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Nuance Communications, Inc. (Nasdaq: NUAN), formerly ScanSoft, Inc., today announced financial results for the fourth quarter ended September 30, 2005. On October 18, 2005, the Company changed its name from ScanSoft, Inc. to Nuance Communications, Inc. and on November 21, 2005, the Company changed its ticker symbol from "SSFT" to "NUAN".
Nuance reported fiscal fourth quarter revenues of $61.9 million, a 47 percent increase over revenues of $42.0 million in the quarter ended September 30, 2004. Nuance recognized a net loss of $7.7 million, or $0.06 per share, in the quarter ended September 30, 2005 compared with a net loss of $6.2 million, or per share, in the comparable period 2004. These GAAP figures include revenues and expenses associated with the acquisition of the former Nuance for the period following September 15, 2005.
In addition to using GAAP results in evaluating the business, management also believes it is useful to evaluate results using non-GAAP measures. Using a non-GAAP measure, Nuance reported revenues of $59.8 million for the quarter ended September 30, 2005, a 42 percent increase over revenues of $42.0 million for the same period 2004. Nuance reported non-GAAP net income of $7.4 million, or $0.06 per diluted share, for the period ending September 30, 2005, compared to a net loss of $300,000, or breakeven per share, in the same period 2004.
These non-GAAP figures exclude revenues and expenses associated with the acquisition of the former Nuance for the period following September 16, 2005; Nuance-related restructuring and other charges; and as applicable, non-cash taxes, interest and stock-based compensation, amortization of intangible assets, and other charges. See "GAAP to non-GAAP Reconciliation" below for further information on the Company's non-GAAP measure.
"The Company had a solid finish to the year, producing strong organic revenue growth of more than 30 percent in the quarter and experiencing strong performance across nearly all major product areas," said Paul Ricci, chairman and CEO, of Nuance. "Our sustained operational performance, strong revenue growth and an increasing demand for our speech solutions provide us with confidence and momentum as we begin fiscal 2006, determined to extend our market leadership, provide value to our customers and deliver results to our shareholders."
Consistent with the Company's strategy and recent trends, highlights from the quarter include:
-- Robust Performance in Network Speech - The Company generated strong revenue from its network speech technologies, applications and services, benefiting from new and expanded agreements with leading businesses and telecommunications providers, including Cox Communications, Empire Blue Cross Blue Shield, the Social Security Administration, T-Mobile, Verizon Wireless and Wal*Mart.
-- Demand for Dictation Solutions - The Company saw continued demand and significant growth for its Dragon Dictation Solutions. Through its Dragon NaturallySpeaking and Dragon MT Workflow, Nuance continued to generate customer demand in its core markets and secured a number of volume license agreements both in North America and internationally as organizations, especially in the healthcare and legal fields, experience the value these speech recognition solutions provide.
-- Design Wins for Embedded Speech - Nuance continued to secure important design wins with automotive and handset manufacturers as they utilize speech to differentiate their offerings and meet growing demand for improved interfaces. In particular, the Company believes handsets present opportunities for growth and in the quarter signed agreements with Kyocera, Nokia, Samsung and Tegic, a subsidiary of AOL.
-- Expanded Speech Portfolio - The Company completed the acquisition of the former Nuance, bringing together the industry's most comprehensive portfolio of speech applications, technologies and expertise that will enable customers to effectively deploy innovative speech-based solutions. As a result, the Company has the technical resources and intellectual property required to develop new and innovative speech solutions that deliver enhanced value to customers.
-- Successful OmniPage Launch - The August 2005 launch of ScanSoft OmniPage 15, the world's most popular optical character recognition (OCR) and document conversion software, contributed to the strong performance for the Company's imaging products. The success of OmniPage 15 is due in large part to significant enhancements to the features that matter most to OCR users - accuracy and speed.
