the risks associated with changes in foreign currency exchange rates so that our exposure to foreign currencies will be mitigated or offset by the gains or losses on the foreign currency forward contracts. Generally, we enter into such contracts for less than 90 days and have no cash requirements until maturity. As of June 30, 2021 and September 30, 2020, we had outstanding contracts with a total notional value of $26.6 million and $40.7 million, respectively.
We did not designate any forward contracts as hedging instruments for the nine months ended June 30, 2021 or 2020. Therefore, changes in fair value of foreign currency forward contracts were recognized within Other (expense) income, net in our consolidated statements of operations. The cash flows related to the settlement of forward contracts not designated as hedging instruments are included in cash flows from investing activities within our consolidated statement of cash flows.
A summary of the derivative instruments is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedges
|
|
Balance Sheet Classification
|
|
Fair Value
|
|
|
June 30,
2021
|
|
September 30,
2020
|
|
Foreign currency forward contracts
|
|
Prepaid expenses and other current assets
|
|
$
|
31
|
|
|
$
|
109
|
|
|
Foreign currency forward contracts
|
|
Accrued expenses and other current liabilities
|
|
$
|
(46)
|
|
|
$
|
(92)
|
|
A summary of other (expense) income, net related to foreign currency forward contracts for the three and nine months ended June 30, 2021 and 2020 is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement Classification
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
Derivatives Not Designated as Hedges
|
|
(Loss) Income Recognized
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Foreign currency forward contracts
|
|
Other (expense) income, net
|
|
$
|
(97)
|
|
|
$
|
9
|
|
|
$
|
451
|
|
|
$
|
451
|
|
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The determination of the applicable level within the hierarchy of a particular financial asset or liability depends on the lowest level of inputs that are significant to the fair value measurement as of the measurement date as follows:
•Level 1: Quoted prices for identical assets or liabilities in active markets.
•Level 2: Observable inputs other than those described as Level 1.
•Level 3: Unobservable inputs that are supportable by little or no market activities and are based on significant assumptions and estimates.
Assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and September 30, 2020 consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
Money market funds (a)
|
$
|
136,758
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
136,758
|
|
|
Time deposits (b)
|
—
|
|
|
46,927
|
|
|
—
|
|
|
46,927
|
|
|
Commercial paper, $56,284 at cost (b)
|
—
|
|
|
56,353
|
|
|
—
|
|
|
56,353
|
|
|
Corporate notes and bonds, $7,225 at cost (b)
|
—
|
|
|
7,197
|
|
|
—
|
|
|
7,197
|
|
|
Foreign currency exchange contracts (b)
|
—
|
|
|
31
|
|
|
—
|
|
|
31
|
|
|
Total assets at fair value
|
$
|
136,758
|
|
|
$
|
110,508
|
|
|
$
|
—
|
|
|
$
|
247,266
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts (b)
|
$
|
—
|
|
|
$
|
(46)
|
|
|
$
|
—
|
|
|
$
|
(46)
|
|
|
Contingent acquisition payments (c)
|
—
|
|
|
—
|
|
|
(768)
|
|
|
(768)
|
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
(46)
|
|
|
$
|
(768)
|
|
|
$
|
(814)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets:
|
|
|
|
|
|
|
|
|
Money market funds (a)
|
$
|
182,645
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
182,645
|
|
|
Time deposits (b)
|
—
|
|
|
95,180
|
|
|
—
|
|
|
95,180
|
|
|
Commercial paper, $33,265 at cost (b)
|
—
|
|
|
33,290
|
|
|
—
|
|
|
33,290
|
|
|
Corporate notes and bonds, $15,460 at cost (b)
|
—
|
|
|
15,480
|
|
|
—
|
|
|
15,480
|
|
|
Foreign currency exchange contracts (b)
|
—
|
|
|
109
|
|
|
—
|
|
|
109
|
|
|
Total assets at fair value
|
$
|
182,645
|
|
|
$
|
144,059
|
|
|
$
|
—
|
|
|
$
|
326,704
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Foreign currency exchange contracts (b)
|
$
|
—
|
|
|
$
|
(92)
|
|
|
$
|
—
|
|
|
$
|
(92)
|
|
|
Contingent acquisition payments (c)
|
—
|
|
|
—
|
|
|
(1,796)
|
|
|
(1,796)
|
|
|
Total liabilities at fair value
|
$
|
—
|
|
|
$
|
(92)
|
|
|
$
|
(1,796)
|
|
|
$
|
(1,888)
|
|
__________
(a)Money market funds and time deposits with original maturity of 90 days or less are included within cash and cash equivalents in the consolidated balance sheets and are valued at quoted market prices in active markets.
(b)Time deposits, commercial paper, corporate notes and bonds, and foreign currency exchange contracts are recorded at fair market values, which are determined based on the most recent observable inputs for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or are directly or indirectly observable. Time deposits are generally for terms of one
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
year or less. Commercial paper and corporate notes and bonds generally mature within three years and had a weighted average maturity of 0.32 years as of June 30, 2021 and 0.31 years as of September 30, 2020.
(c) The fair values of our contingent consideration arrangements were determined using either the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow method.
The estimated fair value of our total debt was approximately $1,865.2 million (face value $1,026.3 million) as of June 30, 2021 and $2,355.5 million (face value $1,666.5 million) as of September 30, 2020 based on Level 2 measurements. The fair value of each borrowing was estimated using the average of the bid and ask trading quotes at each respective reporting date. There was no balance outstanding under our revolving credit agreement as of June 30, 2021 or September 30, 2020.
Additionally, contingent acquisition payments are recorded at fair values upon the acquisition and are remeasured in subsequent reporting periods with the changes in fair values recorded within acquisition-related costs, net. Such payments are contingent upon the achievement of specified performance targets and are valued using the option pricing model with Monte Carlo simulation or the probability-weighted discounted cash flow model (Level 3 measurement).
The following table provides a summary of changes in the aggregate fair value of the contingent acquisition payments for all periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Balance at beginning of period
|
$
|
1,743
|
|
|
$
|
2,493
|
|
|
$
|
1,796
|
|
|
$
|
2,550
|
|
|
Payments and foreign currency translation
|
—
|
|
|
13
|
|
|
(53)
|
|
|
(44)
|
|
|
Adjustments to fair value included in acquisition-related costs, net
|
(975)
|
|
|
—
|
|
|
(975)
|
|
|
—
|
|
|
Balance at end of period
|
$
|
768
|
|
|
$
|
2,506
|
|
|
$
|
768
|
|
|
$
|
2,506
|
|
Contingent acquisition payments are to be made in periods through fiscal year 2021. As of June 30, 2021, the maximum amount payable based on the agreements was $1.8 million if the specified performance targets are achieved.
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
September 30,
2020
|
|
Compensation
|
$
|
103,910
|
|
|
$
|
110,827
|
|
|
Cost of revenue related liabilities
|
28,366
|
|
|
25,434
|
|
|
Accrued interest payable
|
2,638
|
|
|
13,484
|
|
|
Consulting and professional fees
|
13,864
|
|
|
10,589
|
|
|
Sales and marketing incentives
|
1,320
|
|
|
2,021
|
|
|
Sales and other taxes payable
|
7,216
|
|
|
6,339
|
|
|
Operating lease obligations
|
26,382
|
|
|
26,284
|
|
|
Other
|
3,698
|
|
|
4,276
|
|
|
Total
|
$
|
187,394
|
|
|
$
|
199,254
|
|
10. Restructuring and Other Charges, net
Restructuring and other charges, net include restructuring expenses together with other charges that are unusual in nature, are the result of unplanned events, and arise outside of the ordinary course of our business.
