false--09-30FY20200001002517P6M12DP3M21D0.00000.0000P90D20262020202420252035203520312026202020242025203520352031770003800033000150000.0010.0015600000005600000002896800002867030002859290002829520000.01750.00750.01500.00500.056250.053750.060.055780.056220.053940.074320.056250.053750.060.055780.056220.053940.074320.056250.053750.060.01250.010.0150.02750.056250.053750.060.01250.010.0150.027508240000011690000032800000007160000091600000227000000000000P5YP7YP15YP5YP0YP3YP5YP2YP3YP30Y0.30900.27300.28240.27730.03020.02230.01620.0140P3Y0MP1Y0MP3Y0MP2Y8M20D375100037510005100000120000018000003700000560000011000000450000001500000310000043000008000000 0001002517 2019-10-01 2020-09-30 0001002517 2020-03-31 0001002517 2020-10-31 0001002517 2018-10-01 2019-09-30 0001002517 2017-10-01 2018-09-30 0001002517 us-gaap:RetainedEarningsMember 2019-10-01 2020-09-30 0001002517 2020-09-30 0001002517 2019-09-30 0001002517 us-gaap:TreasuryStockMember 2019-10-01 2020-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2017-10-01 2018-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2019-10-01 2020-09-30 0001002517 us-gaap:CommonStockMember 2018-10-01 2019-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2018-10-01 2019-09-30 0001002517 us-gaap:CommonStockMember 2019-10-01 2020-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2020-09-30 0001002517 us-gaap:CommonStockMember 2018-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-10-01 2019-09-30 0001002517 us-gaap:CommonStockMember 2017-10-01 2018-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2017-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2017-10-01 2018-09-30 0001002517 us-gaap:TreasuryStockMember 2018-10-01 2019-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2019-09-30 0001002517 us-gaap:TreasuryStockMember 2017-10-01 2018-09-30 0001002517 us-gaap:TreasuryStockMember 2020-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2019-10-01 2020-09-30 0001002517 us-gaap:RetainedEarningsMember 2017-10-01 2018-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-10-01 2018-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001002517 us-gaap:CommonStockMember 2017-09-30 0001002517 us-gaap:TreasuryStockMember 2019-09-30 0001002517 us-gaap:TreasuryStockMember 2018-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2018-10-01 2019-09-30 0001002517 us-gaap:CommonStockMember 2019-09-30 0001002517 us-gaap:RetainedEarningsMember 2017-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0001002517 us-gaap:RetainedEarningsMember 2020-09-30 0001002517 us-gaap:TreasuryStockMember 2017-09-30 0001002517 us-gaap:RetainedEarningsMember 2018-10-01 2019-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-10-01 2020-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2017-09-30 0001002517 us-gaap:NoncontrollingInterestMember 2018-09-30 0001002517 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001002517 us-gaap:CommonStockMember 2020-09-30 0001002517 us-gaap:RetainedEarningsMember 2018-09-30 0001002517 2017-09-30 0001002517 2018-09-30 0001002517 us-gaap:RetainedEarningsMember 2019-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-09-30 0001002517 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2019-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2018-10-01 2019-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2017-10-01 2018-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2019-10-01 2020-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2018-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2018-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2017-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2018-10-01 2019-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2019-10-01 2020-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2017-10-01 2018-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2019-09-30 0001002517 nuan:SECSchedule1209AllowanceSalesReturnsMember 2020-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2017-09-30 0001002517 us-gaap:AllowanceForCreditLossMember 2020-09-30 0001002517 2019-02-01 0001002517 nuan:HealthCareSegmentMember 2018-10-01 2019-09-30 0001002517 nuan:OtherMobileBusinessesMember 2018-10-01 2019-09-30 0001002517 nuan:EnterpriseSegmentMember 2018-10-01 2019-09-30 0001002517 nuan:EnterpriseSegmentMember 2019-10-01 2020-09-30 0001002517 nuan:HealthCareSegmentMember 2019-10-01 2020-09-30 0001002517 nuan:OtherMobileBusinessesMember 2019-10-01 2020-09-30 0001002517 nuan:TwotoFiveYearsMember 2020-09-30 0001002517 nuan:WithinOneYearMember 2020-09-30 0001002517 nuan:GreaterthanFiveYearsMember 2020-09-30 0001002517 us-gaap:SellingAndMarketingExpenseMember 2018-10-01 2019-09-30 0001002517 us-gaap:RestructuringChargesMember 2018-10-01 2019-09-30 0001002517 us-gaap:GeneralAndAdministrativeExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:OtherExpenseMember 2017-10-01 2018-09-30 0001002517 us-gaap:RestructuringChargesMember 2019-10-01 2020-09-30 0001002517 us-gaap:OtherExpenseMember 2018-10-01 2019-09-30 0001002517 us-gaap:RestructuringChargesMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:GeneralAndAdministrativeExpenseMember 2017-10-01 2018-09-30 0001002517 us-gaap:SellingAndMarketingExpenseMember 2017-10-01 2018-09-30 0001002517 us-gaap:AcquisitionRelatedCostsMember 2018-10-01 2019-09-30 0001002517 us-gaap:GeneralAndAdministrativeExpenseMember 2018-10-01 2019-09-30 0001002517 us-gaap:SellingAndMarketingExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:ResearchAndDevelopmentExpenseMember 2018-10-01 2019-09-30 0001002517 us-gaap:ResearchAndDevelopmentExpenseMember 2017-10-01 2018-09-30 0001002517 us-gaap:ResearchAndDevelopmentExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:AcquisitionRelatedCostsMember 2019-10-01 2020-09-30 0001002517 us-gaap:AcquisitionRelatedCostsMember 2017-10-01 2018-09-30 0001002517 us-gaap:CashAndCashEquivalentsMember nuan:OtherAcquisitionsMember 2017-10-01 2018-09-30 0001002517 nuan:OtherAcquisitionsMember 2019-09-30 0001002517 nuan:OtherAcquisitionsMember 2018-09-30 0001002517 nuan:OtherAcquisitionsMember 2017-10-01 2018-09-30 0001002517 us-gaap:WarrantMember nuan:OtherAcquisitionsMember 2018-10-01 2019-09-30 0001002517 nuan:OtherAcquisitionsMember 2018-10-01 2019-09-30 0001002517 us-gaap:CashAndCashEquivalentsMember nuan:OtherAcquisitionsMember 2018-10-01 2019-09-30 0001002517 nuan:ContingentConsiderationPaymentsMember nuan:OtherAcquisitionsMember 2017-10-01 2018-09-30 0001002517 nuan:ContingentConsiderationPaymentsMember nuan:OtherAcquisitionsMember 2018-10-01 2019-09-30 0001002517 us-gaap:CustomerRelationshipsMember 2019-09-30 0001002517 nuan:TradeNamesTrademarksAndOtherMember 2019-09-30 0001002517 us-gaap:CustomerRelationshipsMember 2018-10-01 2019-09-30 0001002517 us-gaap:PatentedTechnologyMember 2019-09-30 0001002517 us-gaap:PatentedTechnologyMember 2018-10-01 2019-09-30 0001002517 nuan:TradeNamesTrademarksAndOtherMember 2018-10-01 2019-09-30 0001002517 us-gaap:CostOfSalesMember 2020-09-30 0001002517 us-gaap:OperatingExpenseMember 2020-09-30 0001002517 nuan:EnterpriseSegmentMember 2020-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2019-10-01 2020-09-30 0001002517 nuan:EnterpriseSegmentMember 2019-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2020-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2018-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2018-10-01 2019-09-30 0001002517 nuan:HealthCareSegmentMember 2020-09-30 0001002517 nuan:HealthCareSegmentMember 2018-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2019-09-30 0001002517 nuan:EnterpriseSegmentMember 2018-09-30 0001002517 nuan:HealthCareSegmentMember 2019-09-30 0001002517 nuan:TradeNamesTrademarksAndOtherMember 2019-10-01 2020-09-30 0001002517 us-gaap:PatentedTechnologyMember 2020-09-30 0001002517 us-gaap:CustomerRelationshipsMember 2019-10-01 2020-09-30 0001002517 us-gaap:CustomerRelationshipsMember 2020-09-30 0001002517 nuan:TradeNamesTrademarksAndOtherMember 2020-09-30 0001002517 us-gaap:PatentedTechnologyMember 2019-10-01 2020-09-30 0001002517 nuan:MobileReportingUnitMember 2018-07-01 2018-09-30 0001002517 nuan:MobileReportingUnitMember 2017-10-01 2018-03-31 0001002517 nuan:SRSMember 2018-07-01 2018-09-30 0001002517 us-gaap:PatentedTechnologyMember nuan:MobileReportingUnitMember 2018-07-01 2018-09-30 0001002517 us-gaap:PatentedTechnologyMember nuan:SRSMember 2018-07-01 2018-09-30 0001002517 nuan:DragonTVMember 2018-03-31 0001002517 us-gaap:CustomerRelationshipsMember nuan:MobileReportingUnitMember 2018-07-01 2018-09-30 0001002517 nuan:MobileReportingUnitMember 2018-03-31 0001002517 nuan:AutomotiveSegmentMember 2018-03-31 0001002517 us-gaap:CustomerRelationshipsMember nuan:SRSMember 2018-07-01 2018-09-30 0001002517 us-gaap:LeaseholdImprovementsMember 2019-09-30 0001002517 us-gaap:FurnitureAndFixturesMember 2020-09-30 0001002517 us-gaap:BuildingMember 2019-09-30 0001002517 us-gaap:ConstructionInProgressMember 2020-09-30 0001002517 us-gaap:ComputerEquipmentMember 2020-09-30 0001002517 us-gaap:FurnitureAndFixturesMember 2019-09-30 0001002517 us-gaap:LandMember 2020-09-30 0001002517 us-gaap:ComputerEquipmentMember 2019-09-30 0001002517 us-gaap:MachineryAndEquipmentMember 2020-09-30 0001002517 us-gaap:ConstructionInProgressMember 2019-09-30 0001002517 us-gaap:MachineryAndEquipmentMember 2019-09-30 0001002517 us-gaap:LandMember 2019-09-30 0001002517 us-gaap:LeaseholdImprovementsMember 2020-09-30 0001002517 us-gaap:BuildingMember 2020-09-30 0001002517 us-gaap:SoftwareDevelopmentMember 2018-10-01 2019-09-30 0001002517 us-gaap:SoftwareDevelopmentMember 2019-10-01 2020-09-30 0001002517 us-gaap:SoftwareDevelopmentMember 2017-10-01 2018-09-30 0001002517 srt:MinimumMember us-gaap:LeaseholdImprovementsMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:ComputerEquipmentMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember us-gaap:ComputerEquipmentMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember us-gaap:FurnitureAndFixturesMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:FurnitureAndFixturesMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:MachineryAndEquipmentMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember us-gaap:BuildingMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember us-gaap:MachineryAndEquipmentMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:LeaseholdImprovementsMember 2019-10-01 2020-09-30 0001002517 us-gaap:BuildingMember 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2017-03-13 0001002517 nuan:TermLoanFacilityDueAugustSeventhTwentyNinteenMember 2018-10-01 2019-09-30 0001002517 nuan:A5.625SeniorNotesdue2026Member 2016-12-22 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2015-06-01 0001002517 nuan:AfterautospinoffMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2015-12-07 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2011-10-24 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2020-03-31 0001002517 2017-07-01 2017-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2014-10-01 2014-12-31 0001002517 nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2015-12-07 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2019-10-01 2020-09-30 0001002517 nuan:BeforeautospinoffMember nuan:ConvertibleDebentures1.25Due2025Member 2017-03-13 0001002517 nuan:BeforeautospinoffMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2015-12-07 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2014-12-31 0001002517 nuan:A6.0SeniorNotesdue2024Member 2016-06-21 0001002517 srt:MaximumMember nuan:LondonInterbankOfferedRateMember nuan:RevolvingCreditFacilityDueAprilFifteenthTwentyTwentyOneMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2018-10-01 2019-09-30 0001002517 srt:MaximumMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2015-12-07 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2017-10-01 2017-12-31 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2020-03-31 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2015-12-07 0001002517 nuan:BeforeDecember152021Member nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 nuan:RevolvingCreditFacilityDueAprilFifteenthTwentyTwentyOneMember 2020-09-30 0001002517 us-gaap:RevolvingCreditFacilityMember 2020-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2017-11-01 0001002517 srt:MinimumMember nuan:ConvertibleDebentures1.25Due2025Member 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2015-04-01 2015-06-30 0001002517 srt:MinimumMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-09-30 0001002517 nuan:AfterautospinoffMember nuan:ConvertibleDebentures1.25Due2025Member 2017-03-13 0001002517 2020-03-24 0001002517 nuan:A5.625SeniorNotesdue2026Member 2016-12-01 2016-12-31 0001002517 nuan:A5375SeniorNotesDueAugust152020Member 2016-12-22 0001002517 nuan:AtanytimeandfromtimetotimebeforeDecember152021Member nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 srt:MinimumMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-10-01 2020-09-30 0001002517 nuan:BeforeautospinoffMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2015-06-01 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2018-10-01 2019-09-30 0001002517 nuan:A6.0SeniorNotesdue2024Member 2016-06-01 2016-06-30 0001002517 srt:MinimumMember nuan:BeforeDecember152021Member nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:BaseRateMember nuan:RevolvingCreditFacilityDueAprilFifteenthTwentyTwentyOneMember 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2019-09-30 0001002517 nuan:EndingOnLastTradingDayOfPreviousFiscalQuarterMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2015-12-07 0001002517 nuan:ChangeOfControlMember nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2019-09-30 0001002517 nuan:AssetSaleMember nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2016-10-01 2017-06-30 0001002517 srt:MinimumMember nuan:LondonInterbankOfferedRateMember nuan:RevolvingCreditFacilityDueAprilFifteenthTwentyTwentyOneMember 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2018-10-01 2019-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2020-03-01 2020-03-31 0001002517 srt:MinimumMember us-gaap:BaseRateMember nuan:RevolvingCreditFacilityDueAprilFifteenthTwentyTwentyOneMember 2019-10-01 2020-09-30 0001002517 nuan:EndingOnLastTradingDayOfPreviousFiscalQuarterMember nuan:ConvertibleDebentures1.25Due2025Member 2019-10-01 2020-09-30 0001002517 nuan:AfterautospinoffMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2015-06-01 