EX-99 3 q303exhibit99-1.htm Q303 EARNING RELEASE AND FINANCIAL STATMENTS

Exhibit 99.1

For More Information:

Investor Contact: Press Contact:
Karen Blasing Gwen Murphy
Nuance Nuance
(650) 847-0000 (650) 847-0000
kblasing@nuance.com gmurphy@nuance.com

NUANCE REPORTS THIRD QUARTER 2003 RESULTS

Third Quarter Revenue Increases 32% Year Over Year;

License Revenue Grows 24% Year Over Year

MENLO PARK, Calif., October 22, 2003 — Nuance (Nasdaq: NUAN) today announced results for the quarter ended September 30, 2003. Total revenue for the quarter was $13.8 million, up 32% from $10.5 million in the same quarter of fiscal year 2002, and up 7% from $12.9 million in the second quarter of the current fiscal year. Total revenue for the first nine months of fiscal year 2003 was $38.3 million, up 24% from $30.9 million in the same period of the previous fiscal year.

Software license revenue for the third quarter was $7.1 million, up 24% from $5.7 million in the same quarter in fiscal year 2002, and up 14% from $6.2 million in the second quarter of the current fiscal year. Revenue from services and maintenance for the third quarter remained steady quarter over quarter at $3.6 million and $3.1 million, respectively, and up 52% from $2.4 million and up 31% from $2.4 million, respectively, in the same quarter in fiscal year 2002.

Net loss for the third quarter was $12.2 million or $0.35 net loss per share, and includes a restructuring charge of $10.3 million primarily related to increasing the previously reported real estate restructuring accrual. This compares to a net loss of $45.9 million, or $1.36 net loss per share, including restructuring charges and asset impairments totaling $35.7 million in the same period of the previous fiscal year. Net loss for the first nine months of the year was $19.1 million, or $0.56 net loss per share. This compares to a net loss of $66.1 million, or $1.97 net loss per share in the same period last year.

The Company continues to manage expenses in its drive to profitability. Pro forma net loss for the third quarter, which excludes non-cash compensation charges, asset impairments and restructuring charges, was $1.8 million or $0.05 pro forma net loss per share, compared with the pro forma net loss of $10.1 million or $0.30 pro forma net loss per share for the same period last year. Pro forma net loss for the first nine months of the year was $9.7 million or $0.28 pro forma net loss per share. This compares to a pro forma net loss of $28.3 million or $0.84 pro forma net loss per share in the same period last year.

As of September 30, 2003, the Company had $108 million in cash, cash equivalents and investments.

“Nuance’s commitment to enabling a broader distribution of speech solutions to customers around the world is evidenced by license revenue growth and market share leadership,” said Chuck Berger, president and CEO of Nuance. “Continued discipline around cost containment resulted in a significant reduction in ongoing operating expenses, improved margins and continued progress towards profitability.”

Increasing Adoption in Key Segments

Customer wins and expanded relationships helped Nuance extend its leadership position in the global telecommunications, financial services and other markets during the quarter.

In telecommunications, several leading North American service providers selected Nuance Call Steering 1.0, including TELUS, the second largest carrier in Canada. Internationally, Monaco Telecom selected speech software from Nuance, and China Telecom, KTF, Japan Telecom and others returned to Nuance for additional capacity.

In the financial services sector, Countrywide Financial Services Corporation selected Nuance Voice Platform. Mellon Financial Corporation, Wells Fargo Card Services, and a range of other financial institutions and regional banks also selected speech software from Nuance.

During the quarter, Nuance also won business with a variety of other leading companies including AAA Minnesota/Iowa.

