Nuance Announces Fourth Quarter and Fiscal Year 2019 Results


  • Revenue growth at high end of range, beating operating margin and EPS guidance
  • Strength in Dragon Medical cloud offerings, exceeding full-year ARR guidance with 38% growth
  • Successful completion of October 1st Automotive spin
  • Exited year as a simpler, more growth-focused company

BURLINGTON, Mass., Nov. 20, 2019 (GLOBE NEWSWIRE) -- Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results for its fourth quarter and fiscal year ended September 30, 2019.

ASC 606 Q4 2019 Performance Summary (1)

  • GAAP revenue of $470.7 million and GAAP earnings per diluted share of $0.37.
  • Non-GAAP revenue of $472.0 million and non-GAAP earnings per diluted share of $0.33.

ASC 605 Q4 2019 Performance Summary (1)

  • ASC 605 revenue of $487.8 million and earnings per diluted share of $0.42.
  • Non-GAAP revenue of $489.3 million and non-GAAP earnings per diluted share $0.34.

(1) As a reminder, effective October 1, 2018, Nuance adopted the ASC 606 revenue recognition standard using the modified retrospective approach. Under this adoption methodology, the Company does not recast its historical financials to reflect the implementation of ASC 606. Results will be presented for Q4 ‘19 under both ASC 605 and 606 methodologies and all relevant year-over-year financial comparisons and trends will be on an ASC 605 basis only. In addition, due to the sale of the Imaging business, the Company is presenting results on a continuing operations basis, unless otherwise noted.

“We completed this transformational year on a strong footing, executing on our strategic and financial objectives,” said Mark Benjamin, Chief Executive Officer at Nuance. “We posted our sixth consecutive quarter of solid results, meeting or beating our expectations, including 38% full-year ARR growth in our Dragon Medical cloud offerings. This is a testament to the validity of our strategy and the dedication of our employees. As part of our ongoing effort to simplify our business, we successfully completed the spin-off of our Automotive business, as Cerence began trading as an independent public company on October 2. This followed our accelerated exit from our non-core Subscription Revenue Services (SRS) business. These significant steps enabled us to focus more closely on the growth opportunities, particularly in our cloud businesses, within our Healthcare and Enterprise segments and we are very excited about our progress and initiatives to drive growth moving forward.”

Mr. Benjamin concluded, “We look forward to sharing more details about these plans at our upcoming Investor Day on December 10, 2019 in New York City.”

ASC 605 Q4 2019 Performance Summary
ASC 605 Q4 2019 results for continuing operations include:

  • ASC 605 revenue of $487.8 million, compared to $479.4 million in the same period last year.
  • Non-GAAP revenue of $489.3 million, compared to $482.1 million in the same period last year.
  • Organic revenue growth of 2% compared to the same period last year.
  • Recurring revenue of $376.9 million, up 650 basis points year over year.
  • GAAP EPS of $0.42, compared to $(0.16) in the same period last year.
  • Non-GAAP EPS of $0.34, compared to $0.33 in the same period last year.
  • GAAP net income of $121.8 million, compared to $(44.5) million in the same period last year.
  • Non-GAAP net income of $98.3 million, compared to $96.0 million in the same period last year.
  • GAAP operating margin of 9.2%, compared to (1.7%) in the same period last year.
  • Non-GAAP operating margin of 28.3%, compared to 29.4% in the same period last year.
  • Operating cash flows from continuing operations was $104.2 million, or 106% of non-GAAP net income, compared to $134.8 million, or 140% of non-GAAP income in the same period last year.

Capital Allocation
In the fourth quarter of 2019, we repurchased approximately 0.4 million shares of common stock at an average price of $15.34. As of September 30, 2019, and since the beginning of the fiscal year, we repurchased a total of 8.2 million shares of our common stock, at an average price of $15.55 per share, for an aggregate consideration of $126.9 million. During Q1 2020, between October 1, 2019 and November 15, 2019, we repurchased 3.3 million shares of our common stock, at an average price of $15.20 per share, for an aggregate consideration of $50.0 million.  This brings our total share repurchase to 11.5 million shares since the beginning of fiscal 2019 and 21.2 million since May 2018 or 7.2% of shares outstanding. There is $380.4 million still available under our existing authorization for share repurchases.