0001002517 srt:MaximumMember nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-09-30 0001002517 srt:MaximumMember nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2018-10-01 2019-09-30 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2020-06-30 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2020-09-30 0001002517 nuan:A1.25ConvertibleDebenturesdue2025Member 2019-09-30 0001002517 nuan:A5.625SeniorNotesdue2026Member 2019-09-30 0001002517 nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2020-09-30 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2019-09-30 0001002517 nuan:A6.0SeniorNotesdue2024Member 2019-09-30 0001002517 nuan:A5.625SeniorNotesdue2026Member 2020-09-30 0001002517 nuan:A6.0SeniorNotesdue2024Member 2020-09-30 0001002517 nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2019-09-30 0001002517 nuan:ConvertibleDebenturesTwoPointSevenFivePercentDueNovemberOneTwentyThirtyOneMember 2020-09-30 0001002517 nuan:A1.25ConvertibleDebenturesdue2025Member 2020-09-30 0001002517 us-gaap:ConvertibleDebtMember 2020-09-30 0001002517 us-gaap:SeniorNotesMember 2020-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2018-10-01 2019-09-30 0001002517 nuan:A5.625SeniorNotesdue2026Member 2018-10-01 2019-09-30 0001002517 nuan:A5375SeniorNotesDueAugust152020Member 2019-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2020-09-30 0001002517 nuan:A5375SeniorNotesDueAugust152020Member 2020-09-30 0001002517 us-gaap:RevolvingCreditFacilityMember 2019-09-30 0001002517 nuan:A6.0SeniorNotesdue2024Member 2019-10-01 2020-09-30 0001002517 nuan:A5375SeniorNotesDueAugust152020Member 2019-10-01 2020-09-30 0001002517 nuan:ConvertibleDebentures1.25Due2025Member 2019-10-01 2020-09-30 0001002517 nuan:A5.625SeniorNotesdue2026Member 2019-10-01 2020-09-30 0001002517 nuan:A6.0SeniorNotesdue2024Member 2018-10-01 2019-09-30 0001002517 us-gaap:RevolvingCreditFacilityMember 2020-09-30 0001002517 nuan:ConvertibleDebenturesOnePointFivePercentDueNovemberOneTwentyThirtyFiveMemberMember 2018-10-01 2019-09-30 0001002517 nuan:ConvertibleDebenturesOnePercentDueTwentyThirtyFiveMember 2019-10-01 2020-09-30 0001002517 nuan:A5375SeniorNotesDueAugust152020Member 2018-10-01 2019-09-30 0001002517 srt:MinimumMember nuan:LondonInterbankOfferedRateMember nuan:RevolvingCreditFacilityDueAugustSeventhTwentyEighteenMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember nuan:LondonInterbankOfferedRateMember nuan:RevolvingCreditFacilityDueAugustSeventhTwentyEighteenMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember us-gaap:BaseRateMember nuan:RevolvingCreditFacilityDueAugustSeventhTwentyEighteenMember 2019-10-01 2020-09-30 0001002517 srt:MaximumMember us-gaap:BaseRateMember nuan:RevolvingCreditFacilityDueAugustSeventhTwentyEighteenMember 2019-10-01 2020-09-30 0001002517 us-gaap:NondesignatedMember 2019-09-30 0001002517 us-gaap:NondesignatedMember 2020-09-30 0001002517 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember nuan:OtherIncomeAndExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember nuan:OtherIncomeAndExpenseMember 2017-10-01 2018-09-30 0001002517 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember nuan:OtherIncomeAndExpenseMember 2018-10-01 2019-09-30 0001002517 nuan:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember 2019-09-30 0001002517 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember 2020-09-30 0001002517 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember 2019-09-30 0001002517 nuan:AccruedExpensesAndOtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember 2020-09-30 0001002517 srt:MaximumMember us-gaap:NondesignatedMember 2019-10-01 2020-09-30 0001002517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0001002517 us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0001002517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0001002517 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-09-30 0001002517 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0001002517 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0001002517 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0001002517 us-gaap:FairValueMeasurementsRecurringMember 2019-09-30 0001002517 srt:MaximumMember 2020-09-30 0001002517 nuan:CommercialpapercorporatenotesandbondsMember 2019-10-01 2020-09-30 0001002517 us-gaap:CorporateDebtSecuritiesMember 2020-09-30 0001002517 us-gaap:CommercialPaperMember 2020-09-30 0001002517 nuan:CommercialpapercorporatenotesandbondsMember 2018-10-01 2019-09-30 0001002517 us-gaap:CorporateDebtSecuritiesMember 2019-09-30 0001002517 us-gaap:CommercialPaperMember 2019-09-30 0001002517 srt:ChiefExecutiveOfficerMember us-gaap:OtherRestructuringMember us-gaap:CorporateMember 2017-10-01 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2019-10-01 2020-09-30 0001002517 nuan:MalwareIncidentProfessionalServiceChargesMember 2018-10-01 2019-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2017-10-01 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherExpenseMember 2017-10-01 2018-09-30 0001002517 srt:ChiefExecutiveOfficerMember us-gaap:OtherRestructuringMember us-gaap:CorporateMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherExpenseMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember 2020-09-30 0001002517 us-gaap:FacilityClosingMember 2018-10-01 2019-09-30 0001002517 nuan:MalwareIncidentProfessionalServiceChargesMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:OtherRestructuringMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember 2019-10-01 2020-09-30 0001002517 us-gaap:OtherExpenseMember 2018-10-01 2019-09-30 0001002517 us-gaap:FacilityClosingMember 2019-09-30 0001002517 us-gaap:FacilityClosingMember 2017-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2017-09-30 0001002517 us-gaap:FacilityClosingMember 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember 2019-09-30 0001002517 us-gaap:OtherRestructuringMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:HealthCareMember 2018-10-01 2019-09-30 0001002517 us-gaap:EmployeeSeveranceMember nuan:EnterpriseSegmentMember 2019-10-01 2020-09-30 0001002517 us-gaap:HealthCareMember 2018-10-01 2019-09-30 0001002517 nuan:EnterpriseSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember nuan:EnterpriseSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:CorporateMember 2018-10-01 2019-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:CorporateMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:HealthCareMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:AllOtherSegmentsMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember nuan:EnterpriseSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:HealthCareMember 2019-10-01 2020-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:HealthCareMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:AllOtherSegmentsMember 2018-10-01 2019-09-30 0001002517 us-gaap:CorporateMember 2017-10-01 2018-09-30 0001002517 us-gaap:AllOtherSegmentsMember 2017-10-01 2018-09-30 0001002517 us-gaap:HealthCareMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:AllOtherSegmentsMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:HealthCareMember 2019-10-01 2020-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:AllOtherSegmentsMember 2019-10-01 2020-09-30 0001002517 us-gaap:CorporateMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember nuan:EnterpriseSegmentMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:CorporateMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:AllOtherSegmentsMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember nuan:EnterpriseSegmentMember 2018-10-01 2019-09-30 0001002517 us-gaap:FacilityClosingMember nuan:EnterpriseSegmentMember 2018-10-01 2019-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:HealthCareMember 2017-10-01 2018-09-30 0001002517 us-gaap:OtherRestructuringMember nuan:EnterpriseSegmentMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:HealthCareMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember nuan:EnterpriseSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:AllOtherSegmentsMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:CorporateMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember nuan:AutomotiveSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:HealthCareMember 2019-10-01 2020-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:CorporateMember 2018-10-01 2019-09-30 0001002517 us-gaap:FacilityClosingMember nuan:EnterpriseSegmentMember 2019-10-01 2020-09-30 0001002517 us-gaap:HealthCareMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember nuan:AutomotiveSegmentMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:CorporateMember 2017-10-01 2018-09-30 0001002517 us-gaap:CorporateMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:HealthCareMember 2018-10-01 2019-09-30 0001002517 us-gaap:EmployeeSeveranceMember us-gaap:CorporateMember 2019-10-01 2020-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:CorporateMember 2018-10-01 2019-09-30 0001002517 us-gaap:OtherRestructuringMember us-gaap:AllOtherSegmentsMember 2017-10-01 2018-09-30 0001002517 us-gaap:FacilityClosingMember us-gaap:CorporateMember 2019-10-01 2020-09-30 0001002517 2013-04-29 2018-09-30 0001002517 us-gaap:SeriesAPreferredStockMember 2020-09-30 0001002517 srt:MaximumMember us-gaap:SeriesAPreferredStockMember 2020-09-30 0001002517 2018-08-01 0001002517 srt:MinimumMember us-gaap:SeriesAPreferredStockMember 2020-09-30 0001002517 2013-04-29 0001002517 us-gaap:SeriesBMember 2020-09-30 0001002517 2015-04-29 0001002517 us-gaap:RestrictedStockUnitsRSUMember 2019-10-01 2020-09-30 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2019-10-01 2020-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2019-10-01 2020-09-30 0001002517 us-gaap:PerformanceSharesMember 2018-10-01 2019-09-30 0001002517 us-gaap:PerformanceSharesMember 2019-10-01 2020-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2018-10-01 2019-09-30 0001002517 us-gaap:PerformanceSharesMember 2017-10-01 2018-09-30 0001002517 us-gaap:PerformanceSharesMember 2020-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2017-10-01 2018-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2019-09-30 0001002517 us-gaap:PerformanceSharesMember 2018-09-30 0001002517 us-gaap:PerformanceSharesMember 2019-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2018-09-30 0001002517 us-gaap:PerformanceSharesMember 2017-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2020-09-30 0001002517 nuan:TimeLapseRestrictedUnitsMember 2017-09-30 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2018-10-01 2019-09-30 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2017-10-01 2018-09-30 0001002517 nuan:MaintenanceAndSupportMember 2019-10-01 2020-09-30 0001002517 nuan:MaintenanceAndSupportMember 2017-10-01 2018-09-30 0001002517 nuan:ProductAndLicensingMember 2017-10-01 2018-09-30 0001002517 nuan:ProfessionalServicesAndHostingMember 2018-10-01 2019-09-30 0001002517 nuan:ProductAndLicensingMember 2018-10-01 2019-09-30 0001002517 nuan:ProfessionalServicesAndHostingMember 2019-10-01 2020-09-30 0001002517 nuan:ProfessionalServicesAndHostingMember 2017-10-01 2018-09-30 0001002517 nuan:MaintenanceAndSupportMember 2018-10-01 2019-09-30 0001002517 nuan:ProductAndLicensingMember 2019-10-01 2020-09-30 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2015-01-27 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2010-01-29 0001002517 nuan:A1995EmployeeStockPurchasePlanMember 2020-09-30 0001002517 us-gaap:RestrictedStockUnitsRSUMember 2018-10-01 2019-09-30 0001002517 us-gaap:RestrictedStockUnitsRSUMember 2017-10-01 2018-09-30 0001002517 srt:MinimumMember 2018-10-01 2019-09-30 0001002517 srt:MaximumMember 2018-10-01 2019-09-30 0001002517 srt:MaximumMember 2019-10-01 2020-09-30 0001002517 srt:MinimumMember 2019-10-01 2020-09-30 0001002517 nuan:RestructuringOperatingLeasesMember 2020-09-30 0001002517 nuan:NonRestructuringOperatingLeasesMember 2020-09-30 0001002517 us-gaap:StateAndLocalJurisdictionMember nuan:ResearchAndDevelopmentMember 2019-09-30 0001002517 nuan:UnitedStatesMember nuan:ResearchAndDevelopmentMember 2019-09-30 0001002517 nuan:UnitedStatesMember 2020-09-30 0001002517 nuan:UnitedStatesMember 2019-09-30 0001002517 us-gaap:InvestmentCreditMember 2020-09-30 0001002517 us-gaap:ForeignCountryMember 2019-09-30 0001002517 nuan:TCJADomain 2019-10-01 2020-09-30 0001002517 us-gaap:StateAndLocalJurisdictionMember 2019-09-30 0001002517 us-gaap:StateAndLocalJurisdictionMember 2020-09-30 0001002517 us-gaap:ForeignCountryMember 2020-09-30 0001002517 us-gaap:InvestmentCreditMember 2019-09-30 0001002517 us-gaap:StateAndLocalJurisdictionMember nuan:ResearchAndDevelopmentMember 2020-09-30 0001002517 nuan:UnitedStatesMember nuan:ResearchAndDevelopmentMember 2020-09-30 0001002517 nuan:LicensedTechnologyMember nuan:MagnetDomain 2017-10-01 2018-09-30 0001002517 nuan:LicensedTechnologyMember nuan:MagnetDomain 2018-01-01 2018-03-31 0001002517 srt:MaximumMember us-gaap:ServiceAgreementsMember nuan:MagnetDomain 2019-01-01 2019-03-31 0001002517 nuan:LicensedTechnologyMember nuan:MagnetDomain 2018-04-01 2018-06-30 0001002517 srt:MaximumMember us-gaap:ServiceAgreementsMember nuan:MagnetDomain 2017-10-01 2018-06-30 0001002517 country:US 2017-10-01 2018-09-30 0001002517 nuan:InternationalMember 2019-10-01 2020-09-30 0001002517 nuan:InternationalMember 2018-10-01 2019-09-30 0001002517 country:US 2019-10-01 2020-09-30 0001002517 country:US 2018-10-01 2019-09-30 0001002517 nuan:InternationalMember 2017-10-01 2018-09-30 0001002517 nuan:InternationalMember 2019-09-30 0001002517 nuan:InternationalMember 2020-09-30 0001002517 country:US 2019-09-30 0001002517 country:US 2020-09-30 0001002517 nuan:HealthCareSegmentMember 2017-10-01 2018-09-30 0001002517 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2018-10-01 2019-09-30 0001002517 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2017-10-01 2018-09-30 0001002517 us-gaap:SeriesOfIndividuallyImmaterialBusinessAcquisitionsMember 2019-10-01 2020-09-30 0001002517 2019-01-01 2019-03-31 0001002517 2017-10-01 2017-12-31 0001002517 2019-07-01 2019-09-30 0001002517 2019-04-01 2019-06-30 0001002517 2020-01-01 2020-03-31 0001002517 2020-04-01 2020-06-30 0001002517 2020-07-01 2020-09-30 0001002517 2019-10-01 2019-12-31 xbrli:shares iso4217:USD iso4217:USD xbrli:shares xbrli:pure
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
Form 10-K
(Mark One)
 