The following table represents the roll forward of restructuring liabilities for the nine months ended June 30, 2021 (dollars in thousands):
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
Facilities
|
|
Total
|
|
Balance at September 30, 2020
|
$
|
1,243
|
|
|
$
|
15,516
|
|
|
$
|
16,759
|
|
|
Restructuring charges, net
|
6,136
|
|
|
8,207
|
|
|
14,343
|
|
|
Non-cash adjustment
|
(839)
|
|
|
(3,088)
|
|
|
(3,927)
|
|
|
Cash payments
|
(5,818)
|
|
|
(3,843)
|
|
|
(9,661)
|
|
|
Balance at June 30, 2021
|
$
|
722
|
|
|
$
|
16,792
|
|
|
$
|
17,514
|
|
The table below presents the Restructuring and other charges, net associated with each segment, but excluded from calculation of each segment's profit (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Personnel
|
|
Facilities
|
|
Total Restructuring
|
|
Other Charges
|
|
Total
|
|
Personnel
|
|
Facilities
|
|
Total Restructuring
|
|
Other Charges
|
|
Total
|
|
Healthcare
|
$
|
156
|
|
|
$
|
1,301
|
|
|
$
|
1,457
|
|
|
$
|
—
|
|
|
$
|
1,457
|
|
|
$
|
70
|
|
|
$
|
2
|
|
|
$
|
72
|
|
|
$
|
—
|
|
|
$
|
72
|
|
|
Enterprise
|
—
|
|
|
923
|
|
|
923
|
|
|
—
|
|
|
923
|
|
|
(121)
|
|
|
76
|
|
|
(45)
|
|
|
—
|
|
|
(45)
|
|
|
Other
|
—
|
|
|
(91)
|
|
|
(91)
|
|
|
—
|
|
|
(91)
|
|
|
—
|
|
|
34
|
|
|
34
|
|
|
—
|
|
|
34
|
|
|
Corporate
|
84
|
|
|
—
|
|
|
84
|
|
|
14,874
|
|
|
14,958
|
|
|
445
|
|
|
9
|
|
|
454
|
|
|
1,356
|
|
|
1,810
|
|
|
Total
|
$
|
240
|
|
|
$
|
2,133
|
|
|
$
|
2,373
|
|
|
$
|
14,874
|
|
|
$
|
17,247
|
|
|
$
|
394
|
|
|
$
|
121
|
|
|
$
|
515
|
|
|
$
|
1,356
|
|
|
$
|
1,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
|
Personnel
|
|
Facilities
|
|
Total Restructuring
|
|
Other Charges
|
|
Total
|
|
Personnel
|
|
Facilities
|
|
Total Restructuring
|
|
Other Charges
|
|
Total
|
|
Healthcare
|
$
|
3,490
|
|
|
$
|
1,982
|
|
|
$
|
5,472
|
|
|
$
|
—
|
|
|
$
|
5,472
|
|
|
$
|
1,699
|
|
|
$
|
1,777
|
|
|
$
|
3,476
|
|
|
$
|
—
|
|
|
$
|
3,476
|
|
|
Enterprise
|
1,264
|
|
|
6,127
|
|
|
7,391
|
|
|
—
|
|
|
7,391
|
|
|
1,416
|
|
|
794
|
|
|
2,210
|
|
|
—
|
|
|
2,210
|
|
|
Other
|
—
|
|
|
77
|
|
|
77
|
|
|
—
|
|
|
77
|
|
|
—
|
|
|
(277)
|
|
|
(277)
|
|
|
—
|
|
|
(277)
|
|
|
Corporate
|
1,382
|
|
|
21
|
|
|
1,403
|
|
|
13,949
|
|
|
15,352
|
|
|
1,461
|
|
|
360
|
|
|
1,821
|
|
|
7,500
|
|
|
9,321
|
|
|
Total
|
$
|
6,136
|
|
|
$
|
8,207
|
|
|
$
|
14,343
|
|
|
$
|
13,949
|
|
|
$
|
28,292
|
|
|
$
|
4,576
|
|
|
$
|
2,654
|
|
|
$
|
7,230
|
|
|
$
|
7,500
|
|
|
$
|
14,730
|
|
Fiscal Year 2021
For the nine months ended June 30, 2021, we recorded restructuring charges of $14.3 million, which included $6.1 million related to the termination of approximately 80 employees and $8.2 million of charges related to closing certain idle facilities. Of these amounts, $2.4 million was recorded for the three months ended June 30, 2021, which related primarily to closing certain idle facilities. These actions were part of our strategic initiatives focused on investment rationalization, process optimization and cost reduction as we continue to evaluate the geographic footprint of our offices and facilities. We expect the remaining outstanding severance of $0.7 million to be substantially paid during fiscal year 2021, and the remaining $16.8 million lease payments to be made through fiscal year 2027, in accordance with the terms of the applicable leases.
Additionally, for the nine months ended June 30, 2021, we recorded approximately $16.2 million of expenses related to the acquisition of Nuance by Microsoft, and $1.3 million of professional service expenses related to other corporate initiatives, offset in part by $3.5 million of insurance recoveries. During the three months ended June 30, 2021, we recorded $16.2 million expenses related to the acquisition of Nuance by Microsoft, and $0.7 million of professional service expenses related to other corporate initiatives, offset in part by $2.0 million of insurance recoveries.
Fiscal Year 2020
For the nine months ended June 30, 2020, we recorded restructuring charges of $7.2 million, which included $4.6 million related to the termination of approximately 51 employees and $2.7 million related to certain restructuring facilities. Of these amounts, $0.5 million was recorded for the three months ended June 30, 2020, which was related primarily to termination of certain employees. These actions were part of our strategic initiatives focused on investment rationalization, process optimization and cost reduction.
Additionally, for the nine months ended June 30, 2020, we recorded $4.6 million expenses related to the separation of our Automotive business, a $2.0 million impairment charge of a right-of-use asset due to the COVID-19 pandemic, and a
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$0.9 million legal expense related to insurance claims. Of these amounts, we recorded $0.4 million related to the separation of our Automotive business and $0.9 million of legal expenses related to insurance claims for the three months ended June 30, 2020.
11. Debt
As of June 30, 2021 and September 30, 2020, we had the following borrowing obligations (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2021
|
|
September 30,
2020
|
|
5.625% Senior Notes due 2026, net of deferred issuance costs of $3.4 million and $3.9 million, respectively. Effective interest rate 5.625%.
|
$
|
496,610
|
|
|
$
|
496,148
|
|
|
1.000% Convertible Debentures due 2035, net of unamortized discount of $14.2 million and $64.8 million, respectively, and deferred issuance costs of $0.6 million and $2.9 million, respectively. Effective interest rate 5.622%.
|
204,719
|
|
|
608,767
|
|
|
1.250% Convertible Debentures due 2025, net of unamortized discount of $38.4 million and $45.2 million, respectively, and deferred issuance costs of $1.6 million and $1.9 million, respectively. Effective interest rate 5.578%.
|
222,664
|
|
|
215,582
|
|
|
1.500% Convertible Debentures due 2035, net of unamortized discount of $0.6 million and $10.4 million, respectively, and deferred issuance costs of $0.3 million as of September 30, 2020. Effective interest rate 5.394%.
|
43,480
|
|
|
216,627
|
|
|
Deferred issuance costs related to our Revolving Credit Facility
|
(1,945)
|
|
|
(451)
|
|
|
Total debt
|
965,528
|
|
|
1,536,673
|
|
|
Less: current portion (a)
|
(470,863)
|
|
|
(432,209)
|
|
|
Total long-term debt
|
$
|
494,665
|
|
|
$
|
1,104,464
|
|
__________
(a) As of June 30, 2021, the holders have the right to convert all or any portion of the 1.25% 2025 Debentures, 1.5% 2035 Debentures, and 1.0% 2035 Debentures between July 1, 2021 and September 30, 2021. Additionally, the holders of the 1.5% 2035 Debentures will have the right to redeem the notes in November 2021. As a result, the net carrying amounts of the convertible debentures were included in current liabilities as of June 30, 2021.
