Nuance Announces Fiscal 2006 First-Quarter Results; Rapid Progress in Acquisition Integration Aids Results

Business Wire, Feb 9, 2006

BURLINGTON, Mass. -- Nuance Communications, Inc. (Nasdaq: NUAN) today announced financial results for the first quarter ended December 31, 2005.

Nuance reported revenues of $75.6 million in the quarter ended December 31, 2005, a 25 percent increase over revenues of $60.6 million in the quarter ended December 31, 2004. On a GAAP basis, Nuance recognized a net loss of $4.9 million, or $(0.03) per share, in the quarter ended December 31, 2005, compared with net income of $3.1 million, or $0.03 per diluted share, in the quarter ended December 31, 2004.

In addition to using GAAP results in evaluating the business, management also believes it is useful to evaluate results using non-GAAP measures. Using a non-GAAP measure, Nuance reported non-GAAP net income of $11.4 million, or $0.07 per diluted share, for the period ending December 31, 2005, compared to net income of $9.1 million, or $0.08 per diluted share, in the quarter ended December 31, 2004.

These non-GAAP figures exclude non-cash taxes and interest, amortization of intangible assets, non-cash amortization of stock-based compensation, and acquisition-related transition and integration costs and charges. See "GAAP to non-GAAP Reconciliation" below for further information on the Company's non-GAAP measure.

"Nuance experienced a strong start to fiscal 2006 as we saw solid demand in all of our speech segments and continued growth from our international operations," said Paul Ricci, chairman and CEO of Nuance. "These results demonstrate our ability to grow Nuance's leadership position in the expanding speech market and realize the benefits and synergies of our recent acquisitions without suffering from the integration efforts."

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

--Network Speech - The Company generated strong revenue from its network speech technologies, applications and services, benefiting from the incorporation of the former Nuance customers, as well as new or expanded agreements with leading businesses and service providers, including Amtrak, Bell Canada, DaimlerChrysler, Jingle Networks, SBC, and Swisscom.

--Dictation Solutions - The Company saw continued growth in demand for its Dragon Dictation Solutions. Even against the launch quarter comparison of fiscal Q1 2005, North American dictation revenues this quarter were up slightly. Worldwide, this was the second largest quarter in the product family's history. These solutions continued to find growing acceptance in healthcare, as well as within general consumer, professional and legal markets.

--Embedded Markets - In the first quarter, Nuance again concluded important design wins and agreements with partners and customers worldwide. The Company signed or expanded strategic agreements with leading manufacturers and technology companies including Bentley/VW, Casio, Ford/Nokia, Kyocera, and Motorola.

--Imaging - Following the launch of Version 15 in August 2005, OmniPage sustained momentum in the quarter. The Company's family of PDF products achieved accelerated growth. These strengths, though, were partially offset by comparatively weaker performance of the PaperPort product family, against a launch quarter last year and as the Company approaches another impending launch in the coming months.

--Expenses - By the end of the fiscal first quarter the Company had largely realized the planned acquisition-related expense synergies. Additionally, G&A expenses ran materially below plan. These savings were partially offset by higher than expected sales and marketing expenses, resulting from the October 2005 Conversations user conference, corporate name change and above plan commissions associated with strong order bookings in the quarter.

Nuance to Host Quarterly Conference Call at 4:30 p.m. Today

In conjunction with today's announcement, Nuance will broadcast its quarterly conference call over the Internet at 4:30 p.m. ET. Those who wish to listen to the live broadcast should visit the Investor Relations section of the Company's Web site at www.nuance.com at least 15 minutes prior to the event and follow the instructions provided to ensure that the necessary audio applications are downloaded and installed. The conference call can also be heard via telephone by dialing (800) 230-1092 or (612) 288-0337 five minutes prior to the call and referencing conference code 817731. A replay of the call will be available within 24 hours of the announcement. To access the replay, dial (800) 475-6701 or (320) 365-3844 and refer to access code 817731.

About Nuance Communications, Inc.

Nuance Communications, Inc. (Nasdaq: NUAN) is the 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.