For a complete discussion of Nuance’s results and business outlook, please see the Company’s Prepared Remarks document available at http://www.nuance.com/earnings-results/.

Please refer to the “Discussion of Non-GAAP Financial Measures,” and “GAAP to Non-GAAP Reconciliations,” included elsewhere in this release, for more information regarding the Company’s use of non-GAAP financial measures.

Conference Call and Prepared Remarks
Nuance will host a conference call today at 5:00 p.m. ET. To participate, please access the live webcast here, or dial (877) 273-6124 (US and Canada) or (647) 689-5393 (international) and reference code 4188999.

Nuance will provide a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts additional detail for analyzing the results. The remarks will be available at http://investors.nuance.com/ and will not be read on the call.

About Nuance Communications, Inc.
Nuance Communications (NASDAQ: NUAN) is the pioneer and leader in conversational AI innovations that bring intelligence to everyday work and life. The company delivers solutions that understand, analyze, and respond to people – amplifying human intelligence to increase productivity and security. With decades of domain and AI expertise, Nuance works with thousands of organizations globally across healthcare, financial services, telecommunications, government, and retail – to create stronger relationships and better experiences for their customers and workforce. For more information, please visit www.nuance.com.

Trademark reference: Nuance and the Nuance logo are registered trademarks or trademarks of Nuance Communications, Inc. or its affiliates in the United States and/or other countries. All other trademarks referenced herein are the property of their respective owners.

Safe Harbor and Forward-Looking Statements
Statements in this document regarding future performance and our management’s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” "intends" or “estimates” or similar expressions) should also be considered to be forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward- looking statements, including but not limited to: the effects of competition, including pricing pressure, and changing business models in the markets and industries in which we operate; fluctuations in demand for our existing and future products; changes to economic, political, and regulatory conditions in the United States and internationally; our ability to attract and retain key personnel; further unanticipated costs resulting from our FY17 malware incident including potential costs associated with governmental investigations that may result from the incident; our ability to control and successfully manage our expenses and cash position; potential future cybersecurity and data privacy incidents or breaches; our ability to comply with applicable domestic and international laws and policies; fluctuating currency rates; possible quality issues in our products and technologies; our ability to realize anticipated synergies from acquired businesses, to cut stranded costs related to divested businesses, and to capture the expected value from strategic transactions including the spin-off of our Automotive business; and the other factors described in our most recent Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

Discussion of non-GAAP Financial Measures
We believe that providing the non-GAAP ("Generally Accepted Accounting Principles") information to investors, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors not only to better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information included in this press release should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. Our annual financial plan is prepared both on a GAAP and non-GAAP basis, and the non-GAAP annual financial plan is approved by our board of directors. Continuous budgeting and forecasting for revenue and expenses are conducted on a consistent non-GAAP basis (in addition to GAAP) and actual results on a non-GAAP basis are assessed against the non-GAAP annual financial plan. The board of directors and management utilize these non-GAAP measures and results (in addition to the GAAP results) to determine our allocation of resources. In addition, and as a consequence of the importance of these measures in managing the business, we use non-GAAP measures and results in the evaluation process to establish management’s compensation. For example, our annual bonus program payments are based upon the achievement of consolidated non-GAAP revenue and consolidated non-GAAP earnings per share financial targets. We consider the use of non-GAAP revenue helpful in understanding the performance of our business, as it excludes the purchase accounting impact on acquired deferred revenue and other acquisition-related adjustments to revenue. We also consider the use of non-GAAP earnings per share helpful in assessing the organic performance of the continuing operations of our business. By organic performance we mean performance as if we had owned an acquired business in the same period a year ago. By constant currency organic performance, we mean performance excluding the effect of current foreign currency rate fluctuations. By continuing operations, we mean the ongoing results of the business excluding certain unplanned costs. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements.

Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and twelve months ended September 30, 2019 and 2018, our management has either included or excluded items in seven general categories, each of which is described below.