Nuance to Host Quarterly Conference Call and Webcast
In conjunction with today's announcement, Nuance will broadcast its quarterly conference call over the Internet at 4:30 p.m. ET. Those who wish to listen to the live broadcast should visit the Investor Relations section of the Company's Web site at www.nuance.com at least 15 minutes prior to the event and follow the instructions provided to ensure that the necessary audio applications are downloaded and installed. The conference call can also be heard via telephone by dialing (800) 230-1074 or (612) 288-0318 five minutes prior to the call and referencing conference code 804112. A replay of the call will be available within 24 hours of the announcement. To access the replay, dial (800) 475-6701 or (320) 365-3844 and refer to access code 804112.
About Nuance Communications, Inc.
Nuance (Nasdaq: NUAN) is the leading provider of speech and imaging solutions for businesses and consumers around the world. Its technologies, applications and services make the user experience more compelling by transforming the way people interact with information and how they create, share and use documents. Every day, millions of users and thousands of businesses experience Nuance's proven applications. For more information, please visit www.nuance.com.
Trademark reference: Nuance, the Nuance logo, ScanSoft, Dragon NaturallySpeaking and OmniPage are registered trademarks or trademarks of Nuance Communications, Inc. or its affiliates in the United States and other countries. All other company or product names mentioned may be the trademarks of their respective owners.
Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in 000's, except per share amounts)
Unaudited
Three months ended Twelve months ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Product licenses $ 45,479 $ 29,924 $ 171,198 $ 132,848
Professional services 16,404 12,080 61,190 40,572
Related parties - - - 4,358
-------- -------- --------- ---------
Total revenue 61,883 42,004 232,388 177,778
Costs and expenses:
Cost of product licenses 5,608 3,625 20,368 15,211
Cost of professional services 10,045 7,989 39,553 28,565
Cost of revenue from
amortization of intangible
assets 1,890 2,810 9,150 11,466
-------- -------- --------- ---------
Total costs of revenue 17,543 14,424 69,071 55,242
Gross Margin 44,340 27,580 163,317 122,536
Research and development 9,725 8,333 38,949 35,031
Selling and marketing 21,132 16,172 77,925 66,618
General and administrative 9,711 7,470 30,208 22,584
Amortization of other
intangible assets 1,253 664 3,984 2,818
Stock based compensation 1,062 451 2,996 1,476
Restructuring and other
charges 4,485 - 7,223 1,428
-------- -------- --------- ---------
Total operating expenses 47,368 33,090 161,285 129,955
Income (loss) from operations (3,028) (5,510) 2,032 (7,419)
Other income (expense), net (179) (295) (637) (33)
-------- -------- --------- ---------
Income (loss) before income
taxes (3,207) (5,805) 1,395 (7,452)
Provision for income taxes 4,509 349 6,812 591
-------- -------- --------- ---------
Net income (loss) $ (7,716) $ (6,154) $ (5,417) $ (8,043)
======== ======== ========= =========
Net Income (loss) per share:
basic & diluted $ (0.06) $ (0.06) $ (0.05) $ (0.08)
======== ======== ========= =========
Weighted average common
shares outstanding:
basic & diluted 118,816 104,604 109,540 103,604
======== ======== ========= =========
Nuance Communications, Inc.
Condensed Consolidated Balance Sheet
(Unaudited, in thousands)
Assets September 30, September 30,
2005 2004
------------- -----------
Current assets:
Cash and cash equivalents $ 71,687 $ 22,963
Marketable Securities 24,127 7,373
Accounts receivable, net 69,540 36,523
Prepaid expenses and other current
assets 9,548 6,629
------------ -----------
Total current assets 174,902 73,488
Goodwill 459,441 246,424
Long term marketable securities - 17,355
Other intangible assets, net 92,350 43,898
Property and equipment, net 14,333 7,985
Other assets 24,299 3,503
------------ -----------
Total assets $ 765,325 $ 392,653
============ ===========
Liabilities and stockholders' equity
Current liabilities:
Short term notes payable $ 27,711 $ 457
Accounts payable and accrued expenses 78,559 29,302
Deferred revenue 24,120 10,529
Deferred acquisition payment 16,414 -
Other current liabilities 15,041 5,260
------------ -----------
Total current liabilities 161,845 45,548
------------ -----------
Long term portion of deferred revenue 290 147
Long term notes payable 35 27,700
Deferred acquisition payment 16,266 -
Other long term liabilities 72,225 17,513
------------ -----------
Total liabilities 250,661 90,908
Stockholders' equity 514,664 301,745
------------ -----------
Total liabilities and stockholders'
equity $ 765,325 $ 392,653
============ ===========
Nuance Communications, Inc.