The following table summarizes the maturities of our borrowing obligations as of June 30, 2021 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Convertible Debentures (a)
|
|
Senior Notes
|
|
Total
|
|
2021
|
|
$
|
526,325
|
|
|
$
|
—
|
|
|
$
|
526,325
|
|
|
2022
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2023
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2024
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2025
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Thereafter
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
|
Total before unamortized discount
|
|
526,325
|
|
|
500,000
|
|
|
1,026,325
|
|
|
Less: unamortized discount and issuance costs
|
|
(55,462)
|
|
|
(5,335)
|
|
|
(60,797)
|
|
|
Total debt
|
|
$
|
470,863
|
|
|
$
|
494,665
|
|
|
$
|
965,528
|
|
__________
(a) As more fully described below, as of June 30, 2021, the holders have the right to convert all or any portion of the 1.25% 2025 Debentures, 1.5% 2035 Debentures, and 1.0% 2035 Debentures between July 1, 2021 and September 30, 2021. Additionally, the holders of the 1.5% 2035 Debentures will have the right to redeem the notes in November 2021. As a result, these convertible debentures were treated as if they were due in fiscal year 2021.
5.625% Senior Notes due 2026
In December 2016, we issued $500.0 million aggregate principal amount of 5.625% Senior Notes due on December 15, 2026 (the "2026 Senior Notes") in a private placement. The proceeds from the 2026 Senior Notes were approximately $495.0 million, net of issuance costs, and we used the proceeds to repurchase a portion of our then outstanding 5.375% Senior Notes due 2020. The 2026 Senior Notes bear interest at 5.625% per year, payable in cash semi-annually in arrears.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The 2026 Senior Notes are unsecured senior obligations and are guaranteed on an unsecured senior basis by certain of our domestic subsidiaries ("Subsidiary Guarantors"). The 2026 Senior Notes and the guarantees rank equally in right of payment with all of our and the Subsidiary Guarantors’ existing and future unsecured senior debt and rank senior in right of payment to all of our and the Subsidiary Guarantors’ future unsecured subordinated debt. The 2026 Senior Notes and guarantees effectively rank junior to all our secured debt and that of the Subsidiary Guarantors to the extent of the value of the collateral securing such debt and to all liabilities, including trade payables, of our subsidiaries that have not guaranteed the 2026 Senior Notes.
At any time before December 15, 2021, we may redeem all or a portion of the 2026 Senior Notes at a redemption price equal to 100% of the aggregate principal amount of the 2026 Senior Notes to be redeemed, plus a "make-whole" premium and accrued and unpaid interest to, but excluding, the redemption date. At any time on or after December 15, 2021, we may redeem all or a portion of the 2026 Senior Notes at certain redemption prices expressed as percentages of the principal amount, plus accrued and unpaid interest to, but excluding, the redemption date. At any time and from time to time before December 15, 2021, we may redeem up to 35% of the aggregate outstanding principal amount of the 2026 Senior Notes with the net cash proceeds received by us from certain equity offerings at a price equal to 105.625% of the aggregate principal amount, plus accrued and unpaid interest to, but excluding, the redemption date, provided that the redemption occurs no later than 120 days after the closing of the related equity offering, and at least 50% of the original aggregate principal amount of the 2026 Senior Notes remains outstanding immediately thereafter.
Upon the occurrence of a change in control or sale of substantially all assets, we must offer to repurchase the 2026 Senior Notes at a price equal to 100% in the case of an asset sale, or 101% in the case of a change of control, of the principal amount plus accrued and unpaid interest to, but excluding, the repurchase date.
1.0% Convertible Debentures due 2035
In December 2015, we issued $676.5 million in aggregate principal amount of 1.0% Senior Convertible Debentures due in 2035 (the "1.0% 2035 Debentures") in a private placement. Total proceeds were $663.8 million, net of issuance costs, and we used a portion to repurchase $38.3 million in aggregate principal on our 2.75% Senior Convertible Debentures due in 2031 (the “2.75% 2031 Debentures”) and to repay the aggregate principal balance of $472.5 million on our term loan under the amended and restated credit agreement. The 1.0% 2035 Debentures bear interest at 1.0% per year, payable in cash semi-annually in arrears. In addition to ordinary interest and default additional interest, beginning with the semi-annual interest period commencing on December 15, 2022, contingent interest will accrue during any regular semi-annual interest period where the average trading price of our 1.0% 2035 Debentures for the ten trading day period immediately preceding the first day of such semi-annual period is greater than or equal to $1,200 per $1,000 principal amount of our 1.0% 2035 Debentures, in which case, contingent interest will accrue at a rate of 0.50% per annum of such average trading price. The 1.0% 2035 Debentures mature on December 15, 2035, subject to the right of the holders to require us to redeem the 1.0% 2035 Debentures on December 15, 2022, 2027, or 2032. The 1.0% 2035 Debentures are general senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured, unsubordinated indebtedness and senior in right of payment to any indebtedness that is contractually subordinated to the 1.0% 2035 Debentures. The 1.0% 2035 Debentures will be effectively subordinated to indebtedness and other liabilities of our subsidiaries.
We account separately for the liability and equity components of the 1.0% 2035 Debentures in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance requires the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature and record the remainder in stockholders’ equity. At issuance, we allocated $495.4 million to long-term debt, and $181.1 million has been recorded as additional paid-in capital, which is being amortized to interest expense using the effective interest rate method through December 2022.
If converted, the principal amount of the 1.0% 2035 Debentures is payable in cash and any amounts payable in excess of the principal amount will be paid in cash or shares of our common stock, at our election. The conversion of the 1.0% 2035 Debentures will be based upon a conversion ratio of 41.4576 common shares per $1,000 principal amount, subject to adjustments. Conversion is only allowed in the following circumstances and to the following extent: (i) prior to June 15, 2035, on any date during any fiscal quarter (and only during such fiscal quarter) if the closing sale price of our common stock was more than 130% of the then current conversion price for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter; (ii) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for $1,000 principal amount of the 1.0% 2035 Debentures for each day during such five trading-day period was less than 98% of the closing sale price of our common stock multiplied by the then current conversion rate; (iii) upon the occurrence of specified corporate transactions, as described in the indenture for the
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
1.0% 2035 Debentures; or (iv) at the option of the holder at any time on or after June 15, 2035. Additionally, we may redeem the 1.0% 2035 Debentures, in whole or in part, on or after December 20, 2022 for cash at a price equal to 100% of the principal amount of the 1.0% 2035 Debentures to be purchased plus any accrued and unpaid interest, including any additional interest to, but excluding, the repurchase date. Each holder shall have the right, at such holder’s option, to require us to repurchase all or any portion of the 1.0% 2035 Debentures held by such holder on December 15, 2022, December 15, 2027, or December 15, 2032 at par plus accrued and unpaid interest. If we undergo a fundamental change or non-stock change of control (as described in the indenture for the 1.0% 2035 Debentures) prior to maturity, holders will have the option to require us to repurchase all or any portion of their debentures for cash at a price equal to 100% of the principal amount of the 1.0% 2035 Debentures to be purchased plus any accrued and unpaid interest.