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended
September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from         to                   
Commission file number 001-27038
NUANCE COMMUNICATIONS, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
 
94-3156479
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 
 
 
1 Wayside Road
 
01803
Burlington,
Massachusetts
 
 
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (781565-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, $0.001 par value
NUAN
Nasdaq Stock Market LLC
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
 
Accelerated filer
Non-accelerated filer
 
Emerging growth company
 
 
 
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant has filed a report on attestation to its management's assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes No  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No þ
As of March 31, 2020, the aggregate market value of the registrant's common stock held by non-affiliates of the registrant was $3.9 billion based on the closing sale price as reported on the Nasdaq Global Select Market for such date.
The number of shares of the registrant’s common stock, outstanding as of October 31, 2020, was 282,953,777.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement to be delivered to stockholders in connection with the registrant’s 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.
 



NUANCE COMMUNICATIONS, INC.
TABLE OF CONTENTS
 
 
Page
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
PART II
Item 5.
Item 6.
Selected Consolidated Financial Data
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
PART IV
Item 15.



Table of Contents



PART I
This Annual Report on Form 10-K 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 our consolidated results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking, including statements pertaining to: our future revenue, cost of revenue, research and development expense, selling, general and administrative expenses, amortization of intangible assets and gross margin, earnings, cash flows and liquidity; our strategy relating to our segments; the potential of future product releases; our product development plans and investments in research and development; future acquisitions and anticipated benefits from acquisitions; international operations and localized versions of our products; our contractual commitments; our fiscal year 2021 revenue and expense expectations and legal proceedings and litigation matters. 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. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Item 1A of this Annual Report under the heading “Risk Factors.” All forward-looking statements included in this document are based on information available to us on the date hereof. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof. We will not undertake and specifically decline any obligation to update any forward-looking statements, except to the extent required by law.
Item 1.Business
Overview
Nuance Communications, Inc. ("We", "Nuance", or the "Company") is a technology pioneer and market leader in conversational artificial intelligence ("AI") and ambient clinical intelligence. We deliver intuitive solutions that understand, analyze, and respond to people - amplifying their ability to help others with increased productivity and security. We work with thousands of organizations globally across healthcare, financial services, telecommunications, government, and retail - to create stronger relationships and better experiences for their customers and workforce. We offer our customers a wide range of products and services, including clinical documentation, solutions for clinicians, radiologists and care teams, as well as intelligent customer engagement and security biometric solutions for leading brands. In addition, our solutions increasingly utilize our innovations in AI, including cognitive sciences and machine learning to create smarter, more natural experiences with technology. Using advanced analytics and algorithms, our technologies create personalized experiences and transform the way people interact with information and the technology around them. We market and sell our solutions and technologies around the world directly through a dedicated sales force and a global network of resellers, including system integrators, independent software vendors, value-added resellers, distributors, hardware vendors, telecommunications carriers and e-commerce websites.
We are a global organization steeped in research and development ("R&D"). We have approximately 1,600 language scientists, developers, and engineers dedicated to continually refining our technologies and advancing our portfolio to better meet our customers’ diverse and changing needs. As of September 30, 2020, we had operations and sales force in 28 countries. Our corporate headquarters is in Burlington, Massachusetts, and our international headquarters is in Dublin, Ireland. In fiscal year 2020, our revenue was approximately $1.5 billion.
In connection with our ongoing comprehensive portfolio and business review, during the first quarter of 2021, we announced our strategic plan to sell our medical transcription and EHR go-live businesses to Assured Healthcare Partners and Aeries Technology Group. These businesses provide critical support to healthcare organizations, and upon the closing of the sale, Nuance will be both a minority stakeholder and business partner committed to the success of the new business, named DeliverHealth Solutions.
As a result, we expect the results of medical transcription and EHR go-live businesses to be included within discontinued operations on the consolidated statements of operations, and the related assets and liabilities to be classified as assets and liabilities held for sale on the consolidated balance sheets effective the first quarter of fiscal year 2021.
Our Strategy
With the sale of our Imaging segment, the spin-off of our Automotive segment, the exit of our Mobile Operator Services business and the wind-down of Devices, as well as the anticipated sale of our medical transcription and EHR go-live businesses, we are

1


Table of Contents



positioned to be a simpler and more growth-oriented company, which enables us to prioritize and execute our conversational AI strategies within Healthcare and Enterprise. The key elements of our strategy include:
Transitioning to and expansion of our Healthcare cloud-based offerings. We are transitioning our Healthcare solutions to the cloud, enabling us to shift our revenue mix to a more subscription-based, higher-value recurring model. We have established Nuance as a cloud platform in all our strategic solutions within Healthcare. During fiscal year 2020, we continued to make significant progress migrating our customers to the cloud with Dragon Medical One ("DMO") PowerScribe One, and CDE One. We launched new cloud solutions, such as cloud-based Computer-Assisted Physician Documentation ("CAPD") solutions, and Nuance® Dragon Ambient eXperience™ (DAX™), an ambient clinical intelligence ("ACI") solution. We have created a go-to-market approach that aligns sales compensation to our cloud models, and have enabled our channel to sell Dragon Medical cloud. We also launched new Dragon Medical cloud offerings in certain international markets, including France, Belgium, Netherlands, Germany, and Finland.
Expanding our Intelligent Engagement portfolio in Enterprise, with a focus on cloud. While we maintain leadership in interactive voice response ("IVR") offerings, we have increased our focus on Intelligent Engagement growth opportunities, including digital, voice, and Security and Biometrics solutions. We expanded the cloud-native stack with the roll-out of Nuance Mix™ and Intelligent Engagement Services for Conversational AI, Messaging, and Agent AI. We continue to grow our market share of Nuance Gatekeeper, a cloud-native voice biometrics and authentication solution. These solutions offer customers more flexible integration with third-party systems and the ability to deploy across hosted, public, or private clouds. It gives large enterprises flexible deployment options while making Nuance technology available to smaller organizations via the cloud model.
Accelerating our innovation activities. We are accelerating investment in research and development ("R&D"), focusing on new AI products that deliver additional value to our existing customer base. In Healthcare we continued to expand the number of specialties supported by Nuance DAX and launched Nuance DAX for telehealth. Building on our Dragon Medical One platform, we offer CAPD solutions for sub-specialties, including surgical, cardiovascular, pediatrics, and the emergency department, as well as new capabilities for the clinical documentation specialists through CDE One. Building on our large radiology installed base, we offer a suite of additional offerings for image sharing, communication, workflow orchestration, incidental findings follow-up, and the AI marketplace for Diagnostic Imaging in Healthcare. In Enterprise, building on our strong footprint in the Fortune 100 with IVR, we increase revenue, cost savings, and customer satisfaction through the addition of digital offerings and security and biometrics solutions for a seamless omnichannel experience. Enterprises have a choice of deployment whether they leverage our world-class professional services team or leverage Nuance Mix, an open enterprise-grade, SaaS tooling suite for creating advanced conversational experiences that power virtual assistants and IVR using Nuance’s industry-leading and cloud-agnostic conversational AI.
Expanding our go-to-market presence. We are increasing sales coverage in new markets and developing solutions to build on our platform approach to increase our customer lifetime value. In Healthcare, we are pursuing under-served markets, including community hospitals, ambulatory clinics, and surgery centers. We also launched new solutions for specialty areas such as pediatrics, the emergency department, cardiovascular, and surgical. In Enterprise, we are expanding our Intelligent Engagement solutions into our existing IVR customer base and delivering new rapid AI development tools that will allow us to increase our penetration into mid-market accounts.
Expanding internationally. In Healthcare, we continue to expand our international presence in the U.K., France, DACH region, Nordics, Australia, and Canada with a growing direct sales force and new offerings. We launched new Dragon Medical cloud offerings in certain international markets, including the Netherlands, Belgium, Luxembourg, Germany, Austria, Sweden, Denmark, Norway, and Finland. In Enterprise, we continue to expand our international presence in the U.K., France, Spain, Germany, Italy, Japan, Australia, New Zealand, Mexico, Brazil, Argentina, and Canada with expanded Intelligent Engagement offerings and sales focus.
Growing through targeted acquisitions and strategic investments. While organic growth is our priority, we also expect to selectively and opportunistically pursue acquisitions and investments in businesses and technologies that advance the strategies described above.
Segments
As of September 30, 2020, we had three reportable segments: Healthcare, Enterprise, and Other. See Note 23 to the consolidated financial statements for additional information about our reportable segments. We offer our solutions and technologies to our customers in a variety of ways, including via hosted cloud-based solutions, perpetual and term software licenses, implementation

