Nuance Announces First Fiscal Quarter 2008 Results
Strong Demandfor Speech Solutions and Rapid Progress in Acquisition Integration
Drive Results above Expectations
BURLINGTON, Mass., February 11,2008–Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results for the first fiscal quarter ended December 31, 2007.
Nuance reported revenues of $195.0 million in the quarter ended December 31, 2007, a 46 percent increase over revenues of $133.4 million in the quarter ended December 31, 2006. 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, the Company reported non-GAAP revenue of approximately $209.1 million which includes approximately $14 million in revenue lost to purchase accounting largely in conjunction with the Company’s acquisitions of Tegic, Viecore and VoiceSignal. Using the non-GAAP measure, revenues grew 55 percent over the same quarter last year.
On a GAAP basis, Nuance recognized a net loss of $15.4 million, or $(0.08) per share, in the quarter ended December 31, 2007, compared with a net loss of $1.2 million, or $(0.0 1) per share, in the quarter ended December 31, 2006. Using a non-GAAP measure, Nuance reported non-GAAP net income of $38.8 million, or $0.18 per diluted share, for the period ending December 31, 2007, compared to non¬GAAP net income of $24.6 million, or $0.13 per diluted share, in the quarter ended December 31, 2006.
The non-GAAP revenue amount includes revenue lost to purchase accounting largely in conjunction with the Company’s acquisitions of Tegic, Viecore and VoiceSignal. The non-GAAP net income amount excludes non-cash taxes and interest, amortization of intangible assets, non-cash amortization of stock-based compensation, and acquisition-related transition and integration costs and charges. See “GAAP to non-GAAP Reconciliation” below for further information on the Company’s non-GAAP measures.
“Nuance delivered a strong start to fiscal 2008, carrying forward the momentum and favorable trends of 2007 into our first quarter performance,” said Paul Ricci, chairman and CEO of Nuance. “In particular, we experienced strong demand for our solutions, across markets, especially within the mobile industry and in healthcare organizations. The successful integration and performance of recently acquired businesses contributed handsomely to our results and reinforced our ability to extend Nuance’s leadership and to achieve our strategic and operational objectives.”
Consistent with the Company’s strategy and recent trends, highlights from the quarter include:
- Enterprise Speech – The Company’s enterprise speech revenues were up sequentially and year-over-year owing to expanded customer engagements and contributions from the recent acquisitions of BeVocal and Viecore. In particular, the Nuance On-Demand unit contributed robust revenues with its hosted, transaction-oriented solutions that were fueled by increased traffic during the holiday season. In addition, the team also secured important design wins for new offerings within the quarter and customer satisfaction remains strong as evidenced by the record bookings from the installed base of customers. Important agreements, across the Enterprise division, with new and existing customers include AT&T, Deutsche Bank, Deutsche Telecom, Sprint, the U.S. Census Bureau and XM Radio.
- Mobile and Embedded Speech – Nuance revenues for its mobile and embedded solutions were a record for the company, surpassing $43 million, owing to strong organic growth and contributions from its VoiceSignal and Tegic acquisitions. The company continues to benefit from active product cycles and consumer demand for devices and applications from manufacturers, including Ford, LG, Motorola, Nokia, RIM, Samsung and TomTom. In the quarter, Nuance expanded its mobile presence through a partnership with Google and the Open Handset Alliance and through engagements with carriers and mobile operators for new, integrated services to be announced later this year. In addition, Nuance speech solutions continue to gain mainstream visibility through product launches and broadcast advertising for applications such as voice control in Ford Sync and voice-based mobile search with the Palm Centro.
- Healthcare Dictation and Transcription – Nuance’s healthcare dictation revenues were robust in the quarter as interest and demand for Nuance’s dictation and transcription solutions continued to grow. In particular, the company experienced strong performance with its iChart on-demand transcription solution. Important contracts in the quarter with new and existing customers include Adventist, New England Medical Center, St. Joseph’s Health and Spectrum Health.
- PDF and Document Imaging – Nuance’s PDF and imaging solutions recorded revenues in line with expectations as the company experienced solid performance from its OEM partners, including Brother, Canon, HP and Xerox. In addition, the Company continued to expand its site license program, securing agreements with State Farm, Total France and the U.S. Army.
- SaaS and Subscription-based Revenues – The Company continued to experience an acceleration in its revenues delivered as software-as-a-service and through subscription or transaction-based models. Across its enterprise, mobile and healthcare businesses, Nuance saw approximately 19 percent of its revenue delivered in this form, compared to 9 percent in the same period last year.
- Operational Achievement – Nuance sustained a focus on disciplined acquisition integration, cost synergies and expense controls, which resulted in improvements and leverage in its non-GAAP operating margins. Cash flow from operations was approximately $41 million in the first quarter 2008, up 57 percent over the same period last year.
About Nuance Communications, Inc
Nuance Communications, Inc. (NASDAQ: NUAN) is a 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.
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