Acquisition-related revenue and cost of revenue.
We provide supplementary non-GAAP financial measures of revenue that include revenue that we would have recognized but for the purchase accounting treatment of acquisition transactions. Non-GAAP revenue also includes revenue that we would have recognized had we not acquired intellectual property and other assets from the same customer. Because GAAP accounting requires the elimination of this revenue, GAAP results alone do not fully capture all of our economic activities. These non-GAAP adjustments are intended to reflect the full amount of such revenue. We include non-GAAP revenue and cost of revenue to allow for more complete comparisons to the financial results of historical operations, forward-looking guidance and the financial results of peer companies. We believe these adjustments are useful to management and investors as a measure of the ongoing performance of the business because, although we cannot be certain that customers will renew their contracts, we have historically experienced high renewal rates on maintenance and support agreements and other customer contracts. Additionally, although acquisition-related revenue adjustments are non-recurring with respect to past acquisitions, we generally will incur these adjustments in connection with any future acquisitions.

Acquisition-related costs, net.
In recent years, we have completed a number of acquisitions, which result in operating expenses, which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure, which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

These acquisition-related costs fall into the following categories: (i) transition and integration costs; (ii) professional service fees and expenses; and (iii) acquisition-related adjustments. Although these expenses are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions. These categories are further discussed as follows:

  1. Transition and integration costs. Transition and integration costs include retention payments, transitional employee costs, and earn-out payments treated as compensation expense, as well as the costs of integration-related activities, including services provided by third parties.
  2. Professional service fees and expenses. Professional service fees and expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities.
  3. Acquisition-related adjustments. Acquisition-related adjustments include adjustments to acquisition-related items that are required to be marked to fair value each reporting period, such as contingent consideration, and other items related to acquisitions for which the measurement period has ended, such as gains or losses on settlements of pre-acquisition contingencies.

Amortization of acquired intangible assets.
We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets.

Non-cash expenses.
We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; and (ii) non-cash interest. These items are further discussed as follows:

  1. Stock-based compensation. Because of varying valuation methodologies, subjective assumptions and the variety of award types, we believe that excluding stock-based compensation allows for more accurate comparisons of operating results to peer companies, as well as to times in our history when stock-based compensation was more or less significant as a portion of overall compensation than in the current period. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and the options and restricted awards granted are influenced by the Company’s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods.
  2. Non-cash interest. We exclude non-cash interest because we believe that excluding this expense provides senior management, as well as other users of the financial statements, with a valuable perspective on the cash-based performance and health of the business, including the current near-term projected liquidity. Non-cash interest expense will continue in future periods.

Other expenses.
We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, in order to measure operating performance and current and future liquidity both with and without these expenses. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as restructuring charges, asset impairments and other charges (credits), net, and losses from extinguishing our convertible debt. Other items such as consulting and professional services fees related to assessing strategic alternatives and our transformation programs, implementation of the new revenue recognition standard (ASC 606), and expenses associated with the malware incident and remediation thereof are also excluded.

Non-GAAP income tax provision.
Effective Q2 2017, we changed our method of calculating our non-GAAP income tax provision. Under the prior method, we calculated our non-GAAP tax provision using a cash tax method to reflect the estimated amount we expected to pay or receive in taxes related to the period, which is equivalent to our GAAP current tax provision. Under the new method, our non-GAAP income tax provision is determined based on our non-GAAP pre-tax income. The tax effect of each non-GAAP adjustment, if applicable, is computed based on the statutory tax rate of the jurisdiction to which the adjustment relates. Additionally, as our non-GAAP profitability is higher based on the non-GAAP adjustments, we adjust the GAAP tax provision to remove valuation allowances and related effects based on the higher level of reported non-GAAP profitability. We also exclude from our non-GAAP tax provision certain discrete tax items as they occur, which in fiscal year 2019 also includes certain impacts from the Tax Cuts and Jobs Act of 2017.

Contact Information

For Investors 
Tracy Krumme 
Nuance Communications, Inc. 
Tel: 781-565-4334 
Email: tracy.krumme@nuance.com

For Press
Nancy Scott
Nuance Communications, Inc.
Tel: 781-565-4130
Email: nancy.scott@nuance.com

Financial Tables Follow



Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
     
 Three Months Ended September 30,
  2019  2019  2018
 (ASC 606) (ASC 605)
 (ASC 605)
Revenues:       
Hosting and professional services$273,069  $281,184  $260,684 
Product and licensing 131,877   146,245   156,063 
Maintenance and support 65,712   60,327   62,685 
  Total revenues 470,658   487,756   479,432 
          