2


Table of Contents



and custom solution development services and maintenance and support. Our product revenues include traditional perpetual licensing, term-based licensing, royalties, and consumer sales. Our hosting, royalty, term license and maintenance and support revenues are recurring in nature as our customers use our products on an ongoing basis to handle their needs in clinical documentation, radiology diagnosis, and enterprise customer services. Our professional services offer a continuing revenue stream, whether it is provided in connection with our software solutions or on a standalone basis, as we have a backlog of engagements that take time to complete.
Healthcare
Our Healthcare segment provides intelligent systems that support a more natural and insightful approach to clinical documentation, freeing clinicians to spend more time caring for patients. Our Healthcare solutions capture, improve, and communicate more than 300 million patient stories each year, helping more than 500,000 clinicians in 10,000 global healthcare organizations to drive meaningful clinical and financial outcomes. Our clinical speech recognition, medical transcription, CDI, coding, quality, and medical imaging solutions provide a more complete and accurate view of patient care.
Our Healthcare segment revenues were $915.3 million, $950.6 million, and $984.8 million in fiscal years 2020, 2019 and 2018, respectively. Healthcare segment revenues represented 61.9%, 62.4% and 62.4% of total segment revenue in fiscal years 2020, 2019 and 2018, respectively. For each of fiscal years 2020, 2019, and 2018, no customer accounted for more than 10% of Healthcare revenue.
Our principal solutions for the Healthcare segment include the following:
Dragon Medical One: Our cloud-based speech solution provides a consistent and personalized clinical documentation experience across solutions, platforms, and devices, regardless of physical location. Dragon Medical One allows clinicians to use their voice to securely capture the patient story and control applications more naturally and efficiently - anywhere, anytime. Dragon Medical One is HITRUST CSF-certified and uses a secure desktop app to keep data private and protected. It helps increase productivity and offers more flexibility and personalization while establishing a firm foundation for organizations to take advantage of new and future innovations, including virtual assistants and ACI.
Computer-Assisted Physician Documentation: Powered by AI, our solutions give physicians in-workflow guidance to drive better data outcomes across the continuum of care. Our CAPD solutions apply workflow and knowledge automation, proven clinical strategies and point-of-care advice to capture complete and accurate documentation while improving productivity and satisfaction. We make it easier to add specificity to existing diagnoses, discover evidence of undocumented diagnoses and support various specialties and care settings, including inpatient, outpatient, pediatrics, emergency medicine, surgical, and cardiovascular. Details are extracted from patient narratives for fast and accurate translation into discrete data, while coding assistance helps capture professional charges, improve quality and reduce retrospective queries.
Diagnostic Imaging Solutions: Our diagnostic imaging solutions improve the efficiency and effectiveness of the radiologists’ work to improve clinical and financial outcomes across the continuum of care. Driving both speed and precision in how radiology is applied to patient care to maximize reimbursement, we reduce duplications and errors and alleviate burnout. Using AI, we help automate time-consuming, non-value-added tasks, freeing radiologists to perform more important tasks. By focusing more on integrating patients’ clinical and imaging information and collaborating better with peers, we help radiologists uplift their role within the care team. Our industry-leading solutions for radiology deliver real-time intelligence in the workflow and include PowerScribe, which is used for 80% of radiology reports in the U.S. and PowerShare, which offers an image sharing network with more than 7,500 connected healthcare facilities. Our PowerScribe One cloud-based platform supports workflow orchestration, communication, incidental findings follow-up management, and works with our AI Marketplace for our diagnostic imaging solutions.
Nuance® Dragon Ambient eXperience™ (DAX™): During second quarter of fiscal year 2020, we launched Nuance DAX™ solution, which is a comprehensive, AI-powered, voice-enabled solution that uses ambient sensing technology to securely listen to clinician-patient encounter conversations while offering workflow and knowledge automation to complement the EHR. Exceeding the capabilities of a virtual or on-site scribe, Nuance DAX™ promotes a better patient experience by accurately capturing and appropriately contextualizing every word of the patient encounter and automatically documenting patient care without taking the physician's attention off the patient. The Nuance DAX™ solution is built on Microsoft Azure, a highly secure HITRUST CSF certified platform, compliant with the HITECH Act, and that has implemented the physical, technical, and administrative safeguards required by HIPAA. Nuance DAX™ solution accounted for an insignificant portion of our total revenue in fiscal year 2020.

3


Table of Contents



Clinical Documentation Improvement and Coding: Our comprehensive portfolio of cloud-based technologies is designed to help increase the productivity and effectiveness of CDI teams. Our clinically focused program and services deliver documentation guidance, AI-powered encounter prioritization, workflow management, denials support and analytics to drive better documentation across the care continuum. Designed with scale and reliability in mind, these solutions require lower installation, deployment and maintenance costs and are hosted on Microsoft Azure, a HITRUST CSF-certified infrastructure to support privacy, security and compliance. We provide real-time insights that promote a performance-driven program, allow peer comparisons and identify opportunities for improvement. Our Coding solutions offer cloud-based, enterprise-wide products and services that are designed to improve coder productivity and maintain the highest levels of accuracy and compliance. These solutions effectively manage and monitor the types of compliance coding challenges that can put a health system at risk for delayed and reduced reimbursement. We help manage the workflow by bringing together the tools needed to provide better visibility into key coding performance indicators. Coder productivity can be enhanced by enabling a more complete and accurate review of both inpatient and outpatient encounters that are associated with facility and professional service fees.
Transcriptions Solutions: These solutions offer cloud-based transcription capabilities for clinical documentation that use background speech recognition to increase Medical Language Specialists’ productivity and reduce costs. Helping organizations simplify the documentation process by offering users an automated and flexible workflow with options designed to meet a facility’s specific needs, our solutions and services offer fast, accurate, and usable documentation with more seamless and fully automated processes that can identify discrete information and securely upload data directly into the EHR. Clinicians using EHRs can accurately document entire patient encounters using a mobile device or their standard dictation methods.
The channels for distribution in the Healthcare segment utilize our direct sales force to address the market and our professional services organization to support the implementation requirements of the healthcare industry. Direct distribution is supplemented by distributors, resellers, and partnerships with a variety of healthcare IT providers.
Areas of expansion and focus for our Healthcare segment include innovation in AI and development of deeply verticalized and specialized intelligence to integrate with and further enhance our existing products; expansion of Nuance DAX which takes advantage of our cloud‑based speech recognition technology and benefits from increasing levels of workflow, task, and knowledge automation; investment in our cloud-based offerings, operations, and network security; entering new and adjacent markets such as ambulatory care; and expanding our international capabilities.
Enterprise
Our Enterprise segment is a leading provider of AI-powered intelligent customer engagement solutions and services, which enable enterprises and contact centers to enhance and automate customer service and sales engagement.
Our market-leading Intelligent Engagement platform powered by conversational AI has been recognized and awarded by independent industry research firms like Forrester, Gartner and Opus. We are also differentiated by our ability to enable enterprises to implement voice and text-based virtual assistants and to provide automated service and sales engagement across voice and digital channels, as well as the ability of our solutions to seamlessly transition to agent-assisted engagement to complete a customer service request. Our intelligent self-service solutions are highly secure, predictive, and accurate, resulting in increased customer acquisition and satisfaction while simultaneously reducing the costs associated with delivering customer service for the enterprise.
Our solutions and services portfolio now spans voice, behavioral and conversational biometrics, digital virtual assistant capabilities, across voice, mobile, web and messaging channels, with inbound and outbound customer service and engagement in over 85 languages for voice, text, dialog and natural language understanding ("NLU"). Our Enterprise segment utilizes a hybrid go-to-market model, selling both direct and through reseller partners.
Enterprise segment revenues were $530.0 million, $510.8 million, and $483.2 million in fiscal years 2020, 2019 and 2018, respectively. Enterprise segment revenues represented 35.8%, 33.5% and 30.6% of total segment revenues in fiscal years 2020, 2019 and 2018, respectively. For each of fiscal years 2020, 2019, and 2018, no customer accounted for more than 10% of Enterprise revenue.
Our principal solutions for the Enterprise segment include the following:
Intelligent Engagement Solutions: Our open, modular cloud platform provides enterprises with the ability to implement virtual- and live-engagement across nearly all digital voice and text channels. The platform supports virtual assistant, live engagement and proactive notification services, using our conversational AI, engagement AI and security AI capabilities.

4


Table of Contents



Our Intelligent Engagement cloud is sold both direct and through partners and are largely multi-year agreements with volume-based transactional pricing and associated professional services.
Conversational AI: In 2020 we launched Nuance Mix™, an open enterprise-grade, SaaS tooling suite for creating advanced conversational experiences that power virtual assistants and IVR systems, using our industry-leading and cloud-agnostic conversational AI. As global organizations increasingly look to integrate Conversational AI into their digital and voice customer engagements, the ability to build a conversational experience once and deploy it across channels and modalities has become critical. Nuance Mix allows these organizations to build, maintain and deliver the complex enterprise-grade conversational experiences that help brands acquire customers and get vital customer queries and transactions resolved. Our conversational AI solutions are integrated with IVR systems provided to the customer by us or by a wide range of third-party IVR and contact center vendors, who often resell our IVR Voice Solutions. Our solutions in this category include automated speech recognition ("ASR"), TTS, NLU and dialog engines. We also offer a cloud hosted IVR and voice automation platform which is largely sold direct through multi-year agreements with volume-based transactional pricing and associated professional services.
Engagement AI: Our digital solutions are a mix of intelligent virtual assistants and human-assisted customer engagement. This enables companies to target the right visitor with the right message at the right time, delivering a customer-centric experience across all channels. Nuance enables businesses to design a seamless experience once and deploy it on any channel-browsers, inside an app, Apple Business Chat, via text messaging, social media, in third-party messaging apps, such as Facebook Messenger, Google’s Business Messages and WhatsApp, or for smart home devices-while adjusting the experience to the individual channel. Our Engagement AI solutions also enable contact center agents to be more productive by giving them easier access to information with relevant, real-time insights, visibility into active conversations, and proactive recommendations to improve the customer and agent experience.
Security AI: These solutions enable organizations to automate the identification and verification of their customers while preventing fraud in digital and voice channels. In 2020, we launched Nuance Gatekeeper, a cloud-native biometric security platform that combines industry-leading voice, behavioral conversational biometrics with intelligent detectors and an underlying risk engine to authenticate customers, identify fraudsters, and detect cases of potential fraud, seamlessly and in seconds. We license this solution via perpetual maintenance and support ("M&S"), on-premise transactional and cloud transactional models.
Areas of focus and expansion for our Enterprise segment include increasing the penetration of our full portfolio into our large existing customer base; bringing our Intelligent Engagement cloud to new customers, the midmarket and new international markets, especially Western Europe, Japan and Australia; expansion of our security and biometrics cloud solution; and continued investment in our AI-powered solutions to ensure we retain leadership throughout our solutions.
Other
Our Other segment currently consists primarily of voicemail transcription services following the sale of our Mobile Operator Services business and the wind-down of our Devices business in 2019.
Other segment revenues were $33.9 million, $61.5 million, and $109.1 million in fiscal years 2020, 2019 and 2018, respectively. Other segment revenues represented 2.3%, 4.0% and 6.9% of total segment revenues in fiscal years 2020, 2019 and 2018, respectively.
Intellectual Property
Over our history, we have developed and acquired extensive technology assets, intellectual property, and industry expertise in ASR and NLU technologies that provide us with a competitive advantage in our markets. Our technologies are based on complex algorithms that require extensive amounts of acoustic and language models, and recognition and understanding techniques. A significant investment in capital and time would be necessary to replicate our current capabilities.
We continue to invest in technologies to maintain our market-leading position and to develop new applications. We rely on a portfolio of patents, copyrights, trademarks, services marks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our intellectual property and proprietary rights. As of September 30, 2020, we held approximately 2,350 patents and 300 patent applications.