During the third quarter of fiscal year 2021, we induced the exchange of $457.0 million notional amount of our 1.0% 2035 Debentures for $5.0 million in cash and 18.9 million shares of common stock, of which we allocated $435.1 million to debt and $567.1 million to equity. Also, in connection with the redemptions, we wrote off $32.4 million of unamortized discount and $1.4 million of unamortized costs. As a result, we recorded a $15.0 million loss associated with the redemptions, of which $3.1 million represents the inducement expense and $1.9 million represents the interest earned at the time of settlement, based upon the guidance in ASC 470-20. Additionally, as part of these redemptions we transferred non-cash consideration in the form of shares of common stock valued at $1,002.2 million. Following the redemptions, $219.5 million in aggregate principal amount of the 1.0% 2035 Debentures remained outstanding as of June 30, 2021.
The 1.0% 2035 Debentures were convertible as of June 30, 2021, as our common stock price exceeded the conversion threshold price of 130% of the applicable conversion price per share for at least 20 trading days during the 30 consecutive trading days ending June 30, 2021. As a result, the holders of our 1.0% 2035 Debentures have the right to convert all or any portion of their debentures between July 1, 2021 and September 30, 2021. The holders previously had the right to convert all or any portion of their debentures at the aforementioned conversion ratio beginning January 1, 2021 through June 30, 2021.
As of June 30, 2021, holders have exercised their right to convert $67.9 million notional amount of our 1.0% 2035 Debentures for $67.9 million in cash and 1.6 million shares of common stock. The settlement of these conversions occurred in the fourth quarter of fiscal year 2021. The net carrying amount of the 1.0% 2035 Debentures was included within the current portion of long-term debt, and $14.8 million has been reclassified from permanent equity to mezzanine equity. As of June 30, 2021, the if-converted value of the 1.0% 2035 Debentures exceeded its principal amount by $275.9 million.
1.25% Convertible Debentures due 2025
In March 2017, we issued $350.0 million in aggregate principal amount of 1.25% Senior Convertible Debentures due in 2025 (the "1.25% 2025 Debentures") in a private placement. The proceeds were approximately $343.6 million, net of issuance costs. We used a portion of the proceeds to repurchase 5.8 million shares of our common stock for $99.1 million and $17.8 million in aggregate principal on our 2.75% 2031 Debentures. The 1.25% 2025 Debentures bear interest at 1.25% per year, payable in cash semi-annually in arrears, beginning on October 1, 2017. The 1.25% 2025 Debentures mature on April 1, 2025. The 1.25% 2025 Debentures are general senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured, unsubordinated indebtedness and senior in right of payment to any indebtedness that is contractually subordinated to the 1.25% 2025 Debentures. The 1.25% 2025 Debentures will be effectively subordinated to indebtedness and other liabilities of our subsidiaries.
We account separately for the liability and equity components of the 1.25% 2025 Debentures in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. The guidance requires the carrying amount of the liability component to be estimated by measuring the fair value of a similar liability that does not have an associated conversion feature and record the remainder in stockholders’ equity. At issuance, we allocated $252.1 million to long-term debt, and $97.9 million has been recorded as additional paid-in capital, which is being amortized to interest expense using the effective interest rate method through April 1, 2025.
If converted, the principal amount of the 1.25% 2025 Debentures is payable in cash and any amounts payable in excess of the principal amount will be paid in cash or shares of our common stock, at our election. The conversion of the 1.25% 2025 Debentures will be based upon a conversion ratio of 50.7957 common shares per $1,000 principal amount, subject to adjustments. Conversion is only allowed in the following circumstances and to the following extent: (i) prior to October 1, 2024, on any date during any fiscal quarter (and only during such fiscal quarter) if the closing sale price of our common stock was more than 130% of the then current conversion price for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter; (ii) at any time on or after October 1, 2024; (iii) during the five consecutive business-day period immediately following any five consecutive trading-day period in which the trading price
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for $1,000 principal amount of the 1.25% 2025 Debentures for each day during such five trading-day period was less than 98% of the closing sale price of our common stock multiplied by the then current conversion rate; or (iv) upon the occurrence of specified corporate transactions, as described in the indenture for the 1.25% 2025 Debentures. We may not redeem the 1.25% 2025 Debentures prior to the maturity date. If we undergo a fundamental change or non-stock change of control (as described in the indenture for the 1.25% 2025 Debentures) prior to maturity, holders will have the option to require us to repurchase all or any portion of their debentures for cash at a price equal to 100% of the principal amount of the 1.25% 2025 Debentures to be purchased plus any accrued and unpaid interest.
During the second quarter of fiscal year 2020, we repurchased $87.3 million notional amount of our 1.25% 2025 Debentures for $112.3 million, of which we allocated $72.8 million to debt and $39.5 million to equity. Also, in connection with the repurchases, we wrote off $16.7 million of unamortized discount and $0.7 million of unamortized costs. As a result, we recorded a $2.8 million loss associated with the repurchases. Following the repurchases, $262.7 million in aggregate principal amount of the 1.25% 2025 Debentures remains outstanding.
The 1.25% 2025 Debentures were convertible as of June 30, 2021, as our common stock price exceeded the conversion threshold price of 130% of the applicable conversion price per share for at least 20 trading days during the 30 consecutive trading days ending June 30, 2021. As a result, the holders of our 1.25% 2025 Debentures have the right to convert all or any portion of their debentures between July 1, 2021 and September 30, 2021. The holders previously had the right to convert all or any portion of their debentures at the aforementioned conversion ratio beginning October 1, 2020 through June 30, 2021. As of June 30, 2021, the net carrying amount of the 1.25% 2025 Debentures was included within the current portion of long-term debt, and $40.0 million has been reclassified from permanent equity to mezzanine equity. As of June 30, 2021, the if-converted value of the 1.25% 2025 Debentures exceeded its principal amount by $463.7 million.
1.50% Convertible Debentures due 2035
In June 2015, we issued $263.9 million in aggregate principal amount of 1.5% Senior Convertible Debentures due in 2035 in exchange for $256.2 million in aggregate principal amount of our 2.75% 2031 Debentures. Total proceeds, net of issuance costs, were $253.2 million. The 1.5% 2035 Debentures were issued at 97.09% of the principal amount, which resulted in a discount of $7.7 million. The 1.5% 2035 Debentures bear interest at 1.5% per year, payable in cash semi-annually in arrears. In addition to ordinary interest and default additional interest, beginning with the semi-annual interest period commencing on November 1, 2021, contingent interest will accrue during any regular semi-annual interest period where the average trading price of our 1.5% 2035 Debentures for the ten trading day period immediately preceding the first day of such semi-annual period is greater than or equal to $1,200 per $1,000 principal amount of our 1.5% 2035 Debentures, in which case, contingent interest will accrue at a rate of 0.50% per annum of such average trading price. The 1.5% 2035 Debentures mature on November 1, 2035, subject to the right of the holders to require us to redeem the 1.5% 2035 Debentures on November 1, 2021, 2026, or 2031. The 1.5% 2035 Debentures are general senior unsecured obligations and rank equally in right of payment with all of our existing and future unsecured, unsubordinated indebtedness and senior in right of payment to any indebtedness that is contractually subordinated to the 1.5% 2035 Debentures. The 1.5% 2035 Debentures will be effectively subordinated to indebtedness and other liabilities of our subsidiaries.
We account separately for the liability and equity components of the 1.5% 2035 Debentures in accordance with authoritative guidance for convertible debt instruments that may be settled in cash upon conversion. At issuance, we allocated $208.6 million to long-term debt, and $55.3 million has been recorded as additional paid-in capital, which is being amortized to interest expense using the effective interest rate method through November 2021.