Cost of revenues:         
Hosting and professional services 164,985   164,631   161,016 
Product and licensing 11,436   18,486   14,932 
Maintenance and support 8,645   8,636   10,708 
Amortization of intangible assets 9,133   9,133   12,142 
  Total cost of revenues 194,199   200,886   198,798 
          
Gross profit 276,459   286,870   280,634 
          
Operating expenses:         
Research and development 74,112   74,112   76,524 
Sales and marketing 80,160   85,000   78,475 
General and administrative 44,116   44,116   51,262 
Amortization of intangible assets 16,304   16,304   16,903 
Acquisition-related costs, net 2,686   2,686   3,256 
Restructuring and other charges, net 19,797   19,797   29,234 
Impairment of goodwill and other intangible assets -   -   33,034 
  Total operating expenses 237,175   242,015   288,688 
          
Income from operations 39,284   44,855   (8,054)
          
Other expenses, net (27,563)  (27,563)  (31,357)
          
Income (loss) before income taxes 11,721   17,292   (39,411)
          
(Benefit) provision for income taxes (96,408)  (104,474)  5,097 
          
Net income (loss) from continuing operations 108,129   121,766   (44,508)
Net income from discontinued operations -   -   9,442 
Net income (loss)$108,129  $121,766  $(35,066)
          
Net income (loss) per common share - basic:         
Continuing operations$0.38  $0.43  $(0.16)
Discontinued operations       0.03 
Total net income (loss) per basic common share$0.38  $0.43  $(0.13)
          
Net income (loss) per common share - diluted:         
Continuing operations$0.37  $0.42  $(0.16)
Discontinued operations      $0.03 
Total net income (loss) per diluted common share$0.37  $0.42  $(0.13)
          
Weighted average common shares outstanding:         
Basic 285,754   285,754   287,052 
Diluted 291,598   291,598   287,052 
          



Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Unaudited
       
 Twelve Months Ended September 30, 
  2019   2019   2018  
 (ASC 606) (ASC 605) (ASC 605) 
Revenues:      
Hosting and professional services$1,044,670  $1,081,964  $1,045,722  
Product and licensing 509,226   533,096   544,019  
Maintenance and support 269,196   243,665   252,557  
  Total revenues 1,823,092   1,858,725   1,842,298  
       
Cost of revenues:      
Hosting and professional services 636,189   639,137   678,378  
Product and licensing 73,333   67,442   56,799  
Maintenance and support 33,564   33,817   39,324  
Amortization of intangible assets 36,833   36,833   50,886  
  Total cost of revenues 779,919   777,229   825,387  
       
Gross profit 1,043,173   1,081,496   1,016,911  
       
Operating expenses:      
Research and development 275,886   275,886   278,735  
Sales and marketing 303,503   309,366   311,712  
General and administrative 175,008   175,008   225,884  
Amortization of intangible assets 66,730   66,730   73,997  
Acquisition-related costs, net 8,909   8,909   16,093  
Restructuring and other charges, net 80,465   80,465   57,026  
Impairment of goodwill and other intangible assets -   -   170,941  
  Total operating expenses 910,501   916,364   1,134,388  
       
Income (loss) from operations 132,672   165,132   (117,477) 
       
Other expenses, net (106,928)  (106,928)  (129,747) 
       
Income (loss) before income taxes 25,744   58,204   (247,224) 
       
Benefit for income taxes (88,594)  (86,631)  (62,320) 
       
Net income (loss) from continuing operations 114,338   144,835   (184,904) 
Net income from discontinued operations 99,472   120,919   24,976  
Net income (loss)$213,810  $265,754  $(159,928) 
       
Net income (loss) per common share - basic:      
Continuing operations$0.40  $0.51  $(0.63) 
Discontinued operations 0.35   0.42   0.08  
Total net income (loss) per basic common share$0.75  $0.93  $(0.55) 
       
Net income (loss) per common share - diluted:      
Continuing operations$0.39  $0.50  $(0.63) 
Discontinued operations 0.35   0.42   0.08  
Total net income (loss) per diluted common share$0.74  $0.92  $(0.55) 
       
Weighted average common shares outstanding:      
Basic 286,347   286,347   291,318  
Diluted 290,125   290,125   291,318  
       



Nuance Communications, Inc. 
Condensed Consolidated Balance Sheets 
(in thousands) 
        