5


Table of Contents



Competition
The markets in which we compete are highly competitive and are subject to rapid technology changes. There are a number of companies that develop or may develop solutions and technologies that compete in our target markets; however, currently no company directly competes with us across all of our solutions and technologies. While we expect competition to continue to increase both from existing competitors and new market entrants, we believe that we will compete effectively based on many factors, including:
Data Driven Technological Superiority. We have deep domain expertise and our conversational AI technologies, applications and solutions are often recognized as the most innovative and proficient in their respective categories. Our ASR and NLU solutions have industry-leading recognition accuracy and provide a natural, voice-enabled interaction with systems, devices and applications. This technological superiority and AI verticalization are driven by our massive data repository of over 3,000 terabytes aggregated over more than two decades. Technology publications, analyst research and independent benchmarks have consistently indicated that our solutions and technologies rank at or above performance levels of alternative solutions.

Leverageable Base of Strategic Partnerships. We are able to leverage our strong partnerships with EHR vendors, imaging providers, and contact center infrastructure players to integrate tightly into the workflow of our clients, across clinical environments and customer service centers. Additionally, our strategic partnerships with leading technology firms allow us to accelerate the continued progress and delivery of broad suite of offerings, through joint research, development, and selling efforts.

Flexible Deployment with Specialized Professional Services. By providing the optionality of supporting various hosting environments as well as offering premise-based solutions, we are flexible in how our superior technology can be deployed to the world’s largest companies. This flexibility is coupled with the high quality and domain knowledge of our professional services organization, allowing our customers and partners to place a high degree of confidence and trust in our ability to deliver results. We support our customers in designing and building powerful innovative solutions that specifically address their needs and requirements.

Privileged Footprint with Established, Long-Tenured Client Base. With a presence in 90% of U.S. hospitals and with 80% of radiologists, we are an established market leader within Healthcare. Our flagship product Dragon Medical has a user base of over 550,000 physicians and over 55% market share of the entire U.S. physician market, creating an exciting opportunity to deploy incremental AI solutions and added intelligence across our installed base. Within our Enterprise division, we service 85% of Fortune 100 companies, reinforcing our established position in the upper end of the market.

International Coverage. The international reach of our solutions and technologies is due to the broad language coverage of our offerings, including our ASR and NLU solutions, which provide recognition for approximately 90 languages and dialects and natural-sounding synthesized speech in over 200 voices, and support a broad range of hardware platforms and operating systems.
Broad Distribution Channels. Our ability to address the needs of specific markets, such as financial, law, healthcare and government, and to introduce new solutions and technologies quickly and effectively is provided by our direct sales force, our extensive global network of resellers, comprising system integrators, independent software vendors, value-added resellers, hardware vendors, telecommunications carriers and distributors, and our e-commerce website.
Our Healthcare segment competes against Optum, Amazon, Google, 3M and other smaller providers. Our Enterprise segment competes against [24]7, Amazon, Genesys, Google, LivePerson, Salesforce, and Pindrop, among other less frequent competitors. Additionally, a number of smaller companies in voice recognition, natural language understanding, and text input offer technologies or products that are competitive with our solutions.
Current and potential competitors have established, or may establish, cooperative relationships among themselves or with other parties to increase the ability of their technologies to address the needs of our prospective customers.
Some of our current or potential competitors have significantly greater financial, technical and marketing resources than we do. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do.

6


Table of Contents



Employees
As of September 30, 2020, we had approximately 7,100 full-time employees, including approximately 900 in sales and marketing, approximately 1,700 in hosting and maintenance and support services, approximately 600 in professional services, approximately 1,600 in R&D, approximately 700 in general and administrative, and approximately 1,600 who provide transcription and editing services. Approximately 55% of our employees are based outside of the U.S., approximately 36% of whom provide transcription and editing services and are based in India.
None of our employees in the U.S. are represented by a labor union. Employees of certain of our foreign subsidiaries are represented by labor unions or workers’ councils. We believe that our relationships with our employees are satisfactory.
Information About Geographic Areas
We have offices in a number of international locations including Australia, Austria, Belgium, Canada, Germany, India, Ireland, Italy, Japan, and the U.K. The responsibilities of our international operations include research and development, healthcare transcription and editing, customer support, sales and marketing and general and administrative. Additionally, we maintain smaller sales, services and support offices throughout the world to support our international customers and to expand international revenue opportunities.
Geographic revenue classification is based on the geographic areas in which our customers are located. For fiscal years 2020, 2019 and 2018, 80%, 81% and 80% of revenue from continuing operations was generated in the U.S. and 20%, 19% and 20% was generated by our international customers, respectively.
Corporate Information and Website
We were incorporated under the laws of the State of Delaware in 1992. Our website is located at www.nuance.com and we trade under the ticker symbol NUAN. We are not including the information contained in our website as part of, or incorporating it by reference into, this annual report on Form 10-K. We make available free of charge through our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as soon as reasonably practicable after we electronically file these materials with, or otherwise furnish them to, the Securities and Exchange Commission ("SEC").
Item 1A.Risk Factors
You should carefully consider the risks and uncertainties described below when evaluating the company and when deciding whether to invest in the company. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we do not currently believe are important to an investor may also harm our business operations. If any of the events, contingencies, circumstances or conditions described below actually occurs, our business, financial condition or our results of operations could be seriously harmed. If that happens, the trading price of our common stock could decline.
Risks Related to Our Business
Our liquidity and operations have been adversely impacted, and our business, financial condition, results of operations and cash flows may continue to be adversely impacted, by the novel coronavirus (COVID-19).
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. The global spread of COVID-19 has created significant market volatility, uncertainty and economic disruption. The COVID-19 pandemic has adversely affected our results of operations and liquidity as of September 30, 2020, and may continue to adversely impact our business, results of operations, cash flows and financial condition. While we have not experienced significant disruptions to our ability to conduct business thus far as a result of the pandemic, we are currently conducting business with substantial modifications to employee travel, employee work locations, virtualization or cancellation of customer and employee events, and remote sales, implementation, and support activities, among other modifications.
The extent to which the coronavirus pandemic will impact our business, operations, and financial results in the future will depend on numerous evolving factors that we may not be able to accurately predict, including:
the duration and scope of the pandemic;
governmental, business and individual actions taken in response to the pandemic and the impact of those actions on global economic activity;

7


Table of Contents



the actions taken in response to economic disruption;
the impact of business disruptions on our customers and partners and the resulting impact on their demand for our products and services;
our customers’ and partners’ ability to pay for our products and services; and
our ability to provide our products and services, including as a result of our employees working remotely and/or closures of offices and facilities.
We are closely monitoring the impact of the COVID-19 pandemic and continually assessing its potential effects on our business. Many of our customers are hospitals and other healthcare providers that are facing capital shortages and other changes to their businesses as they focus on fighting the pandemic. As a result, in particular with respect to our healthcare customers, our net new sales may continue to be lower than expected; our ability to recognize revenue may continue to be negatively impacted due to implementation delays, decreased utilization of certain products such as our HIM, PowerScribe and DAX solutions, decrease in volumes where we have transaction-based revenue, or other factors; our collections may continue to be delayed, which will negatively affect our cash flows; some customers may go out of business, and we will be unsecured creditors and may not be able to collect what we are owed; our ability to provide 24x7 worldwide support to our customers may be affected; and our employees’ productivity may be negatively impacted as a result of almost all of our workforce working from home. The pandemic and accompanying market volatility, uncertainty and economic disruption may also have the effect of heightening many of the other risks described in the “Risk Factors” set forth in this Annual Report on Form 10-K. The ultimate impact of the COVID-19 pandemic and the effects of the operational changes we have made in response cannot be accurately predicted at this time.
The markets in which we operate are highly competitive and rapidly changing and we may be unable to compete successfully.
There are a number of companies that develop or may develop products that compete in our targeted markets. The markets for our products and services are characterized by intense competition, evolving industry and regulatory standards, emerging business and distribution models, disruptive software and hardware technology developments, short product and service life cycles, price sensitivity on the part of customers, and frequent new product introductions, including alternatives for certain of our products that offer limited functionality at significantly lower costs or free of charge. Current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to increase the ability of their technologies to address the needs of our prospective customers. Furthermore, there has been a trend toward industry consolidation in our markets for several years. We expect this trend to continue as companies attempt to strengthen or hold their market positions.
The competition in our targeted markets could adversely affect our operating results by reducing the volume of the products and solutions we license or sell or the prices we can charge. Some of our current or potential competitors have significantly greater financial, technical and marketing resources than we do. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do, and in certain cases may be able to include or combine their competitive products or technologies with other of their products or technologies in a manner whereby the competitive functionality is available at lower cost or free of charge within the larger offering. To the extent they do so, market acceptance and penetration of our products, and therefore our revenue and bookings, may be adversely affected. Our success depends substantially upon our ability to enhance our products and technologies and to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and incorporate technological enhancements. If we are unable to develop or acquire new products and enhance functionalities or technologies to adapt to these changes our business will suffer.
Our operating results may fluctuate significantly from period to period, and this may cause our stock price to decline.
Our revenue, bookings and operating results have fluctuated materially in the past and we expect such fluctuations to continue in the future. These fluctuations may cause our results of operations not to meet the expectations of securities analysts or investors which would likely cause the price of our stock to decline. Factors that may contribute to fluctuations in operating results include:
volume, timing and fulfillment of customer orders and receipt of royalty reports;
fluctuating sales by our channel partners to their customers;
customers delaying their purchasing decisions in anticipation of new versions of our products;
contractual counterparties failing to meet their contractual commitments to us;
introduction of new products by us or our competitors;
cybersecurity or data breaches;
seasonality in purchasing patterns of our customers;
reduction in the prices of our products in response to competition, market conditions or contractual obligations;

