Expands Nuance Cloud Portfolio with Digital Customer
Engagement Solutions and Enhances AI Capabilities
Nuance Communications, Inc. (NASDAQ:NUAN) today announced that
it has signed a definitive agreement to acquire TouchCommerce, a
technology partner and leader in digital customer service and
engagement solutions. Used by leading enterprises, TouchCommerce’s
customer engagement cloud platform increases eCommerce sales and
improves the customer service experience. The addition of
TouchCommerce will help accelerate Nuance’s Enterprise business and
expand its customer care solutions with a range of new digital
engagement offerings, including live chat, customer analytics and
personalization solutions.
For large enterprises around the world, customer service
interactions are accelerating toward more pervasive digital
engagement across web, mobile and social platforms. Consumers today
want to choose how they interact or transact, and to move
effortlessly between the efficiency of web chat, the connectivity
of social media, the independence of self-service, and the
convenience of human interaction. In order to acquire and retain
customers, enterprises need to be able to provide a customer
service experience when and how the customer desires. This is
creating a growing market opportunity for Nuance’s Enterprise
business, and a combination with TouchCommerce will provide an
end-to-end engagement platform that merges intelligent self-service
with assisted service to increase customer satisfaction, strengthen
customer loyalty and improve business results.
With TouchCommerce, the Nuance Enterprise business gains:
- The Best of Self-Service and Best of
Assisted-Service Solutions: The powerful merging of live chat,
self-service guides and data-driven personalization has established
TouchCommerce as a leader in digital customer engagement across
mobile, web and messaging channels. The TouchCommerce
assisted-service platform is the perfect addition to Nuance’s
AI-powered customer self-service solutions, providing enterprises
with the ability to efficiently and effectively engage with
customers across all channels – phone, web, mobile, social, and
more.
- Strong Customer Relationships and
Synergies: The acquisition of TouchCommerce is a natural
extension of Nuance’s Enterprise business and is expected to add
attractive revenue streams and incremental organic growth.
TouchCommerce has built and maintained strong customer
relationships with premier businesses that include AT&T,
Citizens Bank, DirectTV, Dixons, eHarmony, Panasonic, Telefonica
and T-Mobile. While a majority of TouchCommerce customers already
use Nuance solutions, less than 10% of Nuance enterprise customers
currently use TouchCommerce, which is expected to create a
significant growth opportunity for Nuance. In addition, the company
expects to accelerate global reach for TouchCommerce through
Nuance’s extensive distribution capabilities in EMEA and Asia
Pacific regions.
- Expanded Addressable Market
Opportunity: The combination of TouchCommerce digital assisted
service and Nuance AI-powered solutions comes at a time when
consumer preferences for customer service engagements are
accelerating toward digital web and mobile services. A recent
Forrester study (“Brief: Don’t Make Your Customers Call You For
Service,” Forrester Research, Inc., May 16, 2016) found that
consumers are increasingly using self-service channels for customer
service, with 66% engaging in digital self-service. The
acceleration of digital customer service solutions is expected to
expand Nuance’s opportunities in the Customer Engagement market, a
$3.7 billion market that is growing at 17% (RnR Market Research,
December 2015).
- Enhanced Nuance Analytics and AI
Differentiation: Nuance and TouchCommerce collectively enable
billions of customer interactions each year, generating powerful
data assets that, when combined with Nuance’s artificial
intelligence technologies, will increase the automation and
accuracy levels for a wide range of customer service applications.
Nuance will also leverage TouchCommerce’s agent desktop to enable
seamless escalation from virtual assistant to human-assisted
service, with the system learning through every customer
engagement. Finally, TouchCommerce’s real-time data and targeting
technologies will be leveraged to deliver higher levels of
personalization and proactive service across the platform.
“The combination of Nuance and TouchCommerce promises to disrupt
the customer service industry by bringing together the best of
self-service and the best of assisted-service solutions, each
magnified by the power of artificial intelligence,” said Robert
Weideman, executive vice president and general manager for Nuance
Enterprise Division. “The result provides enterprises with a
customer engagement solution that connects with consumers anytime
and anywhere, across voice, digital and mobile devices – delivering
superior customer experiences and business results.”
“We are thrilled to join forces with our technology partner
Nuance and to integrate our respective capabilities to deliver to
our enterprise customers the best omni-channel customer engagement
technology and solutions in the industry,” said Bernard Louvat,
president and chief executive officer of TouchCommerce. “Our
respective capabilities are so complementary and our strategies so
similar that it became obvious to both parties that joining forces
was the logical next step beyond our existing technology
partnership.”
The transaction has been approved by both companies’ Boards of
Directors and is expected to close by the end of Nuance’s fiscal
year 2016. Total consideration is $215 million. At
closing, Nuance will pay $110 million in cash and $85 million
in a combination of cash and Nuance common stock determined by
Nuance, and the remaining $20 million will be paid
at the conclusion of an indemnity period.