Reconciliation of Supplemental Financial Information
(in 000's, except per share amounts)
Unaudited
Three months ended Twelve months ended
September 30, September 30,
------------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
GAAP Total revenue $ 61,883 $ 42,004 $232,388 $177,778
Former Nuance revenue (2,118) - (2,118) -
-------- -------- -------- --------
Total Non-GAAP revenue $ 59,765 $ 42,004 $230,270 $177,778
GAAP net income (loss) $ (7,716) $ (6,154) $ (5,417) $ (8,043)
Cost of revenue from
amortization of intangible
assets 1,774 2,810 9,034 11,466
Amortization of other
intangible assets 1,105 664 3,836 2,818
Restructuring and other charges 4,485 - 7,223 1,428
Non-cash stock based compensation 858 451 2,792 1,476
Non-cash interest expense 251 - 889 199
Non-cash taxes 4,410 165 5,418 1,179
Former Nuance related expense 1,968 - 1,968 -
Redundant costs associated with
Independent Accountants (G&A) - 400 - 400
Costs associated with
Speechworks restatement (G&A) 250 1,321 539 1,321
-------- -------- -------- --------
Non-GAAP net income (loss) $ 7,385 $ (343) $ 26,282 $ 12,244
======== ======== ======== ========
Non-GAAP net income (loss)
basic: $ 0.06 $ (0.00) $ 0.24 $ 0.12
======== ======== ======== ========
Non-GAAP net income (loss)
diluted: $ 0.06 $ (0.00) $ 0.22 $ 0.11
======== ======== ======== ========
Shares used in computing non-
GAAP net income (loss) per share:
Weighted average common shares:
basic 118,816 104,604 109,540 103,604
======== ======== ======== ========
Weighted average common and
common equivalent shares:
diluted 128,616 112,384 119,111 112,537
======== ======== ======== ========
This press release and the reconciliation contained herein disclose certain financial measures that may be considered non-GAAP financial measures because they exclude, as applicable, revenues and expenses associated with the acquisition of the former Nuance for the period following September 15, 2005; Nuance-related restructuring and other charges; and as applicable, non-cash taxes, interest and stock-based compensation, amortization of intangible assets, and other charges. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures are provided to enhance the user's overall understanding of our current financial performance and our prospects for the future. Management believes that these non-GAAP financial measures present a useful measure of our operating performance because they exclude identified non-cash and restructuring charges. Management uses these measures for evaluating historical performance and for forecasting and planning for future periods. These measures, however, should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with generally accepted accounting principles. The non-GAAP measures included in our press release have been reconciled to the nearest GAAP measure.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
Statements in this document regarding the future demand for, performance of, and opportunities for growth in Nuance's speech solutions and productivity applications; the growth of the speech industry and the demand for speech solutions; the continued strength of existing products, services and relationships as well as the development and introduction of new products, services and relationships, the integration planning efforts, and any other statements about Nuance managements' future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words "believes," "plans," "anticipates," "expects," or "estimates" or similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including: fluctuations in demand for Nuance's existing and future products; economic conditions in the United States and abroad; Nuance's ability to control and successfully manage its expenses, inventory and cash position; the effects of competition, including pricing pressure; possible defects in Nuance's products and technologies; the ability of Nuance's to successfully integrate operations and employees; the ability to realize anticipated synergies from acquired businesses; and the other factors described in Nuance's Annual Report on Form 10KT for the year ended September 30, 2004 and Nuance's most recent quarterly report filed with the SEC. Nuance disclaims any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.
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