EXHIBIT 99.1
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On February 1, 2019, we completed the previously announced sale of our Document Imaging division (the "Business") to Project Leopard AcquireCo Limited (the “Buyer”), an affiliate of Kofax, Inc. The net proceeds received at the closing for the Business were approximately $390 million, after estimated transaction and tax expenses, subject to post-closing finalization of those adjustments as set forth in the Sale Agreement dated November 11, 2018, between us and the Buyer. In addition, pursuant to the call notice we issued on February 1, 2019, we are committed to use $300 million of the net proceeds to redeem our 5.375% Senior Notes due 2020 (the "5.375% Senior Notes").
The following unaudited pro forma condensed consolidated financial statements are based on our historical financial statements included within the Company's Annual Report on Form 10-K for fiscal year 2018, as adjusted to give effect to the disposition of the Business. The unaudited pro forma condensed statements of operations for fiscal years 2018, 2017, and 2016 give effect to the disposition of the Business as if it had occurred on October 1, 2016. Additionally, the unaudited pro forma condensed statements of operations for fiscal year 2018 gives effect to the repayment of the 5.375% Senior Notes as if it had occurred on October 1, 2017. The unaudited pro forma condensed balance sheet as of September 30, 2018 gives effect to the disposition of the Business and the redemption of the 5.375% Senior Notes as if they had occurred on September 30, 2018. The unaudited pro forma condensed consolidated financial information does not reflect nonrecurring charges resulting from this disposition (such as proceeds from our transition service agreement and gain or loss recognized from the disposition), or future transactions that are not directly attributable to the disposition (such as restructuring activities and the realization of operating costs reductions).
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to indicate the financial condition or results of operations of future periods or the financial condition for results of operations that actually would have been realized had the disposition occurred on the date or for the periods presented. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial statement should be read in conjunction with the Company's historical financial statements and notes included in the Company's Annual Report on Form 10-K for fiscal year 2018.
Our actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to the following factors:
— | The pro forma adjustments are estimated based on the operating structure of the Business during each of the historical periods presented, which may differ from the operating structure at the closing; |
— | We did not track the assets and liabilities of the Business historically. The pro forma adjustments are based on our estimates of the assets, liabilities and employees related to the Business in each historical period presented, which may differ from the assets, liabilities and employees assumed by the Buyer at the closing; |
— | The adjustments to the unaudited pro forma results of operations reflect our estimates of operating costs and expenses that we consider directly related to the Business for each historical period, which may differ from the actual amounts eliminated after the disposition; and |
— | The estimated net proceeds are subject to certain customary post-closing adjustments. |
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2018
Pro Forma Adjustments | ||||||||||||||||
As Reported | Removal of Imaging balance sheet items (A) | Use of proceeds paid at the closing (B) | Pro Forma Amounts | |||||||||||||