The transaction is not expected to have a material impact on
Nuance’s fiscal 2016 revenues. In fiscal 2017, TouchCommerce is
expected to add at least $60 million in GAAP revenue and at least
$70 million in non-GAAP revenue, and add at least a percentage
point to overall corporate organic growth. In fiscal 2016, Nuance
expects the transaction to be accretive to GAAP EPS by $0.07 and
neutral to non-GAAP EPS. In fiscal 2017, Nuance expects the
transaction to be dilutive to GAAP EPS by $(0.07) and neutral to
non-GAAP EPS. (see GAAP to non-GAAP reconciliation table)
About TouchCommerceTouchCommerce provides market leading
brands with award-winning omni-channel solutions to engage their
customers on any device through online chat, guides, personalized
content, and other automated tools, resulting in enhanced customer
experience, increased revenue and reduced support costs. For more
information, please visit www.touchcommerce.com.
About Nuance Communications, Inc.Nuance Communications,
Inc. (NASDAQ: NUAN) is a leading provider of voice and language
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
devices and systems. Every day, millions of users and thousands of
businesses experience Nuance’s proven applications. For more
information, please visit: www.nuance.com.
Nuance and the Nuance logo are trademarks or registered
trademarks of Nuance Communications, Inc. or its subsidiaries in
the United States of America and/or other countries. All other
company names or product names may be the trademarks of their
respective owners.
Safe Harbor and Forward-Looking StatementsThis press
release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that involve
risks, uncertainties and assumptions that, if they never
materialize or if they prove incorrect, could cause the predicted
results of our acquisition of TouchCommerce to differ materially
from those expressed or implied by such forward-looking statements.
These forward-looking statements include, but not limited to,
predictions regarding the expected revenue contribution and related
earnings impacts we will derive from the acquired business; our
ability to expand the customer base for our Enterprise solutions;
our ability to effectively integrate our solutions and technologies
with those of TouchCommerce; and our ability to grow our revenue
and to sustain or grow TouchCommerce’s revenue streams. You can
identify these and other forward-looking statements by the use of
words such as “may,” “will,” “should,” “expects,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” “intends,”
“potential,” “continue” or the negative of such terms, or other
comparable terminology. Our actual results could differ materially
from those anticipated in these forward-looking statements for many
reasons, including but not limited to: an inability to introduce
TouchCommerce products into our customer base and or failure to
obtain customer acceptance of combined solutions; difficulties in
integrating the differing technology solutions; disruption in the
business relationships with TouchCommerce’s key customers; and
failure to retain and motivate TouchCommerce personnel; and other
risks customary to achieving the benefits of acquisitions. These
risks as well as other risks associated with our business are
described in our annual report on Form 10-K for the fiscal year
ended September 30, 2015, as amended by our current report on form
8-K filed on May 11, 2016 and our quarterly and other reports filed
with the Securities and Exchange Commission. We disclaim any
obligation to update any forward-looking statements as a result of
developments occurring after the date of this document.
Discussion of non-GAAP Financial Measures
We utilize a number of different financial measures including
some measures that conform to Generally Accepted Accounting
Principles (“GAAP”) as well as additional measures that not conform
to GAAP (“non-GAAP”), in analyzing and assessing the overall
performance of the business, for making operating decisions and for
forecasting and planning for future periods. Consistent with this,
this press release contains both GAAP and non-GAAP measures. We
consider the use of non-GAAP revenue helpful in understanding the
performance of our business, as it excludes the purchase accounting
impact on acquired deferred revenue and other acquisition-related
adjustments to revenue. We also consider the use of non-GAAP
earnings per share helpful in assessing the organic performance of
the continuing operations of our business. By organic performance
we mean performance as if we had owned an acquired business in the
same period a year ago. In assessing the impact of acquiring
TouchCommerce, our management has either included or excluded
certain items as described below.
Non-GAAP Organic Revenue Growth.Organic revenue growth is
calculated by comparing specific period non-GAAP revenue to
non-GAAP revenue from the corresponding prior-year period. For
purposes of this calculation, prior period non-GAAP revenue is
adjusted to include revenue from companies acquired by Nuance as if
we had owned the acquired businesses in all periods presented.
Acquisition-related revenue.We provide supplementary
non-GAAP financial measures of revenue, which include revenue
related to acquisition, that we would have recognized but for the
purchase accounting treatment. Because GAAP accounting requires the
elimination of this revenue, GAAP results alone do not fully
capture all of our economic activities. This non-GAAP adjustment is
intended to reflect the full amount of such revenue. We include
non-GAAP revenue to allow for more complete comparisons to the
financial results of historical operations, forward-looking
guidance and the financial results of peer companies. We believe
these adjustments are useful to management and investors as a
measure of the ongoing performance of the business because,
although we cannot be certain that customers will renew their
contracts, we have historically experienced high renewal rates on
maintenance and support agreements and other customer contracts.