        
  September 30, 2019 September 30, 2018 
  (ASC 606) (ASC 605) (ASC 605) 
ASSETSUnaudited Unaudited   
Current assets:      
 Cash and cash equivalents$560,961 $560,961 $315,963 
 Marketable securities 186,555  186,555  135,579 
 Accounts receivable, net 308,601  339,673  347,873 
 Prepaid expenses and other current assets 199,096  124,514  94,814 
 Current assets held for sale -  -  34,402 
 Total current assets 1,255,213  1,211,703  928,631 
        
Marketable securities 17,287  17,287  21,932 
Land, building and equipment, net 141,316  141,316  153,452 
Goodwill 3,243,464  3,243,464  3,247,105 
Intangible assets, net 356,932  356,932  450,001 
Other assets 351,581  221,821  141,761 
Long-term assets held for sale -  -  359,497 
 Total assets$5,365,793 $5,192,523 $5,302,379 
        
LIABILITIES AND STOCKHOLDERS' EQUITY      
Current liabilities:      
 Current portion of long-term debt$1,142,870 $1,142,870 $- 
 Contingent and deferred acquisition payments 17,470  17,470  14,211 
 Accounts payable 104,865  104,865  80,912 
 Accrued expenses and other current liabilities 276,999  274,590  269,339 
 Deferred revenue 302,872  323,576  330,689 
 Current liabilities held for sale -  -  69,013 
 Total current liabilities 1,845,076  1,863,371  764,164 
        
Long-term debt 793,536  793,536  2,185,361 
Deferred revenue, net of current portion 398,834  414,956  434,316 
Deferred tax liability 54,216  37,581  49,931 
Other liabilities 100,981  90,650  93,593 
Long-term liabilities held for sale -  -  57,518 
 Total liabilities 3,192,643  3,200,094  3,584,883 
        
Stockholders' equity 2,173,150  1,992,429  1,717,496 
 Total liabilities and stockholders' equity$5,365,793 $5,192,523 $5,302,379 



        
Nuance Communications, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Unaudited
 Three Months Ended Twelve Months Ended
 September 30, September 30,
  2019   2018   2019   2018 
 (ASC 606) (ASC 605) (ASC 606) (ASC 605)
Cash flows from operating activities:       
Net income (loss) from continuing operations$108,129  $(44,508) $114,338  $(184,904)
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 11,916   13,852   55,227   60,355 
Amortization 25,436   29,045   103,563   124,883 
Stock-based compensation 41,069   41,443   141,212   142,909 
Non-cash interest expense 12,477   12,000   49,488   49,091 
Deferred tax (benefit) provision (104,788)  3,995   (123,763)  (86,841)
(Gain) loss on extinguishment of debt -   (348)  910   (348)
Impairment of fixed assets -   8,770   -   10,550 
Impairment of goodwill and other intangible assets -   33,034   -   170,941 
Other 5,113   1,336   4,462   2,230 
Changes in operating assets and liabilities, excluding effects of acquisitions:       
Accounts receivable (3,953)  18,422   1,058   16,996 
Prepaid expenses and other assets (4,960)  (1,622)  (25,076)  (20,555)
Accounts payable 7,662   (10,812)  22,922   (14,458)
Accrued expenses and other liabilities 22,015   25,340   30,344   24,451 
Deferred revenue (15,953)  4,902   22,317   96,977 
Net cash provided by operating activities - continuing operations 104,163   134,849   397,002   392,277 
Net cash provided by operating activities - discontinued operations -   14,554   4,355   52,149 
Net cash provided by operating activities 104,163   149,403   401,357   444,426 
Cash flows from investing activities:       
Capital expenditures (11,942)  (9,880)  (44,185)  (48,845)
Proceeds from disposition of businesses, net of transaction fees -   -   407,043   - 
Payments for business and asset acquisitions, net of cash acquired (17,771)  (945)  (20,873)  (110,170)
Purchases of marketable securities and other investments (92,793)  (43,350)  (349,125)  (201,995)
Proceeds from sales and maturities of marketable securities and other investments 40,257   64,018   303,171   323,695 
Net cash (used in) provided by investing activities (82,249)  9,843   296,031   (37,315)
Cash flows from financing activities:       
Repayment and redemption of debt -   (150,000)  (300,000)  (481,172)
Payments for repurchase of common stock (6,003)  (24,111)  (126,938)  (136,090)
Acquisition payments with extended payment terms -   (4,073)  -   (24,842)
Proceeds from issuance of common stock from employee stock plans 7,954   9,025   16,597   18,384 
Payments for taxes related to net share settlement of equity awards (6,866)  (3,544)  (49,428)  (55,396)
Proceeds from sale of noncontrolling interests in a subsidiary 9,863   -   9,863   - 
Other financing activities (689)  (159)  (2,131)  (1,232)
Net cash provided by (used in) financing activities 4,259   (172,862)  (452,037)  (680,348)
Effects of exchange rate changes on cash and cash equivalents (1,589)  (1,680)  (353)  (3,099)
Net increase (decrease) in cash and cash equivalents 24,584   (15,296)  244,998   (276,336)
Cash and cash equivalents at beginning of period 536,377   331,259   315,963   592,299 
Cash and cash equivalents at end of period$560,961  $315,963  $560,961  $315,963 