If converted, the principal amount of the 1.5% 2035 Debentures is payable in cash and any amounts payable in excess of the principal amount, will be paid in cash or shares of our common stock, at our election. The conversion of the 1.5% 2035 Debentures will be based upon a conversion ratio of 48.5216 common shares per $1,000 principal amount, subject to adjustments. Conversion is only allowed in the following circumstances and to the following extent: (i) prior to May 1, 2035, on any date during any fiscal quarter beginning after September 30, 2015 (and only during such fiscal quarter) if the closing sale price of our common stock was more than 130% of the then current conversion price for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter; (ii) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for $1,000 principal amount of the 1.5% 2035 Debentures for each day during such five trading-day period was less than 98% of the closing sale price of our common stock multiplied by the then current conversion rate; (iii) upon the occurrence of specified corporate transactions, as described in the indenture for the 1.5% 2035 Debentures; or (iv) at the option of the holder at any time on or after May 1, 2035. Additionally, we may redeem the 1.5% 2035 Debentures, in whole or in part, on or after
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
November 5, 2021 for cash at a price equal to 100% of the principal amount of the 1.5% 2035 Debentures to be purchased plus any accrued and unpaid interest, including any additional interest to, but excluding, the repurchase date. Each holder shall have the right, at such holder’s option, to require us to repurchase all or any portion of the 1.5% 2035 Debentures held by such holder on November 1, 2021, November 1, 2026, or November 1, 2031 at par plus accrued and unpaid interest. If we undergo a fundamental change (as described in the indenture for the 1.5% 2035 Debentures) prior to maturity, holders will have the option to require us to repurchase all or any portion of their debentures for cash at a price equal to 100% of the principal amount of the 1.5% 2035 Debentures to be purchased plus any accrued and unpaid interest.
During the second quarter of fiscal year 2020, we repurchased $36.5 million notional amount of 1.5% 2035 Debentures for $41.3 million, of which we allocated $34.7 million to debt and $6.6 million to equity based upon ASC 470-20. Also, in connection with the repurchases, we wrote off $2.5 million of unamortized discount and $0.1 million of unamortized costs. As a result, we recorded a $0.8 million loss associated with the repurchases.
During the third quarter of fiscal year 2021, we induced the exchange of $64.9 million notional amount of 1.5% 2035 Debentures for $0.5 million in cash and 3.2 million shares of common stock, of which we allocated $64.2 million to debt and $102.5 million to equity. Also, in connection with the redemptions, we wrote off $1.4 million of unamortized discount. As a result, we recorded a $1.1 million loss associated with the redemptions, of which $0.4 million represents the inducement expense and $0.1 million represents the interest earned at the time of settlement, based upon the guidance in ASC 470-20. Additionally, as part of these redemptions we transferred non-cash consideration in the form of shares of common stock valued at $166.7 million.
The 1.5% 2035 Debentures were convertible as of June 30, 2021, as our common stock price exceeded the conversion threshold price of 130% of the applicable conversion price per share for at least 20 trading days during the 30 consecutive trading days ending June 30, 2021. As a result, the holders of our 1.5% 2035 Debentures have the right to convert all or any portion of their debentures between July 1, 2021 and September 30, 2021. The holders previously had the right to convert all or any portion of their debentures at the aforementioned conversion ratio beginning October 1, 2020 through June 30, 2021.
During the third quarter of fiscal year 2021, holders of our 1.5% 2035 Debentures exercised their right to convert $118.3 million notional amount for $118.3 million in cash and 3.5 million shares of common stock, of which we allocated $117.1 million to debt and $193.3 million to equity. Also, in connection with the conversions, we wrote off $2.1 million of unamortized discount and $0.1 million of unamortized costs. As a result, we recorded a $1.0 million loss associated with the conversions. Additionally, as part of these conversions we transferred non-cash consideration in the form of shares of common stock valued at $192.1 million. Following the conversions and redemptions, $44.1 million in aggregate principal amount of the 1.5% 2035 Debentures remained outstanding as of June 30, 2021.
As of June 30, 2021, holders have exercised their right to convert $16.2 million notional amount of our 1.5% 2035 Debentures for $16.2 million in cash and 0.5 million shares of common stock. The settlement of these conversions occurred in the fourth quarter of fiscal year 2021. The net carrying amount of the 1.5% 2035 Debentures was included within the current portion of long-term debt, and $0.7 million has been reclassified from permanent equity to mezzanine equity. As of June 30, 2021, the if-converted value of the 1.5% 2035 Debentures exceeded its principal amount by $72.5 million.
Revolving Credit Facility
On July 31, 2020, we amended our revolving credit agreement (the "Amended Revolving Credit Agreement") to, among other things, extend the expiration from April 15, 2021 to April 15, 2022. The Amended Revolving Credit Agreement provided for aggregate borrowing commitments of $242.5 million (the "Revolving Credit Facility"), including the revolving facility loans, the swingline loans and issuance of letters of credit. The borrowing outstanding under the Revolving Credit Facility bore interest at either (i) LIBOR plus an applicable margin of 1.50% or 1.75%, or (ii) the alternative base rate plus an applicable margin of 0.50% or 0.75%. The Revolving Credit Facility was secured by substantially all our assets. The Amended Revolving Credit Agreement contained customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. At any time that there were any outstanding borrowings (excluding up to $25,000,000 of issued and undrawn Letters of Credit) under the Revolving Credit Facility, we were required to maintain a Consolidated Senior Secured Leverage Ratio (as defined in the Amended Revolving Credit Agreement) not exceeding 4.00 to 1.00.
On February 4, 2021, we entered into a new revolving credit agreement (the "New Revolving Credit Agreement"), which replaced the existing Amended Revolving Credit Agreement. The New Revolving Credit Agreement expires February 4, 2026, and has an aggregate borrowing commitment of $300.0 million, including revolving loans and letters of credit (the "New Revolving Credit Facility"). The New Revolving Credit Facility bears interest at either (i) LIBOR plus an applicable margin of
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
1.50% or 1.75%, or (ii) the alternative base rate plus an applicable margin of 0.50% or 0.75%. The New Revolving Credit Facility is secured by substantially all our assets and substantially all assets of certain of our domestic subsidiaries that guarantee our obligations under the New Revolving Credit Agreement. The New Revolving Credit Agreement contains customary affirmative and negative covenants and conditions to borrowing, as well as customary events of default. Among other things, we are required to maintain a Consolidated Senior Secured Leverage Ratio (as defined in the New Revolving Credit Agreement) not exceeding 4.00 to 1.00. We were in compliance with all the debt covenants as of June 30, 2021.
As of June 30, 2021, after taking into account the outstanding letters of credit of $1.9 million, we had $298.1 million available for borrowing under the New Revolving Credit Facility.
12. Stockholders' Equity
Share Repurchases
On April 29, 2013, our Board of Directors approved a share repurchase program for up to $500.0 million, which was increased by $500.0 million on April 29, 2015. On August 1, 2018, our Board of Directors approved an additional $500.0 million under our share repurchase program. Under the terms of the share repurchase program, we have the ability to repurchase shares from time to time through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated stock repurchase transactions, or any combination of such methods. The share repurchase program does not require us to acquire any specific number of shares and may be modified, suspended, extended or terminated by us at any time without prior notice. The timing and the amount of any purchases are subject to our assessment of the prevailing market conditions, general economic conditions, capital allocation alternatives, and other factors.