Additionally, although acquisition-related revenue adjustments are
non-recurring with respect to past acquisitions, we generally will
incur these adjustments in connection with any future
acquisitions.
Acquisition-related costs, net.We provide supplementary
non-GAAP financial measures, which exclude certain transition,
integration and other acquisition-related expense items resulting
from acquisitions, to allow more accurate comparisons of the
financial results to historical operations, forward looking
guidance and the financial results of less acquisitive peer
companies. We consider these types of costs and adjustments, to a
great extent, to be unpredictable and dependent on a significant
number of factors that are outside of our control. Furthermore, we
do not consider these acquisition-related costs and adjustments to
be related to the organic continuing operations of the acquired
businesses and are generally not relevant to assessing or
estimating the long-term performance of the acquired assets. In
addition, the size, complexity and/or volume of past acquisitions,
which often drives the magnitude of acquisition related costs, may
not be indicative of the size, complexity and/or volume of future
acquisitions. By excluding acquisition-related costs and
adjustments from our non-GAAP measures, management is better able
to evaluate our ability to utilize our existing assets and estimate
the long-term value that acquired assets will generate for us. We
believe that providing a supplemental non-GAAP measure, which
excludes these items allows management and investors to consider
the ongoing operations of the business both with, and without, such
expenses.
These acquisition-related costs fall into the following
categories: (i) transition and integration costs; (ii) professional
service fees; and (iii) acquisition-related adjustments. Although
these expenses are not recurring with respect to past acquisitions,
we generally will incur these expenses in connection with any
future acquisitions. These categories are further discussed as
follows:
(i) Transition and integration costs. Transition and integration
costs include retention payments, transitional employee costs,
earn-out payments treated as compensation expense, as well as the
costs of integration-related services, including services provided
by third parties.
(ii) Professional service fees. Professional service fees
include third party costs related to the acquisition, and legal and
other professional service fees associated with disputes and
regulatory matters related to acquired entities.
(iii) Acquisition-related adjustments. Acquisition-related
adjustments include adjustments to acquisition-related items that
are required to be marked to fair value each reporting period, such
as contingent consideration, and other items related to
acquisitions for which the measurement period has ended, such as
gains or losses on settlements of pre-acquisition
contingencies.
Amortization of acquired intangible assets.We exclude the
amortization of acquired intangible assets from non-GAAP expense
and income measures. These amounts are inconsistent in amount and
frequency and are significantly impacted by the timing and size of
acquisitions. Providing a supplemental measure which excludes these
charges allows management and investors to evaluate results “as-if”
the acquired intangible assets had been developed internally rather
than acquired and, therefore, provides a supplemental measure of
performance in which our acquired intellectual property is treated
in a comparable manner to our internally developed intellectual
property. Although we exclude amortization of acquired intangible
assets from our non-GAAP expenses, we believe that it is important
for investors to understand that such intangible assets contribute
to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Future acquisitions
may result in the amortization of additional intangible assets.
Non-cash expenses.We provide non-GAAP information
relative to certain non-cash income taxes because we believe that
excluding the non-cash income taxes provides senior management, as
well as other users of the financial statements, with a valuable
perspective on the cash-based performance and health of the
business, including the current near-term projected liquidity. This
non-cash income taxes will continue in future periods.
We believe that providing the non-GAAP information to investors,
in addition to the GAAP presentation, allows investors to view the
financial results in the way management views the operating
results. We further believe that providing this information allows
investors to not only better understand our financial performance,
but more importantly, to evaluate the efficacy of the methodology
and information used by management to evaluate and measure such
performance.
Financial Tables Follow
Nuance Communications, Inc. Reconciliation of Estimated
Financial Impact of Acquisition (in thousands, except per share
amounts) Unaudited
Estimated GAAP
and non-GAAP Revenue:
Fiscal 2017
GAAP revenue $ 60,000 Acquisition-related
adjustment - revenue 10,000
Non-GAAP revenue $
70,000
Estimated
Accretion (Dilution) of GAAP and non-GAAP Net Income per
Share:
Fiscal 2016 Fiscal 2017
Accretion (dilution) of GAAP net
income (loss), per share $ 0.07 $ (0.07 ) Acquisition-related
costs, net 0.01 0.03 Amortization of intangible assets 0.01 0.04
Non-cash income taxes (0.09 ) -
Accretion
of non-GAAP net income, per share $ - $ -
Shares used in computing accretion on
GAAP and non-GAAP net income per share:
Weighted average common shares: basic 292,000
290,500 Weighted average common shares: diluted
299,000 296,500
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version on businesswire.com: http://www.businesswire.com/news/home/20160721005669/en/
Nuance Communications, Inc.For MediaErica Hill,
781-888-5518erica.hill@nuance.comorFor InvestorsRichard
Mack, 781-565-5000richard.mack@nuance.com
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