(In thousands) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 315,963 | $ | — | $ | 90,000 | $ | 405,963 | ||||||||
Marketable securities | 135,579 | — | 135,579 | |||||||||||||
Accounts receivable, net | 378,832 | (30,959 | ) | 347,873 | ||||||||||||
Prepaid expenses and other current assets | 98,257 | (3,443 | ) | 94,814 | ||||||||||||
Total current assets | 928,631 | (34,402 | ) | 90,000 | 984,229 | |||||||||||
Marketable securities | 21,932 | — | 21,932 | |||||||||||||
Land, building and equipment, net | 155,894 | (2,442 | ) | 153,452 | ||||||||||||
Goodwill | 3,504,457 | (257,352 | ) | 3,247,105 | ||||||||||||
Intangible assets, net | 549,508 | (99,507 | ) | 450,001 | ||||||||||||
Other assets | 141,957 | (196 | ) | 141,761 | ||||||||||||
Total assets | $ | 5,302,379 | $ | (393,899 | ) | $ | 90,000 | $ | 4,998,480 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current portion of long-term debt | $ | — | $ | — | $ | — | $ | — | ||||||||
Contingent and deferred acquisition payments | 14,211 | — | 14,211 | |||||||||||||
Accounts payable, accrued expenses and other current liabilities | 366,160 | (15,909 | ) | — | 350,251 | |||||||||||
Deferred revenue | 383,793 | (53,104 | ) | 330,689 | ||||||||||||
Total current liabilities | 764,164 | (69,013 | ) | — | 695,151 | |||||||||||
Long-term debt | 2,185,361 | — | (300,000 | ) | 1,885,361 | |||||||||||
Deferred revenue, net of current portion | 489,177 | (54,861 | ) | 434,316 | ||||||||||||
Other liabilities | 146,181 | (2,657 | ) | — | 143,524 | |||||||||||
Total liabilities | 3,584,883 | (126,531 | ) | (300,000 | ) | 3,158,352 | ||||||||||
Stockholders' equity | 1,717,496 | (267,368 | ) | 390,000 | 1,840,128 | |||||||||||
Total liabilities and stockholders' equity | $ | 5,302,379 | $ | (393,899 | ) | $ | 90,000 | $ | 4,998,480 |
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2018
As Reported | Removal of Income | Pro Forma | ||||||||||
Fiscal Year 2018 | Statement Items (C) | Fiscal Year 2018 | ||||||||||
Revenues: | (In thousands, except per share amounts) | |||||||||||
Professional services and hosting | $ | 1,049,448 | $ | (3,726 | ) | $ | 1,045,722 | |||||
Product and licensing | 684,230 | (140,211 | ) | 544,019 | ||||||||
Maintenance and support | 317,983 | (65,426 | ) | 252,557 | ||||||||
Total revenues | 2,051,661 | (209,363 | ) | 1,842,298 | ||||||||
Cost of revenues: | ||||||||||||
Professional services and hosting | 681,516 | (3,138 | ) | 678,378 | ||||||||
Product and licensing | 77,086 | (20,287 | ) | 56,799 | ||||||||
Maintenance and support | 58,095 | (18,771 | ) | 39,324 | ||||||||
Amortization of intangible assets | 56,873 | (5,987 | ) | 50,886 | ||||||||
Total cost of revenues | 873,570 | (48,183 | ) | 825,387 | ||||||||
Gross profit | 1,178,091 | (161,180 | ) | 1,016,911 | ||||||||
Operating expenses: | ||||||||||||
Research and development | 305,323 | (26,588 | ) | 278,735 | ||||||||
Sales and marketing | 388,305 | (76,593 | ) | 311,712 | ||||||||
General and administrative | 229,774 | (3,890 | ) | 225,884 | ||||||||
Amortization of intangible assets | 91,093 | (17,096 | ) | 73,997 | ||||||||
Acquisition-related costs, net | 16,101 | (8 | ) | 16,093 | ||||||||
Restructuring and other charges, net | 63,498 | (6,472 | ) | 57,026 | ||||||||
Impairment of goodwill and other intangible assets | 170,941 | — | 170,941 | |||||||||
Total operating expenses | 1,265,035 | (130,647 | ) | 1,134,388 | ||||||||
(Loss) income from operations | (86,944 | ) | (30,533 | ) | (117,477 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 9,327 | — | 9,327 | |||||||||
Interest expense | (137,253 | ) | 16,125 | (121,128 | ) | |||||||
Other expense, net | (1,865 | ) | 44 | (1,821 | ) | |||||||
