Nuance Announces Fourth Fiscal Quarter 2008 Results

Earnings, Margins and Cash Flows exceed October 1 Guidance Update

(PresseBox) (BURLINGTON, Mass., ) Nuance Communications, Inc.(NASDAQ: NUAN) today announced financial results for the fourth fiscal quarter ended September 30, 2008.

Nuance reported revenues of $253.4 million in the quarter ended September 30, 2008, a 41 percent increase over revenues of $179.9 million in the quarter ended September 30, 2007. The Company reported non-GAAP revenue of approximately $260.7 million, which includes $7.3 million in revenue lost to purchase accounting primarily in conjunction with the Company's acquisitions of Tegic and VoiceSignal. Using the non-GAAP measure, revenue grew approximately 39 percent over the same quarter last year.

Nuance recognized GAAP net income of $22.0 million, or $0.09 per diluted share, in the quarter ended September 30, 2008, compared with a net loss of $3.4 million, or $(0.02) per share, in the quarter ended September 30, 2007. Nuance reported non-GAAP net income of $71.1 million, or $0.29 per diluted share, for the period ending September 30, 2008, compared to non-GAAP net income of $37.0 million, or $0.18 per diluted share, in the same period last year.

The non-GAAP net income amount excludes non-cash income taxes and interest, amortization of intangible assets, in-process research and development, non-cash share-based payments, acquisition-related transition and integration costs, and restructuring and other charges (credits), net. Non-GAAP net income includes revenue and cost of revenue related to acquisitions that would otherwise be recognized but for the purchase accounting treatment. See "GAAP to non-GAAP Reconciliation" below for further information on the Company's non-GAAP measures.

Nuance reported cash flows from operations of $66.1 million in the quarter ended September 30, 2008, compared with $14.8 million in the quarter ended September 30, 2007. For the fiscal year 2008, Nuance reported cash flows from operations of $196.2 million, compared to $106.4 million in fiscal 2007.

"Nuance delivered a strong finish to its fiscal 2008, continuing trends exhibited in previous quarters," said Paul Ricci, chairman and CEO, of Nuance. "Our fourth quarter was notable in three important areas.First, Nuance's diversity of revenue across industries and geographies helped the Company execute against its revenue objectives. Second, disciplined expense management and success with acquisition integrations drove operating margins above our expectations. And third, our focus on operational processes helped Nuance generate record cash flows."

Highlights for the quarter include:

- Mobile Solutions - Nuance's mobile revenues were at record levels as the Company benefited from active product cycles for handset OEMs and especially from new agreements with Nokia and other large mobile product manufacturers. In addition, early customer demand for Nuance Mobile Care solutions, launched in the quarter and recently complemented with the acquisition of SNAPin, has exceeded initial expectations.
- Enterprise Solutions - Nuance experienced continued growth in its Nuance On-Demand offerings. In particular, the Company signed a multi-year contract with a large financial services firm for an on-demand solution, which along with other activity underscores increased interest during uncertain economic times for hosted deployment options. Demand for our enterprise services was also strong, where the Company saw growth in bookings. But licensing sales among Nuance's largest enterprise partners continued to be sluggish, offsetting the benefits of its hosted and services revenues.
- Healthcare Solutions - Nuance experienced sustained performance and growth for its on-demand healthcare solutions. In addition, the Company experienced increased demand for the new version of Dragon Medical launched in the quarter, signing several significant contracts.Customer wins and contract extensions for Nuance healthcare solutions include Baptist Health, Carondelet Health Network, Texas Healthcare Resources, the U.S. Army and the University of Iowa.
- Dragon NaturallySpeaking - Nuance launched version 10 of Dragon NaturallySpeaking in August to strong customer demand and media acclaim.The launch results and revenue growth exceeded expectations, surpassing those of any prior Nuance product launch.
- PDF Solutions - Revenues for Nuance's PDF and document imaging solutions were down slightly from a year ago. Results from OEM providers continued to be strong, but results from North American channels were somewhat below expectations.
- Operational Achievement - Nuance continued its disciplined acquisition integration, cost synergies and expense controls, which afforded additional improvement and leverage in operations. Both gross margins and operating margins were above expectations.

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.

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.

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