We did not repurchase any shares of our common stock for the three and nine months ended June 30, 2021. We did not repurchase any shares of our common stock for the three months ended June 30, 2020, and we repurchased 9.5 million shares of our common stock for $169.2 million for the nine months ended June 30, 2020. The amount paid in excess of par value is recognized in additional paid in capital and these shares were retired upon repurchase. Since the commencement of the program, we have repurchased 73.8 million shares for $1,238.8 million. As of June 30, 2021, approximately $261.2 million remained available for future repurchases under the program.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
13. Net (Loss) Income Per Share
The following table sets forth the computation for basic and diluted net (loss) income per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
$
|
(26,267)
|
|
|
$
|
2,261
|
|
|
$
|
(6,579)
|
|
|
$
|
19,402
|
|
|
Net income (loss) from discontinued operations
|
—
|
|
|
14,401
|
|
|
(8,427)
|
|
|
25,939
|
|
|
Net (loss) income
|
$
|
(26,267)
|
|
|
$
|
16,662
|
|
|
$
|
(15,006)
|
|
|
$
|
45,341
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — basic
|
294,388
|
|
|
281,281
|
|
|
287,826
|
|
|
282,674
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of employee stock compensation plans(a)
|
—
|
|
|
6,571
|
|
|
—
|
|
|
5,422
|
|
|
Weighted average common shares outstanding — diluted
|
294,388
|
|
|
287,852
|
|
|
287,826
|
|
|
288,096
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - basic:
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.09)
|
|
|
$
|
0.01
|
|
|
$
|
(0.02)
|
|
|
$
|
0.07
|
|
|
Discontinued operations
|
—
|
|
|
0.05
|
|
|
(0.03)
|
|
|
0.09
|
|
|
Total net (loss) income per basic common share
|
$
|
(0.09)
|
|
|
$
|
0.06
|
|
|
$
|
(0.05)
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share - diluted:
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
(0.09)
|
|
|
$
|
0.01
|
|
|
$
|
(0.02)
|
|
|
$
|
0.07
|
|
|
Discontinued operations
|
—
|
|
|
0.05
|
|
|
(0.03)
|
|
|
0.09
|
|
|
Total net (loss) income per diluted common share
|
$
|
(0.09)
|
|
|
$
|
0.06
|
|
|
$
|
(0.05)
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive equity instruments excluded from the calculation
|
—
|
|
|
158
|
|
|
45
|
|
|
93
|
|
|
Contingently issuable awards excluded from the calculation
|
—
|
|
|
15
|
|
|
—
|
|
|
1,841
|
|
__________
(a)Certain performance-based awards were excluded from the determination of dilutive net (loss) income per share as the conditions were not met at the end of the reporting period.
14. Stock-Based Compensation
On January 22, 2020, our shareholders adopted our 2020 Stock Plan (the "2020 Stock Plan") and as such date, we no longer grant awards under our amended and restated 2000 Stock Plan (the "2000 Stock Plan"). Outstanding awards under our 2000 Stock Plan that are forfeited or returned to the company for satisfaction of taxes, are transferred to the 2020 Stock Plan and may be used for future issuance. The 2020 Stock Plan (i) grants the Company's compensation committee the discretionary authority over the plan; (ii) makes employees, directors, consultants, and advisors of the Company and its subsidiaries eligible to receive awards; (iii) sets the number of shares of common stock that may be issued in satisfaction of awards to be 9,000,000 shares, plus the number of shares that become available for issuance under the 2000 Stock Plan; and (iv) identifies the annual limits on shares granted to each individual and the types of awards permissible.
As of June 30, 2021, we had 11.9 million shares available for future grants under the 2020 Stock Plan. We recognize stock-based compensation expenses over the requisite service periods. Our share-based awards are classified within equity upon issuance.
The amounts included in the consolidated statements of operations related to stock-based compensation are as follows (dollars in thousands):
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Cost of hosting and professional services
|
$
|
6,327
|
|
|
$
|
5,748
|
|
|
$
|
19,732
|
|
|
$
|
16,525
|
|
|
Cost of product and licensing
|
103
|
|
|
124
|
|
|
280
|
|
|
382
|
|
|
Cost of maintenance and support
|
423
|
|
|
360
|
|
|
1,268
|
|
|
1,200
|
|
|
Research and development
|
9,230
|
|
|
8,530
|
|
|
26,402
|
|
|
25,274
|
|
|
Sales and marketing
|
8,974
|
|
|
8,002
|
|
|
26,475
|
|
|
22,825
|
|
|
General and administrative
|
9,597
|
|
|
9,723
|
|
|
30,279
|
|
|
28,817
|
|
|
Total
|
$
|
34,654
|
|
|
$
|
32,487
|
|
|
$
|
104,436
|
|
|
$
|
95,023
|
|
Stock Options
The table below summarizes activities related to stock options for the nine months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (a)
|
|
Outstanding at September 30, 2020
|
9,355
|
|
|
$
|
17.18
|
|
|
|
|
|
|
Outstanding at June 30, 2021
|
9,355
|
|
|
$
|
17.18
|
|
|
0.8 years
|
|
$
|
0.3
|
million
|
|
Exercisable at June 30, 2021
|
9,355
|
|
|
$
|
17.18
|
|
|
0.8 years
|
|
$
|
0.3
|
million
|
|
Exercisable at June 30, 2020
|
9,355
|
|
|
$
|
17.18
|
|
|
1.8 years
|
|
$
|
0.1
|
million
|
__________
(a)The aggregate intrinsic value in this table represents any excess of the closing market price of our common stock as of June 30, 2021 ($54.44) over the exercise price of the underlying options.
The aggregate intrinsic values of stock options exercised during the nine months ended June 30, 2021 and 2020 were de minimis.
Restricted Units
Restricted units are not included in issued and outstanding common stock until the units are vested and underlying shares are released. The purchase price for vested restricted units is $0.001 per share. The table below summarizes activities relating to restricted units for the nine months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Underlying Restricted Units — Performance-Based Awards
|
|
Number of Shares Underlying Restricted Units — Time-Based Awards
|
|
Outstanding at September 30, 2020
|
2,620,120
|
|
|
7,157,649
|
|
|
Granted
|
1,048,943
|
|
|
2,094,247
|
|
|
Earned/released
|
(1,067,802)
|
|
|
(3,489,771)
|
|
|
Forfeited
|
(137,340)
|
|
|
(275,159)
|
|
|
Outstanding at June 30, 2021
|
2,463,921
|
|
|
5,486,966
|
|
|
Weighted average remaining recognition period of outstanding Restricted Units
|
1.2 years
|
|
1.5 years
|
|
Unrecognized stock-based compensation expense of outstanding Restricted Units
|
$23.1 million
|
|
$65.3 million
|
|
Aggregate intrinsic value of outstanding Restricted Units (a)
|
$134.1 million
|
|
$298.7 million
|
__________
(a)The aggregate intrinsic value in this table represents any excess of the closing market price of our common stock as of June 30, 2021 ($54.44) over the purchase price of the underlying restricted units.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the weighted-average grant-date fair value of restricted units granted, and the aggregate intrinsic value of restricted units vested during the periods noted is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
Weighted-average grant-date fair value per share
|
$
|
38.05
|
|
|
$
|
17.71
|
|
|
Total intrinsic value of shares vested (in millions)
|
$
|
193.5
|
|
|
$
|
115.6
|
|
Performance-based restricted units outstanding as of June 30, 2021 include performance goals based on total shareholder return relative to a peer index and a revenue growth metric (for awards granted in November 2020) during the performance period. The awards actually earned will be up to two hundred percent of the target number of the performance-based restricted units. Compensation expense is recorded ratably over the performance period of the award based on the grant date fair value as determined using a Monte Carlo simulation model. Below is a summary of key assumptions of the valuation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
Dividend yield
|
0.0%
|
|
0.0%
|
|
Expected volatility
|
34.95%
|
|
27.73% - 28.24%
|
|
Risk-free interest rate
|
0.21%
|
|
1.40% - 1.62%
|
|
Expected term (in years)
|
3.00
|
|
2.72 - 3.00
|
15. Income Taxes
The components of loss before income taxes from continuing operations are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Domestic
|
$
|
(40,324)
|
|
|
$
|
(20,615)
|
|
|
$
|
(33,425)
|
|
|
$
|
(50,598)
|
|
|
Foreign
|
9,635
|
|
|
10,096
|
|
|
29,550
|
|
|
29,795
|
|
|
Loss before income taxes
|
$
|
(30,689)
|
|
|
$
|
(10,519)
|
|
|
$
|
(3,875)
|
|
|
$
|
(20,803)
|
|
The components of (benefit) provision for income taxes from continuing operations are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Domestic
|
$
|
(1,151)
|
|
|
$
|
(230)
|
|
|
$
|
(5,658)
|
|
|
$
|
(38,925)
|
|
|
Foreign
|
(3,271)
|
|
|
(12,550)
|
|
|
8,362
|
|
|
(1,280)
|
|
|
(Benefit) provision for income taxes
|
$
|
(4,422)
|
|
|
$
|
(12,780)
|
|
|
$
|
2,704
|
|
|
$
|
(40,205)
|
|
|
Effective tax rate
|
14.4
|
%
|
|
121.5
|
%
|
|
(69.8)
|
%
|
|
193.3
|
%
|
The effective income tax rate is based upon the income for the year, the geographic mix of our income, the composition of the income in different countries, changes relating to valuation allowances and the potential tax consequences of resolving audits or other tax contingencies.