8


Table of Contents



returns and allowance charges in excess of accrued amounts;
timing of significant marketing and sales promotions;
impairment of goodwill or intangible assets;
the pace of the transition to an on-demand and transactional revenue model;
delayed realization of synergies resulting from our acquisitions;
accounts receivable that are not collectible and write-offs of excess or obsolete inventory;
increased expenditures incurred pursuing new product or market opportunities;
higher than anticipated costs related to fixed-price contracts with our customers;
change in costs due to regulatory or trade restrictions;
expenses incurred in litigation matters, whether initiated by us or brought by third parties against us, and settlements or judgments we are required to pay in connection with disputes; and
general economic trends as they affect the customer bases into which we sell.
Due to the foregoing factors, among others, our revenue, bookings and operating results are difficult to forecast. Our expense levels are based in significant part on our expectations of future revenue, and we may not be able to reduce our expenses quickly to respond to near-term shortfalls in projected revenue. Therefore, our failure to meet revenue expectations would seriously harm our operating results, financial condition and cash flows.
A significant portion of our revenue and bookings are derived, and a significant portion of our research and development activities are based, outside the United States. Our results could be harmed by economic, political, regulatory, foreign currency fluctuation and other risks associated with these international regions.
Because we operate worldwide, our business is subject to risks associated with doing business internationally. We generate most of our international revenue and bookings in Canada and Europe, and we anticipate that revenue and bookings from international operations could increase in the future. In addition, some of our products are developed outside the United States and we have a large number of employees in India who provide transcription and development services, and we also have a large number of employees in Canada, Germany and the United Kingdom who provide professional services. We conduct a significant portion of the development of our voice recognition and natural language understanding solutions in Canada and Germany. We also have significant research and development resources in Austria, Belgium, Italy, and the United Kingdom. We are exposed to fluctuating exchange rates of foreign currencies including the Euro, British pound, Australian dollar, Canadian dollar, Japanese yen, and Indian rupee. Accordingly, our future results could be harmed by a variety of factors associated with international sales and operations, including:
adverse political and economic conditions, or changes to such conditions, in a specific region or country;
trade protection measures, including tariffs and import/export controls, imposed by the United States and/or by other countries or regional authorities such as Canada or the European Union;
the impact on local and global economies of the United Kingdom leaving the European Union;
changes in foreign currency exchange rates or the lack of ability to hedge certain foreign currencies;
compliance with laws and regulations in many countries and any subsequent changes in such laws and regulations;
geopolitical turmoil, including terrorism and war;
changing data privacy regulations and customer requirements to locate data centers in certain jurisdictions;
evolving restrictions on cross-border investment, including recent enhancements to the oversight by the Committee on Foreign Investment in the United States pursuant to the Foreign Investment Risk Preview Modernization Act;
changes in applicable tax laws;
difficulties in staffing and managing operations in multiple locations in many countries;
longer payment cycles of foreign customers and timing of collections in foreign jurisdictions; and
less effective protection of intellectual property outside the United States.
If we are unable to attract and retain key personnel, our business could be harmed.
To execute our business strategy, we must attract and retain highly qualified personnel. If any of our key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience. Although we have arrangements with some of our executive officers designed to promote retention, our employment relationships are generally at-will and we have had key employees leave in the past. We cannot assure you that one or more key employees will not leave in the future. In particular, we compete with many other companies for

9


Table of Contents



software developers with high levels of experience in designing, developing and managing software, as well as for skilled information technology, marketing, sales and operations professionals, and we may not be successful in attracting and retaining the professionals we need. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and difficulty in retaining highly skilled employees with appropriate qualifications. In particular, we have experienced a competitive hiring environment in the Greater Boston area, where we are headquartered. Many of the companies with which we compete for experienced personnel have greater resources than we do. In addition, in making employment decisions, particularly in the software industry, job candidates often consider the value of the equity incentives they are to receive in connection with their employment. If the price of our stock declines, or experiences significant volatility, our ability to attract or retain key employees will be adversely affected. We intend to continue to hire additional highly qualified personnel, including research and development and operational personnel, but may not be able to attract, assimilate or retain qualified personnel in the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.
Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit our growth.
The confidentiality and security of our information, and that of third parties, is critical to our business. Our services involve the transmission, use, and storage of our customers’ and their customers' confidential information. We were the victim of a cybercrime in 2017, and future cybersecurity or data privacy incidents could have a material adverse effect on our results of operations and financial condition. While we maintain a broad array of information security and privacy measures, policies and practices, our networks may be breached through a variety of means, resulting in someone obtaining unauthorized access to our information, to information of our customers or their customers, or to our intellectual property; disabling or degrading service; or sabotaging systems or information. In addition, hardware, software, or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third parties with whom we do business, through fraud or other forms of deceiving our employees, contractors, and vendors. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. We will continue to incur significant costs to continuously enhance our information security measures to defend against the threat of cybercrime. Any cybersecurity or data privacy incident or breach may result in:
loss of revenue resulting from the operational disruption;
loss of revenue or increased bad debt expense due to the inability to invoice properly or to customer dissatisfaction resulting in collection issues;
loss of revenue due to loss of customers;
material remediation costs to restore systems;
material investments in new or enhanced systems in order to enhance our information security posture;
cost of incentives offered to customers to restore confidence and maintain business relationships;
reputational damage resulting in the failure to retain or attract customers;
costs associated with potential litigation or governmental investigations;
costs associated with any required notices of a data breach;
costs associated with the potential loss of critical business data; and
other consequences of which we are not currently aware but will discover through the remediation process.
Our business is subject to a variety of domestic and international laws, rules, policies and other obligations including data protection, anticorruption and health care reimbursement.
We must comply with, numerous, and sometimes conflicting, legal regimes on matters such as data privacy and protection, anticorruption, employment and labor relations, tax, foreign currency, anti-competition, import/export controls, trade regulations, immigration, anti-kickback laws and healthcare reimbursement laws. The global nature of our operations increases the difficulty of compliance. Compliance with diverse legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of these laws in the conduct of our business could result in significant fines, criminal sanctions against us and/or our employees, prohibitions on doing business, breach of contract damages and harm to our reputation.
In particular, we are subject to a complex array of federal, state and international laws relating to the collection, use, retention, disclosure, security and transfer of personally identifiable information and personal health information, with additional laws applicable in some jurisdictions where the information is collected from children. In many cases, these laws apply not only to transfers between unrelated third parties but also to transfers between us and our subsidiaries. Many of the laws passed in this area are relatively new and their interpretation is evolving and changing. In the United States, the California Consumer Privacy Act ("CCPA"), went into effect in January 2020. The CCPA imposes privacy and data security obligations on companies and provides

10


Table of Contents



California consumers with certain rights as data subjects. Several other U.S. states have proposed data privacy laws that impose similar but non-identical obligations. In addition, some states have passed laws imposing increased data security and breach notification obligations on companies operating in the U.S. In the EU, the European General Data Protection Regulation (the “GDPR”), which went into effect in May 2018, imposes privacy and data security compliance obligations and significant penalties for noncompliance. The GDPR presents numerous privacy-related changes for companies operating in the EU, including rights guaranteed to data subjects, requirements for data portability for EU consumers, data breach notification requirements and significant fines for noncompliance. In GDPR enforcement matters, companies have faced fines for violations of certain provisions. Fines can reach as high as 4% of a company’s annual total revenue, potentially including the revenue of a company’s international affiliates. On July 16, 2020, the Court of Justice of the European Union issued a decision that invalidates the EU-U.S. Privacy Shield framework, a mechanism that companies had previously relied on to transfer information between the EU and U.S., on the basis that such transfer mechanism does not comply with the level of protection required under the GDPR. There is also an increase in regulation of biometric data globally, which may include voiceprints. In addition, we are subject to laws relating specifically to personal health information, including the Health Insurance Portability and Accountability Act of 1996 ("HIPAA") and the Health Information Technology for Economic and Clinical Health ("HITECH") Act.
Changes in these data privacy and protection laws and regulations and inconsistencies in the standards that apply to our business in different jurisdictions may impose significant compliance costs, reduce the efficiency of our operations, expose us to enforcement risks, and materially adversely affect our ability to market and sell our products and solutions.  Any alleged or actual failure by us, our customers, suppliers or other parties with whom we do business to comply with federal, state or international privacy-related or data protection laws and regulations could cause our customers to lose confidence in our solutions; harm our reputation; expose us to litigation, regulatory investigations and to resulting liabilities including reimbursement of customer costs, damages penalties or fines imposed by regulatory agencies, and require us to incur significant expenses for remediation.
We are also subject to a variety of anticorruption laws in respect of our international operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and the Canadian Corruption of Foreign Public Officials Act, and regulations issued by the U.S. Customs and Border Protection, the U.S. Bureau of Industry and Security, the U.S Treasury Department’s Office of Foreign Assets Control, and various other foreign governmental agencies.  We cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. Actual or alleged violations of these laws and regulations could lead to enforcement actions and financial penalties that could result in substantial costs.
Many of our customers are subject to various federal and state laws concerning their submission of claims for reimbursement by Medicare, Medicaid and other federal and state government-sponsored health care programs. Such laws include the federal False Claims Act (the “False Claims Act”), the federal anti-kickback statute, state false claims acts and anti-kickback statutes in most states, the federal “Stark Law” and related state laws. In particular, the False Claims Act prohibits knowingly submitting, conspiring to submit, or causing to be submitted, false claims, records, or statements to the federal government, or knowingly and improperly failing to return overpayments, in connection with reimbursement by federal government programs and can be used as a vehicle to enforce each of these other laws. Claims under federal and state false claims acts can be brought by the government or by private individuals on behalf of the government through a qui tam or “whistleblower” suit. If there is an adverse decision against us or our customers under these laws relating to use of our products or solutions, we may be required to pay damages, significant fines and/or other monetary penalties, and our ability to market and sell such products or solutions to customers may be materially adversely impacted.
Interruptions or delays in our services, including from data center hosting facilities, could impair the delivery of our services and harm our business.
Because our services are complex and incorporate a variety of third-party hardware and software, our services may have errors or defects that could result in unanticipated downtime for our customers and harm to our reputation and our business. We have from time to time, found defects in our services, and new errors in our services may be detected in the future. In addition, we currently serve our customers from data center hosting facilities we directly manage and from third party public cloud facilities. Any damage to, or failure of, the systems that serve our customers in whole or in part could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issue credits or pay service-level agreement penalties, cause customers to terminate their on-demand services, and adversely affect our renewal rates and our ability to attract new customers.
We may be unable to fully capture the expected value from strategic transactions.
As part of our business strategy, we have in the past acquired and divested, and expect to continue to acquire and may divest, other businesses and technologies. We also expect to from time to time pursue other strategic transactions including divestitures, joint ventures, minority stakes and strategic alliances. Our acquisitions and divestitures have required substantial integration and

11


Table of Contents



management efforts, and we expect future acquisitions, divestitures and other strategic transactions to require similar efforts. Successfully realizing the benefits of acquisitions, divestitures and other strategic transactions involves a number of risks, including:
difficulty in transitioning and integrating the operations and personnel of the acquired businesses;
difficulty in separating the operations, personnel and systems of divested businesses:
potential negative impact on our profitability as a result of losses that may result from a divestiture, including the loss of sales and operating income or decrease in cash flows;
retained exposure on financial guarantee leases, real estate and other contractual, employment, pension and severance obligations of divested business, and potential liabilities that may arise under law as a result of the disposition or the subsequent failure of an acquirer;
potential disruption of our ongoing business and distraction of management;
difficulty in incorporating acquired products and technologies into our products and technologies;
potential difficulties in completing projects associated with in-process research and development;
unanticipated expenses and delays in completing acquired development projects and technology integration and upgrades;
challenges associated with managing additional, geographically remote businesses;
impairment of relationships with partners and customers;
assumption of unknown material liabilities of acquired companies;
the accuracy of revenue and bookings projections of acquired companies;
customers delaying purchases of our products pending resolution of product integration between our existing and our newly acquired products;
entering markets or types of businesses in which we have limited experience; and
potential loss of key employees of the acquired business or loss of key employees of a divested business.
As a result of these and other risks, we may not realize the anticipated benefits from our acquisitions, divestitures, and other strategic transactions. Any failure to achieve these benefits or failure to successfully integrate acquired businesses and technologies or disaggregate divested businesses and technologies could seriously harm our business.
We may be exposed to claims and liabilities as a result of the spin-off of our Automotive business segment.
We entered into a separation and distribution agreement and various other agreements with Cerence to govern the spin-off and the relationship between the two companies going forward. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and Cerence. For example, in the Tax Matters Agreement, dated September 30, 2019, between Nuance and Cerence, Cerence agreed to indemnify Nuance for resulting taxes and related expenses if, as a result of any of Cerence’s breach of certain of its representations or covenants, the spin-off and certain related reorganization transactions are determined not to qualify for non-recognition of gain or loss under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended. The indemnity rights we have against Cerence under the agreements may not be sufficient to protect us, for example if our losses exceed our indemnity rights or if Cerence did not have the financial resources to meet its indemnity obligations. In addition, our indemnity obligations to Cerence may be significant, and these risks could negatively affect our results of operations and financial condition.
Charges to earnings as a result of our acquisitions may adversely affect our operating results in the foreseeable future, which could have a material and adverse effect on the market value of our common stock.
Under accounting principles generally accepted in the United States, we record the market value of our common stock and other forms of consideration issued in connection with an acquisition as the cost of acquiring the company or business. We allocate that cost to the individual assets acquired and liabilities assumed, including various identifiable intangible assets such as acquired technology, acquired trade names and acquired customer relationships, based on their respective fair values. We base our estimates of fair value upon assumptions believed to be reasonable, but which are inherently uncertain. After we complete an acquisition, the following factors could result in material charges and may adversely affect our operating results and cash flows:
costs incurred to integrate the operations of businesses we acquire, such as transitional employee expenses and employee retention, redeployment or relocation expenses;
impairment of goodwill or intangible assets;
amortization of intangible assets acquired;
a reduction in the useful lives of intangible assets acquired;