         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands)
Unaudited
         
   
  Three Months Ended September 30,
   2019   2018 
  ASC 606 Adjustments ASC 605 ASC 605
         
GAAP revenues $470,658  $17,098  $487,756  $479,432 
Acquisition-related revenue adjustments: professional services and hosting  1,224   1   1,225   1,275 
Acquisition-related revenue adjustments: product and licensing  3   332   335   1,262 
Acquisition-related revenue adjustments: maintenance and support  83   (63)  20   147 
Non-GAAP revenues $471,968  $17,368  $489,336  $482,116 
         
GAAP cost of revenues $194,199  $6,687  $200,886  $198,798 
Cost of revenues from amortization of intangible assets  (9,133)  -   (9,133)  (12,142)
Cost of revenues adjustments: professional services and hosting (1)  (8,430)  -   (8,430)  (10,620)
Cost of revenues adjustments: product and licensing (1)  (262)  -   (262)  (322)
Cost of revenues adjustments: maintenance and support (1)  (584)  -   (584)  (1,552)
Cost of revenues adjustments: Other  35   (2)  33   (348)
Non-GAAP cost of revenues $175,825  $6,685  $182,510  $173,814 
         
GAAP gross profit $276,459  $10,411  $286,870  $280,634 
Gross profit adjustments  19,684   272   19,956   27,668 
Non-GAAP gross profit $296,143  $10,683  $306,826  $308,302 
         
GAAP income (loss) from operations $39,284  $5,571  $44,855  $(8,054)
Gross profit adjustments  19,684   272   19,956   27,668 
Research and development (1)  11,542   -   11,542   13,279 
Sales and marketing (1)  9,872   -   9,872   9,841 
General and administrative (1)  10,379   -   10,379   5,829 
Acquisition-related costs, net  2,686   -   2,686   3,256 
Amortization of intangible assets  16,304   -   16,304   16,903 
Restructuring and other charges, net  19,797   -   19,797   29,234 
Impairment of goodwill and other intangible assets  -   -   -   33,034 
Other  3,238   (9)  3,229   10,757 
Non-GAAP income from operations $132,786  $5,834  $138,620  $141,747 
         
GAAP income (loss) before income taxes $11,721  $5,571  $17,292  $(39,411)
Gross profit adjustments  19,684   272   19,956   27,668 
Research and development (1)  11,542   -   11,542   13,279 
Sales and marketing (1)  9,872   -   9,872   9,841 
General and administrative (1)  10,379   -   10,379   5,829 
Acquisition-related costs, net  2,686   -   2,686   3,256 
Amortization of intangible assets  16,304   -   16,304   16,903 
Restructuring and other charges, net  19,797   -   19,797   29,234 
Non-cash interest expense  12,477   -   12,477   12,000 
Impairment of goodwill and other intangible assets  -   -   -   33,034 
Other (4)  7,625   (9)  7,616   10,327 
Non-GAAP income before income taxes $122,087  $5,834  $127,921  $121,960 
         
(4) Includes approximately $8.1 million and $51.6 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and twelve months ended September 30, 2018, respectively.



