Nuance Reports Third Fiscal Quarter 2009 Results

Nuance Communications, Inc. announced financial results for the third fiscal quarter ended June 30.

In a release on August 10, the Company noted reported GAAP revenue of $241.0 million in the quarter ended June 30, an 11.2 percent increase over GAAP revenue of $216.7 million in the quarter ended June 30, 2008. The Company reported non-GAAP revenue of approximately $251.3 million, which includes $10.3 million in revenue lost to accounting treatment in conjunction with the Company's business and technology acquisitions. Non-GAAP revenue grew approximately 9.6 percent over non-GAAP revenue of $229.2 million in the same quarter last year.

Nuance recognized a GAAP net loss of $1.0 million, or $(0.00) per diluted share, in the quarter ended June 30, compared with a GAAP net loss of $9.9 million, or $(0.05) per diluted share, in the quarter ended June 30, 2008. For the period ended June 30, Nuance reported non-GAAP net income of $73.3 million, or $0.26 per diluted share, compared to non-GAAP net income of $51.3 million, or $0.22 per diluted share, in the quarter ended June 30, 2008. Nuance reported cash flow from operations of $53.7 million in the quarter ended June 30, compared to $48.1 million in the same quarter last year.

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

"Nuance increased operating margins, operating cash flows and recurring revenue streams in what continues to be a cautious capital purchasing environment," said Paul Ricci, chairman and CEO of Nuance. "Our attention to expense controls and our growth in hosted revenue establish the foundation for continued performance improvements as we complete the fiscal year."

Highlights from the quarter include:

- Healthcare-Dictation - Non-GAAP revenue for Nuance's healthcare and dictation solutions was $108.1 million, up 27 percent, as reported, from the same quarter last year. Revenue in Nuance's healthcare unit grew year-over-year, fueled by hosted, on-demand solutions, as a record number of new customers went live in Nuance's hosted transcription services. Important contracts from the third quarter include Florida Hospital, Harvard Vanguard, HCA MountainStar, Sarasota Memorial Hospital, and UHS Binghamton.

- Mobile-Enterprise - Non-GAAP revenue for Nuance's enterprise and mobile solutions was $125.5 million, up slightly, as reported, from the same quarter last year. Nuance experienced continued strength in enterprise on-demand, professional services and maintenance contracts, especially in North America, with wins at customers such as Bank of America, Cigna, TD Ameritrade and United Airlines. Nuance Mobile Care revenue grew as deployment progressed within our carrier customers. National Australia Bank Personal Banking deployed a voice biometric identification and verification function incorporating Nuance technology to improve customer experience and security. Nuance's mobile revenue streams again reflected the challenges of reduced purchases of mobile devices worldwide. During Q3 2009, millions of new smart phones shipped with Nuance products that enable voice control of various functions. In addition, Nuance won significant new contracts at HTC, LG, MiTAC/Magellan, Samsung and Vodafone.

- Imaging - Non-GAAP revenue for Nuance's PDF and document imaging solutions was $17.7 million, down 8 percent, as reported, from the same quarter last year. The year-over-year decline reflects the continued weakness in Windows-based software sales, as well as reduced sales through its channels as Nuance prepared for upcoming product release launches. The Company did see a strong performance from the launch of OmniPage 17 during Q3 2009.

- Operational Achievements - Nuance benefited from its focus on expense controls and accelerating synergies from recent acquisitions to significantly improve non-GAAP margins. Non-GAAP operating margins rose to 32.6 percent, compared to 27.5 percent in the third quarter 2008. Cash flows from operations were $53.7 million in the third quarter 2009, compared to $48.1 million a year ago. On a year-to-date basis, cash flows from operations were $184.3 million, compared to $130.1 for the same period in 2008. The Company's cash balance as of June 30, was $418.6 million.

Nuance Communications, Inc. is a provider of speech and imaging solutions for businesses and consumers around the world.

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