12


Table of Contents



identification of or changes to assumed contingent liabilities, both income tax and non-income tax related, after our final determination of the amounts for these contingencies or the conclusion of the measurement period (generally up to one year from the acquisition date), whichever comes first;
charges to our operating results to eliminate certain duplicative pre-merger activities, to restructure our operations or to reduce our cost structure;
charges to our operating results arising from expenses incurred to effect the acquisition; and
charges to our operating results due to the expensing of stock awards assumed in acquisitions.
Intangible assets are generally amortized over three to ten years. Goodwill is not subject to amortization but is subject to an impairment analysis, at least annually, which may result in an impairment charge if the carrying value exceeds its implied fair value. As of September 30, 2020, we recorded goodwill of $2,133.7 million and intangible assets of $213.5 million, net of accumulated amortization and impairment charges. In addition, purchase accounting limits our ability to recognize certain revenue that otherwise would have been recognized by the acquired company as an independent business. As a result, the combined company may delay revenue recognition or recognize less revenue than we and the acquired company would have recognized as independent companies.
Impairment of our intangible assets could result in significant charges that would adversely impact our future operating results.
We have significant intangible assets, including goodwill and other intangible assets, which are susceptible to valuation adjustments as a result of changes in various factors or conditions. The most significant intangible assets are customer relationships, patents and core technologies, technologies and trademarks. Customer relationships are amortized on an accelerated basis based upon the pattern in which the economic benefits of customer relationships are being utilized. Other identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives. We assess the potential impairment of intangible assets on an annual basis, as well as whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that could trigger an impairment of such assets include the following:
significant adjustments to our multi-year operating plans, in connection with our ongoing portfolio review;
changes in our organization or management reporting structure that could result in additional reporting units, which may require alternative methods of estimating fair values or greater disaggregation or aggregation in our analysis by reporting unit;
significant under performance relative to historical or projected future operating results;
significant changes in the manner of or use of the acquired assets or the strategy for our overall business;
significant negative industry or economic trends;
significant decline in our stock price for a sustained period; and
our market capitalization declining to below net book value.
Future adverse changes in these or other unforeseeable factors could result in an impairment charge that would impact our results of operations and financial position in the reporting period identified.
We have grown, and may continue to grow, through acquisitions, which could dilute our existing stockholders and/or increase our debt levels.
In connection with past acquisitions, we have in the past issued a substantial number of shares of our common stock as transaction consideration, including contingent consideration, and also incurred significant debt to finance the cash consideration used for our acquisitions. We may continue to issue equity securities for future acquisitions, which would dilute existing stockholders, perhaps significantly, depending on the terms of such acquisitions. We may also incur additional debt in connection with future acquisitions, which, if available at all, may place additional restrictions on our ability to operate our business.
Our strategy to transition to cloud-based recurring revenue may adversely affect our near-term revenue growth and results of operations.
We expect our ongoing shift from a software license model to cloud-based services revenue models to create a recurring revenue stream that is more predictable. The transition, however, creates risks related to the timing of revenue recognition. We also incur certain expenses associated with the infrastructures and selling efforts of our hosting offerings in advance of our ability to recognize the revenues associated with these offerings, which may adversely affect our near-term reported revenues, results of operations and cash flows. A decline in renewals of recurring revenue offerings in any period may not be immediately reflected in our results for that period but may result in a decline in our revenue and results of operations in future quarters.

13


Table of Contents



We have a history of operating losses, and may incur losses in the future, which may require us to raise additional capital on unfavorable terms.
We had a total accumulated deficit of $272.2 million and $293.6 million as of September 30, 2020 and 2019, respectively. If we are unable to return to and sustain our profitability, the market price for our stock may decline, perhaps substantially. We cannot assure you that our revenue or bookings will grow or that we will sustain profitability in the future. If we do not achieve profitability, we may be required to raise additional capital to maintain or grow our operations. Additional capital, if available at all, may be highly dilutive to existing investors or contain other unfavorable terms, such as a high interest rate and restrictive covenants.
Tax matters may cause significant variability in our financial results.
Our businesses are subject to income taxation in the United States, as well as in many tax jurisdictions throughout the world. Tax rates in these jurisdictions may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors including:
projected levels of taxable income;
pre-tax income being lower than anticipated in countries with lower statutory rates or higher than anticipated in countries with higher statutory rates;
increases or decreases to valuation allowances recorded against deferred tax assets;
tax audits conducted and settled by various tax authorities;
adjustments to income taxes upon finalization of income tax returns;
the ability to claim foreign tax credits;
the repatriation of non-U.S. earnings for which we have not previously provided for income taxes; and
changes in tax laws and their interpretations in countries in which we are subject to taxation.
During 2014, Ireland enacted changes to the taxation of certain Irish incorporated companies effective as of January 2021. On October 5, 2015, the Organization for Economic Cooperation and Development released the Final Reports for its Action Plan on Base Erosion and Profit Shifting. The implementation of one or more of these reports in jurisdictions in which we operate, together with the 2014 enactment by Ireland, could result in an increase to our effective tax rate. In addition, in December 2017, the United States enacted the Tax Cut and Jobs Act of 2017. We expect this to continue having a material impact on our tax financial results under United States generally accepted accounting principles. Future changes in U.S. and non-U.S. tax laws and regulations could have a material effect on our results of operations in the periods in which such laws and regulations become effective as well as in future periods.
The failure to successfully maintain the adequacy of our system of internal control over financial reporting could have a material adverse impact on our ability to report our financial results in an accurate and timely manner.
Under the Sarbanes-Oxley Act of 2002, we were required to develop and are required to maintain an effective system of disclosure controls and internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. In addition, our management is required to assess and certify the adequacy of our controls on a quarterly basis, and our independent auditors must attest and report on the effectiveness of our internal control over financial reporting on an annual basis. Any failure in the effectiveness of our system of internal control over financial reporting could have a material adverse impact on our ability to report our financial statements in an accurate and timely manner. Inaccurate and/or untimely financial statements could subject us to regulatory actions, civil or criminal penalties, stockholder litigation, or loss of customer confidence, which could result in an adverse reaction in the financial marketplace and ultimately could negatively impact our stock price due to a loss of investor confidence in the reliability of our financial statements.
Our sales to government clients subject us to risks, including early termination, audits, investigations, sanctions and penalties.
We derive a portion of our revenues and bookings from arrangements with governmental users in the U.S., the U.K. and elsewhere, contracts with the government in the U.S., the U.K. and elsewhere, as well as various state and local governments, and their respective agencies. Government contracts are generally subject to oversight, including audits and investigations which could identify violations of these agreements. Government contract violations could result in a range of consequences including, but not limited to, contract price adjustments, civil and criminal penalties, contract termination, forfeiture of profit and/or suspension of payment, and suspension or debarment from future government contracts. We could also suffer serious harm to our reputation if we were found to have violated the terms of our government contracts.

14


Table of Contents



Risks Related to Our Intellectual Property and Technology
Third parties have claimed and may claim in the future that we are infringing their intellectual property, and we could be exposed to significant litigation or licensing expenses or be prevented from selling our products if such claims are successful.
From time to time, we are subject to claims and legal actions alleging that we or our customers may be infringing or contributing to the infringement of the intellectual property rights of others. We may be unaware of intellectual property rights of others that may cover some of our technologies and products. If it appears necessary or desirable, we may seek licenses for these intellectual property rights. However, we may not be able to obtain licenses from some or all claimants, the terms of any offered licenses may not be acceptable to us, and we may not be able to resolve disputes without litigation. Any litigation regarding intellectual property could be costly and time-consuming and could divert the attention of our management and key personnel from our business operations. Intellectual property disputes could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from manufacturing or licensing certain of our products, cause severe disruptions to our operations or the markets in which we compete, or require us to satisfy indemnification commitments to our customers. Any of these could seriously harm our business.
Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations.
Our success and competitive position depend in large part on our ability to obtain and maintain intellectual property rights protecting our products and services. We rely on a combination of patents, copyrights, trademarks, service marks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our intellectual property and proprietary rights. Unauthorized parties may attempt to copy or discover aspects of our products or to obtain, license, sell or otherwise use information that we regard as proprietary. Policing unauthorized use of our products is difficult and we may not be able to protect our technology from unauthorized use. Additionally, our competitors may independently develop technologies that are substantially the same or superior to our technologies and that do not infringe our rights. In these cases, we would be unable to prevent our competitors from selling or licensing these similar or superior technologies. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States. Although the source code for our proprietary software is protected both as a trade secret and as a copyrighted work, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Litigation, regardless of the outcome, can be very expensive and can divert management efforts.
Our software products may have bugs, which could result in delayed or lost revenue and bookings, expensive correction, liability to our customers and claims against us.
Complex software products such as ours may contain errors, defects or bugs. Defects in the solutions or products that we develop and sell to our customers could require expensive corrections and result in delayed or lost revenue and bookings, adverse customer reaction and negative publicity about us or our products and services. Customers who are not satisfied with any of our products may also bring claims against us for damages, which, even if unsuccessful, would likely be time-consuming to defend, and could result in costly litigation and payment of damages. Such claims could harm our reputation, financial results and competitive position.
Risks Related to our Indebtedness, Investments and Common Stock
Our debt agreements contain covenant restrictions that may limit our ability to operate our business.
Our debt agreements contain, and any of our other future debt agreements or arrangements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our ability to:
incur additional debt or issue guarantees;
create liens;
make certain investments;
enter into transactions with our affiliates;
sell certain assets;
repurchase capital stock or make other restricted payments;
declare or pay dividends or make other distributions to stockholders; and
merge or consolidate with any entity.
Our ability to comply with these limitations is dependent on our future performance, which will be subject to many factors, some of which are beyond our control, including prevailing economic conditions. As a result of these limitations, our ability to respond