(Loss) income before income taxes | (216,735 | ) | (14,364 | ) | (231,099 | ) | ||||||
(Benefit) provision for income taxes | (56,807 | ) | (5,513 | ) | (62,320 | ) | ||||||
Net loss | $ | (159,928 | ) | $ | (8,851 | ) | $ | (168,779 | ) | |||
Net loss per share: | ||||||||||||
Basic | $ | (0.55 | ) | $ | (0.58 | ) | ||||||
Diluted | $ | (0.55 | ) | $ | (0.58 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 291,318 | 291,318 | ||||||||||
Diluted | 291,318 | 291,318 |
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2017
As Reported | Removal of Income | Pro Forma | ||||||||||
Fiscal Year 2017 | Statement Items (C) | Fiscal Year 2017 | ||||||||||
Revenues: | (In thousands, except per share amounts) | |||||||||||
Professional services and hosting | $ | 976,893 | $ | (10,327 | ) | $ | 966,566 | |||||
Product and licensing | 635,391 | (141,480 | ) | 493,911 | ||||||||
Maintenance and support | 327,078 | (59,380 | ) | 267,698 | ||||||||
Total revenues | 1,939,362 | (211,187 | ) | 1,728,175 | ||||||||
Cost of revenues: | ||||||||||||
Professional services and hosting | 660,849 | (6,250 | ) | 654,599 | ||||||||
Product and licensing | 74,004 | (19,900 | ) | 54,104 | ||||||||
Maintenance and support | 54,094 | (16,851 | ) | 37,243 | ||||||||
Amortization of intangible assets | 64,853 | (6,961 | ) | 57,892 | ||||||||
Total cost of revenues | 853,800 | (49,962 | ) | 803,838 | ||||||||
Gross profit | 1,085,562 | (161,225 | ) | 924,337 | ||||||||
Operating expenses: | ||||||||||||
Research and development | 266,097 | (26,172 | ) | 239,925 | ||||||||
Sales and marketing | 398,130 | (73,760 | ) | 324,370 | ||||||||
General and administrative | 166,677 | (3,612 | ) | 163,065 | ||||||||
Amortization of intangible assets | 113,895 | (21,056 | ) | 92,839 | ||||||||
Acquisition-related costs, net | 27,740 | (32 | ) | 27,708 | ||||||||
Restructuring and other charges, net | 61,054 | (1,131 | ) | 59,923 | ||||||||
Impairment of goodwill and other intangible assets | — | — | — | |||||||||
Total operating expenses | 1,033,593 | (125,763 | ) | 907,830 | ||||||||
(Loss) income from operations | 51,969 | (35,462 | ) | 16,507 | ||||||||
Other income (expense): | ||||||||||||
Interest income | 6,922 | — | 6,922 | |||||||||
Interest expense | (156,889 | ) | — | (156,889 | ) | |||||||
Other expense, net | (21,017 | ) | (193 | ) | (21,210 | ) | ||||||
(Loss) income before income taxes | (119,015 | ) | (35,655 | ) | (154,670 | ) | ||||||
(Benefit) provision for income taxes | 31,981 | (8,310 | ) | 23,671 | ||||||||
Net loss | $ | (150,996 | ) | $ | (27,345 | ) | $ | (178,341 | ) | |||
Net loss per share: | ||||||||||||
Basic | $ | (0.52 | ) | $ | (0.62 | ) | ||||||
Diluted | $ | (0.52 | ) | $ | (0.62 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 289,348 | 289,348 | ||||||||||
Diluted | 289,348 | 289,348 |
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2016
As Reported | Removal of Income | Pro Forma | ||||||||||
Fiscal Year 2016 | Statement Items (C) | Fiscal Year 2016 | ||||||||||
Revenues: | (In thousands, except per share amounts) | |||||||||||
Professional services and hosting | $ | 955,329 | $ | (5,699 | ) | $ | 949,630 | |||||
Product and licensing | 669,227 | (167,114 | ) | 502,113 | ||||||||
Maintenance and support | 324,347 | (55,763 | ) | 268,584 | ||||||||
Total revenues | 1,948,903 | (228,576 | ) | 1,720,327 | ||||||||
Cost of revenues: | ||||||||||||
Professional services and hosting | 626,168 | (5,108 | ) | 621,060 | ||||||||
Product and licensing | 86,379 | (24,795 | ) | 61,584 | ||||||||
Maintenance and support | 54,077 | (16,084 | ) | 37,993 | ||||||||
Amortization of intangible assets | 62,876 | (8,617 | ) | 54,259 | ||||||||
Total cost of revenues | 829,500 | (54,604 | ) | 774,896 | ||||||||