Our effective income tax rate was 14.4% for the three months ended June 30, 2021, compared to 121.5% for the three months ended June 30, 2020. The effective tax rate for the three months ended June 30, 2021 differed from the U.S. federal statutory rate of 21.0% primarily due to the base erosion anti-abuse tax offset by a change in the valuation allowance in the United States. The effective tax rate for the three months ended June 30, 2020 differed from the U.S. federal statutory rate of 21.0% primarily due to the valuation allowance on deferred tax assets in the United States and a foreign tax benefit related to a prior-year intangible property transfer.
Our effective income tax rate was (69.8)% for the nine months ended June 30, 2021, compared to 193.3% for the nine months ended June 30, 2020. The effective tax rate for the nine months ended June 30, 2021 differed from the U.S. federal statutory rate of 21.0% primarily due to the base erosion anti-abuse tax offset by a change in the valuation allowance in the United States. The effective tax rate for the nine months ended June 30, 2020 differed from the U.S. federal statutory rate of 21.0% primarily
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
due to a deferred tax benefit from an adjustment to domestic valuation allowance and a foreign tax benefit related to prior-year intangible property transfers.
Valuation Allowances
As of June 30, 2021 and September 30, 2020, we had a full valuation allowance against net domestic deferred tax assets and certain foreign deferred tax assets. We intend to maintain valuation allowances on these deferred tax assets until there is sufficient evidence to support the release of all or some portion of these allowances. A significant portion of our domestic deferred tax assets relate to U.S. net operating losses. We continue to believe its negative evidence outweighs its positive evidence after considering recent profitability trends and the disposition of the medical transcription and EHR implementation businesses. We continue to evaluate all sources of domestic taxable income including both the reversal of existing deferred tax liabilities and the likelihood that we could sustain pretax profitability in the future. As of June 30, 2021, we believe that there is a reasonable possibility that within the next twelve months these sources of taxable income may become sufficient positive evidence to support a conclusion that a substantial portion of the domestic valuation allowance, excluding capital losses, could be released.
16. Commitments and Contingencies
Litigation and Other Claims
Similar to many companies in the software industry, we are involved in a variety of claims, demands, suits, investigations and proceedings that arise from time to time relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, employment, benefits and securities matters. At each balance sheet date, we evaluate contingent liabilities associated with these matters in accordance with ASC 450 "Contingencies". If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgments are required for the determination of probability and the range of the outcomes, and the estimates are based only on the information available at the time. Due to the inherent uncertainties involved in claims, legal proceedings, and in estimating the losses that may arise, actual outcomes may differ from our estimates. Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods which may have a material impact on our results of operations and financial position. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. As of June 30, 2021, accrued losses were not material to our condensed consolidated financial statements, and we do not expect any pending matter to have a material impact on our condensed consolidated financial statements.
Guarantees and Other
We include indemnification provisions in the contracts we enter into with customers and business partners. Generally, these provisions require us to defend claims arising out of our products’ infringement of third-party intellectual property rights, breach of contractual obligations and/or unlawful or otherwise culpable conduct. The indemnity obligations generally cover damages, costs and attorneys’ fees arising out of such claims. In most, but not all cases, our total liability under such provisions is limited to either the value of the contract or a specified, agreed upon amount. In some cases, our total liability under such provisions is unlimited. In many, but not all cases, the term of the indemnity provision is perpetual. While the maximum potential amount of future payments we could be required to make under all the indemnification provisions is unlimited, we believe the estimated fair value of these provisions is minimal due to the low frequency with which these provisions have been triggered.
We indemnify our directors and officers to the fullest extent permitted by Delaware law, which provides among other things, indemnification to directors and officers for expenses, judgments, fines, penalties and settlement amounts incurred by such persons in their capacity as a director or officer of the company, regardless of whether the individual is serving in any such capacity at the time the liability or expense is incurred. Additionally, in connection with certain acquisitions, we agreed to indemnify the former officers and members of the boards of directors of those companies, on similar terms as described above, for a period of six years from the acquisition date. In certain cases, we purchase director and officer insurance policies related to these obligations, which fully cover the six-year period. To the extent that we do not purchase a director and officer insurance policy for the full period of any contractual indemnification, and such directors and officers do not have coverage under separate insurance policies, we would be required to pay for costs incurred, if any, as described above.
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Contingencies
The Company is subject to contingencies which arise through the ordinary course of business. All material liabilities of which management were aware are properly reflected in the financial statements as of June 30, 2021 and September 30, 2020.
Microsoft Acquisition Contingencies
On April 11, 2021, we entered into a Merger Agreement with Microsoft, subject to the terms of which Microsoft has agreed to acquire Nuance. The consummation of the Merger remains subject to customary closing conditions including satisfaction of certain regulatory approvals. The Merger is currently intended to close by December 31, 2021. As part of the transaction, Nuance expects to incur liabilities of approximately $115 million that are contingent on the deal consummation. These liabilities include banker fees, legal fees, and certain retention bonuses.
17. Operating Leases
Operating Leases
We have various operating leases for office space, data centers, office equipment and automobiles around the world with lease terms expiring between 2021 and 2030.
We determine if an arrangement is a lease at inception. The current portion of our operating lease liabilities is included in accrued expenses and other current liabilities and the long-term portion is included in operating lease liabilities.
Operating lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate. Due to the interest rate implicit in most of our leases not being readily determinable, our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Operating lease assets also include any prepaid lease payments and lease incentives. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term.
Our lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. We combine fixed payments for non-lease components with our lease payments and account for them together as a single lease component which increases the amount of our lease assets and liabilities. Payments under our lease arrangements are primarily fixed. Variable rents, if any, are expensed as incurred.
As of June 30, 2021, our operating leases had a weighted average remaining lease term of 4.1 years and a weighted average discount rate of 3.8%.