         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations
(in thousands)
Unaudited
         
    
   Twelve Months Ended September 30,
    2019   2018 
   ASC 606 Adjustments ASC 605
  ASC 605
            
GAAP revenues  $1,823,092  $35,633  $1,858,725  $1,842,298 
Acquisition-related revenue adjustments: professional services and hosting   4,895   79   4,974   4,947 
Acquisition-related revenue adjustments: product and licensing   1,054   1,339   2,393   8,861 
Acquisition-related revenue adjustments: maintenance and support   345   (168)  177   373 
Non-GAAP revenues  $1,829,386  $36,883  $1,866,269  $1,856,479 
            
GAAP cost of revenues  $779,919  $(2,690) $777,229  $825,387 
Cost of revenues from amortization of intangible assets   (36,833)  -   (36,833)  (50,886)
Cost of revenues adjustments: professional services and hosting (1)   (28,523)  -   (28,523)  (31,094)
Cost of revenues adjustments: product and licensing (1)   (855)  -   (855)  (814)
Cost of revenues adjustments: maintenance and support (1)   (1,314)  -   (1,314)  (3,322)
Cost of revenues adjustments: Other   (376)  9   (367)  (719)
Non-GAAP cost of revenues  $712,018  $(2,681) $709,337  $738,552 
              
GAAP gross profit  $1,043,173  $38,323  $1,081,496  $1,016,911 
Gross profit adjustments   74,195   1,241   75,436   101,016 
Non-GAAP gross profit  $1,117,368  $39,564  $1,156,932  $1,117,927 
              
GAAP income from operations  $132,672  $32,460  $165,132  $(117,477)
Gross profit adjustments   74,195   1,241   75,436   101,016 
Research and development (1)   38,454   -   38,454   38,077 
Sales and marketing (1)   34,360   -   34,360   35,838 
General and administrative (1)   37,706   -   37,706   33,764 
Acquisition-related costs, net   8,909   -   8,909   16,093 
Amortization of intangible assets   66,730   -   66,730   73,997 
Restructuring and other charges, net   80,465   -   80,465   57,026 
Impairment of goodwill and other intangible assets   -   -   -   170,941 
Other   15,884   (71)  15,813   60,460 
Non-GAAP income from operations  $489,375  $33,630  $523,005  $469,735 
              
GAAP income (loss) before income taxes  $25,744  $32,460  $58,204  $(247,224)
Gross profit adjustments   74,195   1,241   75,436   101,016 
Research and development (1)   38,454   -   38,454   38,077 
Sales and marketing (1)   34,360   -   34,360   35,838 
General and administrative (1)   37,706   -   37,706   33,764 
Acquisition-related costs, net   8,909   -   8,909   16,093 
Amortization of intangible assets   66,730   -   66,730   73,997 
Restructuring and other charges, net   80,465   -   80,465   57,026 
Impairment of goodwill and other intangible assets   -   -   -   170,941 
Non-cash interest expense   49,488   -   49,488   49,091 
Other (4)   19,735   (70)  19,665   60,067 
Non-GAAP income before income taxes  $435,786  $33,631  $469,417  $388,686 
              
(4) Includes approximately $8.1 million and $51.6 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and twelve months ended September 30, 2018, respectively.



         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands, except per share amounts)
Unaudited
         
   
  Three Months Ended September 30,
   2019   2018 
  ASC 606 Adjustments ASC 605 ASC 605
         
GAAP (benefit) provision for income taxes $(96,408) $(8,066) $(104,474) $5,097 
Income tax effect of Non-GAAP adjustments  194,273   638   194,911   36,854 
Removal of valuation allowance and other items  (177,476)  10,147   (167,329)  (8,522)
Removal of discrete items (3)  106,419   111   106,530   (7,496)
Non-GAAP provision for income taxes $26,808  $2,830  $29,638  $25,933 
         
GAAP net income (loss) from continuing operations $108,129  $13,637  $121,766  $(44,508)
Acquisition-related adjustment - revenues (2)  1,310   270   1,580   2,684 
Acquisition-related costs, net  2,686   -   2,686   3,256 
Cost of revenue from amortization of intangible assets  9,133   -   9,133   12,142 
Amortization of intangible assets  16,304   -   16,304   16,903 
Restructuring and other charges, net  19,797   -   19,797   29,234 
Impairment of goodwill and other intangibles  -   -   -   33,034 
Stock-based compensation (1)  41,069   -   41,069   41,443 
Non-cash interest expense  12,477   -   12,477   12,000 
Adjustment to income tax expense  (123,216)  (10,896)  (134,112)  (20,836)
Other (4)  7,589   (7)  7,582   10,675 
Non-GAAP net income  $95,278  $3,004  $98,282  $96,027 
         