Gross profit | 1,119,403 | (173,972 | ) | 945,431 | ||||||||
Operating expenses: | ||||||||||||
Research and development | 271,130 | (24,304 | ) | 246,826 | ||||||||
Sales and marketing | 390,866 | (71,295 | ) | 319,571 | ||||||||
General and administrative | 168,473 | (4,138 | ) | 164,335 | ||||||||
Amortization of intangible assets | 108,021 | (22,498 | ) | 85,523 | ||||||||
Acquisition-related costs, net | 17,166 | (343 | ) | 16,823 | ||||||||
Restructuring and other charges, net | 25,224 | (1,019 | ) | 24,205 | ||||||||
Impairment of goodwill and other intangible assets | — | — | — | |||||||||
Total operating expenses | 980,880 | (123,597 | ) | 857,283 | ||||||||
(Loss) income from operations | 138,523 | (50,375 | ) | 88,148 | ||||||||
Other income (expense): | ||||||||||||
Interest income | 4,438 | — | 4,438 | |||||||||
Interest expense | (132,732 | ) | — | (132,732 | ) | |||||||
Other expense, net | (8,490 | ) | 163 | (8,327 | ) | |||||||
(Loss) income before income taxes | 1,739 | (50,212 | ) | (48,473 | ) | |||||||
(Benefit) provision for income taxes | 14,197 | (3,967 | ) | 10,230 | ||||||||
Net loss | $ | (12,458 | ) | $ | (46,245 | ) | $ | (58,703 | ) | |||
Net loss per share: | ||||||||||||
Basic | $ | (0.04 | ) | $ | (0.20 | ) | ||||||
Diluted | $ | (0.04 | ) | $ | (0.20 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 292,129 | 292,129 | ||||||||||
Diluted | 292,129 | 292,129 |
See accompanying notes.
NUANCE COMMUNICATIONS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are based on our historical financial statements included within our Annual Report on Form 10-K for fiscal year 2018, as adjusted to give effect to the disposition of the Business. The unaudited pro forma condensed statements of operations for fiscal years 2018, 2017, and 2016 give effect to the disposition of the Business as if it had occurred on October 1, 2016. Additionally, the unaudited pro forma condensed statements of operations for fiscal year 2018 gives effect to the repayment of the 5.375% Senior Notes as if it had occurred on October 1, 2017. The unaudited pro forma condensed balance sheet as of September 30, 2018 gives effect to the disposition of the Business and the repayment of 5.375% Senior Notes as if they had occurred on September 30, 2018.
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and, in the opinion of management, reflect all necessary adjustments that are: (i) directly attributable to the disposition; (ii) factually supportable; and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results of the Company.
Note 2. Pro Forma Adjustments
Adjustments to the pro forma condensed consolidated balance sheet:
(A) Removal of the assets and liabilities of the Business from the consolidated balance sheet as of September 30, 2018.
(B) Reflects receipt of net proceeds of approximately $390 million, after estimated transaction and tax expenses, subject to post-closing finalization of those adjustments as set forth in the Sale Agreement. Pursuant to the call notice issued on February 1, 2019, we are committed to use $300 million of the net proceeds to redeem the 5.375% Senior Notes.
Adjustments to the pro forma consolidated statements of operations:
(C) The pro forma adjustments for each of fiscal years 2018, 2017 and 2016 reflect the removal of the estimated revenue, costs and direct expenses of the Business and the related tax effects. The pro forma adjustments for fiscal year 2018 also reflect the reduction of interest expense had we redeemed the remaining $300 million of the 5.375% Senior Notes on October 1, 2017.
The pro forma adjustments above do not reflect the income taxes related to the disposition as we are still in the process of estimating the resulting tax impact.