Future lease payments under operating leases as of June 30, 2021 were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Operating Leases
|
|
Operating leases under restructuring
|
|
Total
|
|
2021
|
|
$
|
6,313
|
|
|
$
|
1,539
|
|
|
$
|
7,852
|
|
|
2022
|
|
22,208
|
|
|
5,189
|
|
|
27,397
|
|
|
2023
|
|
16,540
|
|
|
3,768
|
|
|
20,308
|
|
|
2024
|
|
14,290
|
|
|
2,271
|
|
|
16,561
|
|
|
2025
|
|
12,793
|
|
|
1,346
|
|
|
14,139
|
|
|
Thereafter
|
|
41,638
|
|
|
1,843
|
|
|
43,481
|
|
|
Total
|
|
$
|
113,782
|
|
|
$
|
15,956
|
|
|
$
|
129,738
|
|
As of June 30, 2021, we have subleased certain office space that is included in the above table to third parties. As of June 30, 2021, the aggregate sublease income to be recognized during the remaining lease terms is $11.6 million, with approximately an average of $1.9 million annually for each of the next five fiscal years and approximately $2.2 million thereafter.
Our operating lease cost was approximately $6.7 million and $20.7 million for the three and nine months ended June 30, 2021, respectively, and $7.7 million and $23.2 million for the three and nine months ended June 30, 2020, respectively. Operating lease payments included within operating cash flows were $7.8 million and $22.4 million for the three and nine months ended
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
June 30, 2021, respectively, and $8.8 million and $24.8 million for the three and nine months ended June 30, 2020, respectively.
18. Segment and Geographic Information
Our Chief Operating Decision Maker ("CODM") regularly reviews segment revenues and segment profits for performance evaluation and resources allocation. Segment revenues include certain acquisition-related adjustments for revenues that would otherwise have been recognized without the acquisition. Segment profits reflect controllable costs directly related to each segment and the allocation of certain corporate expenses such as corporate sales and marketing expenses and research and development project costs that benefit multiple segments. Certain items such as stock-based compensation, amortization of intangible assets, acquisition-related costs, net, restructuring and other charges, net, other expenses, net and certain unallocated corporate expenses are excluded from segment profits, which allow for more meaningful comparisons to the financial results of the historical operations for performance evaluation and resources allocation by our CODM.
•The Healthcare segment is primarily engaged in providing clinical speech and clinical language understanding solutions that improve the clinical documentation process, from capturing the complete patient record to improving clinical documentation and quality measures for reimbursement.
•The Enterprise segment is primarily engaged in using speech, natural language understanding, and artificial intelligence to provide automated customer solutions and services for voice, mobile, web and messaging channels.
•The Other segment consists primarily of voicemail transcription services.
As more fully described in Note 4, on November 17, 2020, we entered into the Agreement to sell the Business, comprised of our medical transcription and EHR implementation businesses. Effective the first quarter of fiscal year 2021, the results of operations of the Business are included within discontinued operations for all periods presented. Our Healthcare segment revenue and segment profit for the historical periods have been recast to reflect the forementioned change.
We do not track our assets by segment. Consequently, it is not practical to show assets or depreciation by segment. The following table presents segment results along with a reconciliation of segment profit to Loss before income taxes (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Segment revenues:
|
|
|
|
|
|
|
|
|
Healthcare
|
$
|
195,199
|
|
|
$
|
160,085
|
|
|
$
|
606,423
|
|
|
$
|
544,877
|
|
|
Enterprise
|
137,106
|
|
|
130,392
|
|
|
406,255
|
|
|
406,310
|
|
|
Other
|
4,277
|
|
|
8,143
|
|
|
16,634
|
|
|
25,167
|
|
|
Total segment revenues
|
$
|
336,582
|
|
|
$
|
298,620
|
|
|
$
|
1,029,312
|
|
|
$
|
976,354
|
|
|
Less: acquisition-related revenues adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
(301)
|
|
|
Total revenues
|
$
|
336,582
|
|
|
$
|
298,620
|
|
|
$
|
1,029,312
|
|
|
$
|
976,053
|
|
|
Segment profit:
|
|
|
|
|
|
|
|
|
Healthcare
|
$
|
59,977
|
|
|
$
|
48,693
|
|
|
$
|
220,015
|
|
|
$
|
175,683
|
|
|
Enterprise
|
38,898
|
|
|
36,511
|
|
|
112,993
|
|
|
116,321
|
|
|
Other
|
2,005
|
|
|
5,032
|
|
|
9,405
|
|
|
13,980
|
|
|
Total segment profit
|
$
|
100,880
|
|
|
$
|
90,236
|
|
|
$
|
342,413
|
|
|
$
|
305,984
|
|
|
Corporate expenses and other, net
|
(27,479)
|
|
|
(28,269)
|
|
|
(84,317)
|
|
|
(87,388)
|
|
|
Acquisition-related revenues
|
—
|
|
|
—
|
|
|
—
|
|
|
(301)
|
|
|
Stock-based compensation
|
(34,654)
|
|
|
(32,487)
|
|
|
(104,436)
|
|
|
(95,023)
|
|
|
Amortization of intangible assets
|
(15,971)
|
|
|
(14,932)
|
|
|
(46,447)
|
|
|
(45,777)
|
|
|
Acquisition-related costs, net
|
(699)
|
|
|
(758)
|
|
|
(2,693)
|
|
|
(3,656)
|
|
|
Restructuring and other charges, net
|
(17,247)
|
|
|
(1,871)
|
|
|
(28,292)
|
|
|
(14,730)
|
|
|
Other expenses, net
|
(35,519)
|
|
|
(22,438)
|
|
|
(80,103)
|
|
|
(79,912)
|
|
|
Loss before income taxes
|
$
|
(30,689)
|
|
|
$
|
(10,519)
|
|
|
$
|
(3,875)
|
|
|
$
|
(20,803)
|
|
NUANCE COMMUNICATIONS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
No country outside of the United States provided greater than 10% of our total revenues. Revenues, classified by the major geographic areas in which our customers are located, were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
United States
|
$
|
271,114
|
|
|
$
|
232,340
|
|
|
$
|
821,677
|
|
|
$
|
775,876
|
|
|
International
|
65,468
|
|
|
66,280
|
|
|
207,635
|
|
|
200,177
|
|
|
Total revenues
|
$
|
336,582
|
|
|
$
|
298,620
|
|
|
$
|
1,029,312
|
|
|
$
|
976,053
|
|
19. Supplemental Cash Flow Information
Cash paid for Interest and Income Taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Nine Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
(Dollars in thousands)
|
|
Interest paid
|
$
|
20,731
|
|
|
$
|
22,068
|
|
|
$
|
42,065
|
|
|
$
|
49,897
|
|
|
Income taxes paid
|
$
|
1,847
|
|
|
$
|
12,474
|
|
|
$
|
9,633
|
|
|
$
|
24,857
|
|
20. COVID-19 Pandemic
The novel coronavirus ("COVID-19") pandemic has disrupted economic markets, and the future economic impact, duration and spread of COVID-19 is still uncertain at this time. The COVID-19 pandemic adversely affected our results of operations and liquidity for fiscal year 2020, and may continue to adversely impact our business, results of operations, cash flows and financial condition. While we have not experienced significant disruptions to our ability to conduct business thus far as a result of the pandemic, we are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications.
The full extent to which the coronavirus pandemic will impact our business, operations, and financial results in the future will depend on numerous evolving factors and may not be accurately predicted at this time.
21. Subsequent Events
In addition to the debt holder exercises disclosed in Note 11, subsequent to our period end of June 30, 2021, certain debt holders have exercised their right to convert $21.4 million notional amount of our 1.0% 2035 Debentures for an estimated $21.4 million in cash and 0.5 million shares of common stock for an estimated total consideration of $48.7 million, and $2.8 million notional amount of our 1.5% 2035 Debentures for an estimated $2.8 million in cash and 0.1 million shares of common stock for an estimated total consideration of $7.5 million. The settlement of these conversions is expected to occur in the fourth quarter of fiscal year 2021.