Strengthened Channel Support

In the third quarter, Nuance won business with a range of key partners including Avaya, Edify, Nortel Networks, Workforce Technology, Syntellect, Ydilo Advanced Voice Solutions, and others. To better serve the growing speech market, Nuance delivered an expanded set of channel programs during the quarter for its Original Equipment Manufacturers (OEMs), Value Added Resellers (VARs), technology partners, and master distributors. By taking advantage of the new programs, Nuance partners will improve their ability to deliver speech solutions worldwide. Partner tools and training have been specifically designed by Nuance to help partners identify and implement speech solutions, leverage marketing and sales support, and increase the knowledge of speech within their organizations. In addition, Nuance unveiled a master distributor program during the quarter. This new program was developed to enable companies to license and self-provision Nuance software to resell to other parties for incorporation into their integrated speech solutions.

Acknowledged Industry Leadership

During the quarter, leading industry analyst firm Gartner, Inc. named Nuance the worldwide speech software market share leader in its report, “Speech Recognition Telephony Software: Worldwide, 2002-2007.” The Gartner report identified Nuance as the leader in all key global speech recognition telephony software market categories: number of ports of software shipped and ports market share, number of systems shipped and systems market share. Highly regarded analyst firm Voice Information Associates (VIA) also named Nuance the world’s top provider of automated speech recognition (ASR) technology in a report titled “ASR in Telephony – The World-Wide Market.” Once again, Nuance was recognized as the worldwide leader in all market categories: 2002 ASR port shipments, cumulative ASR installed base, and advanced (second generation) speech systems.

The strength of Nuance’s technology, professional services, and leadership team was also recognized during the quarter. Nuance was the standout winner of Speech Technology Magazine’s recent Speech Technology Solutions Awards, earning twice as many awards as any other speech vendor. Nuance was recognized for offering the industry’s “Best Automated Speech Recognition Solution” and the “Best Verification Solution.” Additionally, Nuance’s speech deployment at Bell Canada was recognized as the “Best Persona Solution.” Nuance Call Steering™ 1.0 was named the “Best Speech Application,” and Nuance Vice President and Chief Marketing Officer, Lynda Kate Smith, and co-founder Dr. Mike Cohen were recognized as two of the “Top Ten Leaders in Speech.”

“Industry acknowledgement of our market share leadership and strength of our speech software reflects the value of the Nuance offering and the strength of our relationships with customers and partners worldwide,” said Chuck Berger, president and CEO of Nuance. “We believe our firm commitment to R&D investment not only differentiates us in the market, but also results in the delivery of industry leading voice automation solutions.”

About Nuance

Nuance is the speech expert. Nuance’s speech software solutions enable automated access to everything from account balances to flight information, e-mail reading to voice activated dialing — accessed using nothing more than the power of voice and an ordinary phone. In markets around the world, leading enterprises and telecommunications carriers — including British Airways, Nomura Securities, OnStar, Sprint PCS, United Parcel Service, Vodafone, and many more — work with Nuance to reduce costs, increase customer satisfaction and retention, create new sources of revenue and improve security. Nuance is headquartered in Menlo Park, Calif. and has offices around the world. For more information, visit www.nuance.com or call 1-888-NUANCE-8.

This press release contains forward-looking statements, including, for example, those relating to the continued success of Nuance’s operating results, the success of Nuance’s distribution model, the success of Nuance’s partner programs and channel, and Nuance’s achievement of profitability. There is no assurance that the results contemplated by any forward-looking statements will be realized. The following factors, risks and uncertainties, among others, could cause actual results to differ materially from those described or implied in this press release’s forward-looking statements: the risk that Nuance will encounter unplanned expenses or events which may negatively impact operating results and/or hinder Nuance’s achievement of profitability; the risk that Nuance’s distribution model, partner programs or partner channel will not produce anticipated results; the risk that unfavorable economic or other global conditions may negatively impact Nuance’s business and/or the market for Nuance technology; and other factors described in Nuance’s filings with the Securities and Exchange Commission, including but not limited to Nuance’s last-filed quarterly report on form 10-Q. Nuance does not undertake to update any oral or written forward-looking statements that may be made by or on behalf of Nuance.

Nuance is a registered trademark of Nuance Communications, Inc. Nuance Call Steering and Nuance Voice Platform are trademarks of Nuance. All other trademarks are the property of their respective owners.


