Nuance Announces Third Fiscal Quarter 2008 Results

Sustained Demand in Mobile Business, Performance across On-Demand Solutions and Improved Revenues in Enterprise Speech All Contributed to Record Revenues in the Quarter

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Nuance Communications, Inc. (NASDAQ: NUAN) today announced financial results for the third fiscal quarter ended June 30, 2008.

Nuance reported revenues of $216.7 million in the quarter ended June 30, 2008, a 38 percent increase over revenues of $156.6 million in the quarter ended June 30, 2007. In addition to using GAAP results to evaluate 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 $229.2 million, which includes approximately $12.5 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, revenue grew 46 percent over the same quarter last year.

On a GAAP basis, Nuance recognized a net loss of $9.9 million, or $(0.05) per share, in the quarter ended June 30, 2008, compared with a net loss of $7.6 million, or $(0.04) per share, in the quarter ended June 30, 2007. Using a non-GAAP measure, Nuance reported non-GAAP net income of $51.4 million, or $0.22 per diluted share, for the period ending June 30, 2008, compared to non-GAAP net income of $27.9 million, or $0.14 per diluted share, in the quarter ended June 30, 2007.

The non-GAAP net income amount excludes non-cash income taxes and interest, amortization of intangible assets, non-cash share-based payments, acquisition-related transition and integration costs, and restructuring and other charges (credits), net. See "GAAP to non-GAAP Reconciliation" below for further information on the Company's non-GAAP measures.

"Sustained demand in our mobile business, continued performance across all business lines for our on-demand solutions and improved performance in our enterprise business contributed to record revenues in the quarter," said Paul Ricci, chairman and CEO of Nuance. "The balanced performance in our core markets with continued progress in realizing the cost efficiencies from recent acquisitions helped expand operating margins in the quarter and put us on course to achieve our full-year objectives."

Consistent with the Company's strategy and recent trends, highlights from the quarter include:

- Mobile and Embedded Solutions - Nuance revenue from mobile and embedded solutions was $45.3 million, up from $33.9 million a year ago. The Company continued to benefit from active product cycles, strong consumer demand and OEM agreements for devices and services from customers including LG, Nokia and Samsung, as well as other partners to be announced in coming months. In the quarter, Nuance extended its mobile offerings by launching its new voicemail-to-text service and previewing its Open VoiceSearch application for mobile devices.

- Healthcare Solutions - Healthcare revenue in the quarter grew sequentially as demand for clinical documentation solutions continued to grow. The Company sustained strong performance and growth for its on-demand solutions, signing several multi-million dollar, extended-term contracts in the quarter with organizations including Baptist Health System and MeritCare Health System. On May 20, 2008, Nuance closed the acquisition of eScription, expanding the Company's on-demand, computer-aided medical transcription and clinical documentation solutions.

- Enterprise Speech - Growth in the Company's enterprise speech revenues improved primarily due to continued strength in the Nuance on-demand offerings and expanded customer engagements for enterprise solutions. In addition, the team secured important design wins for new offerings within the quarter and sustained high levels of customer satisfaction as evidenced by strong bookings from its installed base of customers. Important agreements with new and existing customers include BBC, Cisco, Citi, Dell, Visa and Walgreens.

- PDF and Document Imaging - Revenue for Nuance's PDF and document imaging solutions showed strength in the third quarter, with PDF growth at 38 percent and total imaging solutions growth of 16 percent.

- Operational Achievement - Nuance maintained its strict focus on expense controls and realizing acquisition synergies to improve operating leverage and margins. Cash flows from operations were a record, at $48.1 million in the third quarter 2008, up 59 percent over the same period last year.
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