Non-GAAP diluted net income per share $0.33    $0.34  $0.33 
         
Diluted weighted average common shares outstanding 291,598     291,598   294,088 
         
(3) As a result of the Tax Cuts and Jobs Act of 2017 (‘TCJA’), we remeasured certain deferred tax assets and liabilities at the lower rates and recorded approximately $92.9 million of tax benefits for fiscal year 2018. Additionally, we recorded a $5.8 million provision for the deemed repatriation of foreign cash and earnings, which is estimated based upon estimated foreign earnings and foreign income taxes.
(4) Includes approximately $8.1 million and $51.6 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and twelve months ended September 30, 2018, respectively.



         
Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands, except per share amounts)
Unaudited
         
   
  Twelve Months Ended September 30,
   2019   2018 
  ASC 606 Adjustments ASC 605 ASC 605
         
GAAP (benefit) provision for income taxes $(88,594) $1,963  $(86,631) $(62,320)
Income tax effect of Non-GAAP adjustments  277,841   567   278,408   134,086 
Removal of valuation allowance and other items  (192,873)  3,979   (188,894)  (62,362)
Removal of discrete items (3)  107,329   111   107,440   83,573 
Non-GAAP provision for income taxes $103,703  $6,620  $110,323  $92,977 
         
GAAP net income (loss) from continuing operations $114,338  $30,497  $144,835  $(184,904)
Acquisition-related adjustment - revenues (2)  6,294   1,250   7,544   14,181 
Acquisition-related costs, net  8,909   -   8,909   16,093 
Cost of revenue from amortization of intangible assets  36,833   -   36,833   50,886 
Amortization of intangible assets  66,730   -   66,730   73,997 
Restructuring and other charges, net  80,465   -   80,465   57,026 
Impairment of goodwill and other intangible assets  -   -   -   170,941 
Stock-based compensation (1)  141,212   -   141,212   142,909 
Non-cash interest expense  49,488   -   49,488   49,091 
Adjustment to income tax expense  (192,297)  (4,657)  (196,954)  (155,297)
Other (4)  20,111   (79)  20,032   60,786 
Non-GAAP net income  $332,083  $27,011  $359,094  $295,709 
         
Non-GAAP diluted net income per share $1.14    $1.24  $1.00 
         
Diluted weighted average common shares outstanding 290,125     290,125   295,381 
         
(3) As a result of the Tax Cuts and Jobs Act of 2017 (‘TCJA’), we remeasured certain deferred tax assets and liabilities at the lower rates and recorded approximately $92.9 million of tax benefits for fiscal year 2018. Additionally, we recorded a $5.8 million provision for the deemed repatriation of foreign cash and earnings, which is estimated based upon estimated foreign earnings and foreign income taxes.
(4) Includes approximately $8.1 million and $51.6 million in professional services costs associated with considering strategic alternatives for certain businesses and establishing our Automotive business as an independent reporting segment, for the three and twelve months ended September 30, 2018, respectively.
         


Nuance Communications, Inc.
Supplemental Financial Information - GAAP to Non-GAAP Reconciliations, continued
(in thousands)
Unaudited
            
 Three Months Ended September 30, Twelve Months Ended September 30,
  2019   2019   2018   2019   2019   2018 
 (ASC 606) (ASC 605) (ASC 605) (ASC 606) (ASC 605) (ASC 605)
(1) Stock-based compensation           
Cost of professional services and hosting$8,430  $8,430  $10,620  $28,523  $28,523  $31,094 
Cost of product and licensing 262   262   322   855   855   814 
Cost of maintenance and support 584   584   1,552   1,314   1,314   3,322 
Research and development 11,542   11,542   13,279   38,454   38,454   38,077 
Sales and marketing 9,872   9,872   9,841   34,360   34,360   35,838 
General and administrative 10,379   10,379   5,829   37,706   37,706   33,764 
Total$41,069  $41,069  $41,443  $141,212  $141,212  $142,909 
            
(2) Acquisition-related revenue           
Revenues$1,310  $1,580  $2,684  $6,295  $7,544  $14,181 
  Total$1,310  $1,580  $2,684  $6,295  $7,544  $14,181