Nuance Communications, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
Nine Months Ended
      September 30, September 30,
        2003
    2002
    2003
    2002
 
Revenue:    
     License     $ 7,095   $ 5,741   $ 19,409   $ 19,233  
     Service       3,645     2,404     10,082     5,241  
     Maintenance    3,083
   2,358
   8,819
   6,472
 
          Total revenue    13,823    10,503    38,310    30,946  
Cost of revenue:  
     License    102    196    282    491  
     Service    2,255    2,052    6,729    5,467  
     Maintenance    853
   863
   2,624
   2,625
 
          Total cost of revenue    3,210
   3,111
   9,635
   8,583
 
Gross profit    10,613    7,392    28,675    22,363  
Operating expenses:  
     Sales and marketing    6,583    10,959    20,936    32,312  
     Research and development    3,665    3,883    11,492    11,090  
     General and administrative    2,753    3,159    8,892    10,051  
     Non-cash compensation expense     33     33     19     803  
     Restructuring charges      10,318     34,841     9,375     36,160  
     Asset impairments      --     887     --     887  
          Total operating expenses    23,352
   53,762
   50,714
   91,303
 
Loss from operations    (12,739 )  (46,370 )  (22,039 )  (68,940 )
     Interest and other income, net    325
   694
   1,044
   2,215
 
 Loss before income taxes    (12,414 )  (45,676 )  (20,995 )  (66,725 )
     Expenses (benefits) from income taxes     (242
)   191
    (1,881
)   (607
)
Net loss   $ (12,172
) $ (45,867
) $ (19,114
) $ (66,118
)
Basic and diluted net loss per share   $ (0.35
) $ (1.36
) $ (0.56
) $ (1.97
)
Shares used to compute basic and diluted net loss per share    34,503
   33,807
   34,353
   33,541
 
Reconicliation of net loss in acordance with generally  
accepted accounting principles to pro forma net loss:  
Net loss   $ (12,172 ) $ (45,867 ) $ (19,114 ) $ (66,118 )
Non-cash compensation expense       33     33     19     803  
Asset impairments       --     887     --     887  
Restructure charges    10,318
   34,841
   9,375
    36,160
 
Pro forma net loss   $ (1,821
) $ (10,106
) $ (9,720
) $ (28,268
)
Pro forma basic and diluted net loss per share   $ (0.05
) $ (0.30
) $ (0.28
) $ (0.84
)
   
Shares used in computing pro forma basic and diluted net loss per share    34,503
   33,807
   34,353
   33,541
 





Nuance Communications, Inc.
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)

September 30,
2003

December 31,
2002

ASSETS          
   Current assets:          
          Cash and cash equivalents  $  30,077   $  43,771  
          Short-term investments  77,536   80,624  
          Accounts receivable, net  10,563   8,350  
          Prepaid expenses and other current assets   5,342
  5,249
 
                    Total current assets  123,518   137,994  
   Property and equipment, net  4,344   6,330  
   Intangible assets, net  1,096   1,405  
   Restricted cash  12,521   12,393  
   Long-term investments  --   3,113  
   Other assets  235
  435
 
                    Total assets  $141,714
  $161,670
 
LIABILITIES AND STOCKHOLDERS' EQUITY  
   Current liabilities: 
          Accounts payable  $    708   $    1,591  
          Accrued liabilities  5,442   7,249  
          Accrued vacation  1,692   1,847  
          Current restructuring accrual  9,736   10,453  
          Deferred revenue  7,764   8,954  
          Current portion of capital lease  43
  37
 
                    Total current liabilities   25,385   30,131  
   Long-term restructuring accrual  45,172   42,232  
   Other long-term liabilities  15
  34
 
                    Total liabilities   70,572   72,397  
   Stockholders'equity  71,142
  89,273
 
                    Total liabilities and stockholders' equity  $141,714
  $161,670
 
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