15


Table of Contents



to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions that might otherwise be beneficial to us. In addition, our failure to comply with our debt covenants could result in a default under our debt agreements, which could permit the holders to accelerate our obligation to repay the debt. If any of our debt is accelerated, we may not have sufficient funds available to repay the accelerated debt.
Our significant debt could adversely affect our financial health and prevent us from fulfilling our obligations under our credit facility and our convertible debentures.
We have a significant amount of debt. As of September 30, 2020, we had $1,666.5 million outstanding principal of debt, including $500.0 million of senior notes due in 2026, $227.4 million of 1.5% 2035 Convertible Debentures redeemable in November 2021, $676.5 million of 1.0% 2035 Convertible Debentures redeemable in December 2022, and $262.7 million of 1.25% 2025 Convertible Debentures redeemable in April 2025. Investors may require us to redeem these convertible debentures earlier than the dates indicated if the closing sale price of our common stock is more than 130% of the then current conversion price of the respective debentures for certain specified periods. If a holder elects to convert, we will be required to pay the principal amount in cash and any amounts payable in excess of the principal amount in cash or shares of our common stock, at our election. For example, on November 1, 2017, holders of $331.2 million of our 2.75% 2031 Convertible Debentures exercised their rights to require us to repurchase such debentures. We also have a $242.5 million Revolving Credit Facility under which $2.4 million was committed to backing outstanding letters of credit issued and $240.1 million was available for borrowing at September 30, 2020. Our debt level could have important consequences. For example, it could:
require us to use a large portion of our cash flow to pay principal and interest on debt, including the convertible debentures and the credit facility, which will reduce the availability of our cash flow to fund working capital, capital expenditures, acquisitions, research and development, exploit business opportunities, and undertake other business activities;
place us at a competitive disadvantage compared to our competitors that have less debt; and
limit, along with the financial and other restrictive covenants related to our debt, our ability to borrow additional funds, dispose of assets or pay cash dividends.
Our ability to meet our payment and other obligations under our debt instruments depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that additional capital will be available to us, in an amount sufficient to enable us to meet our payment obligations under the convertible debentures and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the convertible debentures, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the convertible debentures and our other debt.
Current uncertainty in the global financial markets and the global economy may negatively affect the value of our investment portfolio.
Our investment portfolios, which include investments in money market funds, bank deposits and separately managed investment portfolios, are generally subject to credit, liquidity, counterparty, market and interest rate risks that may be exacerbated by a global financial crisis or by uncertainty surrounding the terms of the United Kingdom's relationship with the European Union or recent changes in tariffs and trade agreements. If the banking system or the fixed income, credit or equity markets deteriorate or remain volatile, our investment portfolio may be impacted, and the values and liquidity of our investments could be adversely affected.
The market price of our common stock has been and may continue to be subject to wide fluctuations, and this may make it difficult for our stockholders to resell the common stock when they want or at prices they find attractive.
Our stock price historically has been, and may continue to be, volatile. Various factors contribute to the volatility of our stock price, including, for example, quarterly variations in our financial results, new product introductions by us or our competitors and general economic and market conditions. Sales of a substantial number of shares of our common stock by our largest stockholders, or the perception that such sales could occur, could also contribute to the volatility or our stock price. While we cannot predict the individual effect that any of these factors may have on the market price of our common stock, these factors, either individually or in the aggregate, could result in significant volatility in our stock price. Moreover, companies that have experienced volatility in the market price of their stock may be subject to securities class action litigation. Any such litigation could result in substantial costs and divert management's attention and resources.

16


Table of Contents



Future issuances of our common stock could adversely affect the trading price of our common stock and our ability to raise funds in new stock offerings.
Future issuances of substantial amounts of our common stock, whether in the public market or through private placements, including issuances in connection with acquisition activities, or the perception that such issuances could occur, could adversely affect prevailing trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or equity-related securities. In connection with past acquisitions, we issued a substantial number of shares of our common stock as transaction consideration or contingent consideration. We may continue to issue equity securities for future acquisitions, which would dilute existing stockholders, perhaps significantly depending on the terms of such acquisitions. No prediction can be made as to the effect, if any, that future sales of shares of common stock, or the availability of shares of common stock for future sale, will have on the trading price of our common stock.
Our business could be negatively affected by the actions of activist stockholders.
In the past, certain stockholders have publicly and privately expressed concerns with our performance and with certain governance matters. Responding to actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees. Furthermore, any perceived uncertainties as to our future direction could result in the loss of potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners. In addition, we have enacted certain changes to our bylaws in the past year that may weaken our ability to prevent an unsolicited takeover.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Our corporate headquarters are located in Burlington, Massachusetts. As of September 30, 2020, we leased approximately 1.1 million square feet of building space, primarily in the United States, and to a lesser extent, in the Asia-Pacific regions, Europe and Canada. Larger leased sites include properties located in Montreal, Canada and Bangalore, India. In addition, we own 130,000 square feet of building space located in Melbourne, Florida.
We also include in the total square feet leased space leased in specialized data centers in Massachusetts, Washington, Texas, and smaller facilities around the world.
We believe our existing facilities and equipment are in good operating condition and are suitable for the conduct of our business.
Item 3.
Legal Proceedings
Similar to many companies in the software industry, we are involved in a variety of claims, demands, suits, investigations and proceedings that arise from time to time relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, employment, benefits and securities matters. We evaluate the probability of adverse outcomes and, as applicable, estimate the amount of probable losses that may result from pending matters. Probable losses that can be reasonably estimated are reflected in our consolidated financial statements. These recorded amounts are not material to our consolidated financial statements for any of the periods presented in the accompanying consolidated financial statements. While it is not possible to predict the outcome of these matters with certainty, we do not expect the results of any of these actions to have a material adverse effect on our results of operations or financial position. However, each of these matters is subject to uncertainties, the actual losses may prove to be larger or smaller than the accruals reflected in our consolidated financial statements, and we could incur judgments or enter into settlements of claims that could adversely affect our financial position, results of operations or cash flows.
Item 4.
Mine Safety Disclosures
Not applicable.

17


Table of Contents



PART II
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common stock is traded on the Nasdaq Global Select Market under the symbol “NUAN”.
As of October 31, 2020, there were 555 stockholders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these record holders.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently expect to retain future earnings, if any, to finance the growth and development of our business, or to purchase common stock under our share repurchase program and do not anticipate paying any cash dividends in the foreseeable future. Furthermore, the terms of our debt agreements place restrictions on our ability to pay dividends.
Stock Performance Graph
The following performance graph compares the Company’s cumulative total return on its common stock between September 30, 2015 and September 30, 2020 to the cumulative total return of the Russell 2000, and to the S&P Information Technology indices assuming $100 was invested in the Company’s common stock and each of the indices upon the closing of trading on September 30, 2015 and assuming the reinvestment of dividends, if any. The Company has have never declared or paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future.
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.
capture.jpg
* $100 invested on September 30, 2015 in stock or index, including reinvestment of dividends, for each of the fiscal years below.
 
 
9/15

9/16

9/17

9/18

9/19

9/20

 
 
 
 
 
 
 
 
Nuance Communications, Inc.
 
100.00

88.58

96.03

105.80

99.63

234.36

Russell 2000
 
100.00

115.47

139.42

160.66

146.38

146.95

S&P Software & Services Select
 
100.00

119.58

142.85

198.56

204.95

264.51


18


Table of Contents



Issuer Purchases of Equity Securities
The following is a summary of our share repurchases for the three months ended September 30, 2020:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Program (1)
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
July 1, 2020 - July 31, 2020
 

 
$

 

 
$261.2 Million
August 1, 2020 - August 31, 2020
 

 
$

 

 
$261.2 Million
September 1, 2020 - September 30, 2020
 

 
$

 

 
$261.2 Million
Total
 

 
 
 

 
 
              
(1) On April 29, 2013, our Board of Directors approved a share repurchase program for up to $500.0 million, which was increased by $500.0 million on April 29, 2015. On August 1, 2018, our Board of Directors approved an additional $500.0 million under our share repurchase program. The program has no expiration date. As of September 30, 2020, approximately $261.2 million remained available for future repurchases under the program.
For the majority of restricted stock units granted to employees, the number of shares issued on the date the restricted stock units vest is net of the minimum statutory income withholding tax requirements that we pay in cash to the applicable taxing authorities on behalf of our employees. We do not consider these transactions to be common stock repurchases.
Unregistered Sales of Equity Securities and Use of Proceeds
None.

19


Table of Contents



Item 6.Selected Consolidated Financial Data
The following selected consolidated financial data is not necessarily indicative of the results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
 
Fiscal Year Ended September 30,
(In millions, except per share amounts)
2020
 
2019
 
2018
 
2017
 
2016
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 605)
Continuing Operations (a):
 

 
 

 
 

 
 

 
 

Total revenues
$
1,478.9

 
$
1,521.3

 
$
1,567.6

 
$
1,479.7

 
$
1,509.8

Gross profit
$
840.0

 
$
837.8

 
$
824.2

 
$
745.7

 
$
797.1

Income (loss) from operations
$
112.6

 
$
107.2

 
$
(184.3
)
 
$
(76.0
)
 
$
20.1

(Benefit) provision for income taxes
$
(18.8
)
 
$
12.1

 
$
(77.2
)
 
$
4.8

 
$
6.0

Net income (loss) from continuing operations
$
28.8

 
$
(12.2
)
 
$
(236.8
)
 
$
(251.4
)
 
$
(121.9
)
Net Income (Loss) Per Share - continuing operations:
 
 
 
 
 
 
 
 
 
Basic
$
0.10

 
$
(0.04
)
 
$
(0.81
)
 
$
(0.87
)
 
$
(0.42
)
Diluted
$
0.10

 
$
(0.04
)
 
$
(0.81
)
 
$
(0.87
)
 
$
(0.42
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
282.6

 
286.3

 
291.3

 
289.3

 
292.1

Diluted
292.0

 
286.3

 
291.3

 
289.3

 
292.1

Financial Position:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents and marketable securities
$
372.3

 
$
764.8

 
$
473.5

 
$
874.1

 
$
608.1

Total assets
$
3,593.3

 
$
5,365.8

 
$
5,302.4

 
$
5,931.9

 
$
5,661.5

Total debt
$
1,536.7

 
$
1,936.4

 
$
2,185.4

 
$
2,617.4

 
$
2,433.2

Total deferred revenue (a)
$
365.6

 
$
348.0

 
$
416.4

 
$
370.3

 
$
371.6

Total stockholders’ equity
$
1,143.9

 
$
2,173.2

 
$
1,717.5

 
$
1,931.4

 
$
1,931.3

Selected Data and Ratios (a):
 
 
 
 
 
 
 
 
 
Working capital (b)
$
(250.2
)
 
$
(551.6
)
 
$
235.9

 
$
(112.7
)
 
$
397.8

Depreciation of property and equipment
$
37.8

 
$
47.4

 
$
51.4

 
$
47.1

 
$
54.1

Amortization of intangible assets
$
78.7

 
$
81.6

 
$
105.4

 
$
134.0

 
$
121.2

Gross margin percentage
56.8
%
 
55.1
%
 
52.6
%
 
50.4
%
 
52.8
%
                       
(a) Amounts exclude those related to our Imaging and Automotive businesses, which were included in discontinued operations for all the periods presented.
(b) Our working capital is defined as total current assets less total current liabilities of continuing operations. Our working capital takes into accounts $432.2 million, $1,142.9 million, and $376.1 million short-term debt as of September 30, 2020, 2019, and 2017, respectively.
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis is intended to help the reader understand the results of operations and financial condition of our business. The Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.
Overview
Business Overview
We are a pioneer and leader in conversational and cognitive AI innovations that bring intelligence to everyday work and life. Our solutions and technologies can understand, analyze and respond to human language to increase productivity and amplify human intelligence. Our solutions are used by businesses in the healthcare, financial services, telecommunications and travel industries, among others. We see several trends in our markets, including (i) the growing adoption of cloud-based, connected services and highly interactive mobile applications, (ii) deeper integration of virtual assistant capabilities and services, and (iii) the continued expansion of our core technology portfolio including automated speech recognition, natural language understanding, semantic

20


Table of Contents



processing, domain-specific reasoning, dialog management capabilities, AI, and voice biometric speaker authentication. We report our business in three segments, Healthcare, Enterprise, and Other.
Healthcare. Our healthcare segment provides intelligent systems that support a more natural and insightful approach to clinical documentation, freeing clinicians to spend more time caring for patients and helping care teams and health organizations drive meaningful financial and clinical outcomes. Our principal solutions include dragon medical cloud-based solutions ("Dragon Medical One"), computer assisted physician documentation, diagnostic imaging solutions, Nuance® Dragon Ambient eXperience™, clinical documentation improvement and coding, and medical transcription services.
Enterprise. Our Enterprise segment is a leading provider of AI-powered intelligent customer engagement solutions and services, which enable enterprises and contact centers to enhance and automate customer service and sales engagement. Our principal solutions include interactive voice responses solutions, intelligent engagement solutions and security & biometric solutions.
Other. Our Other segment currently consists primarily of voicemail transcription services following the sale of our Mobile Operator Services business and the wind-down of Devices in 2019.
Discontinued Operations. On February 1, 2019, we completed the sale of our Imaging business and received approximately $404.0 million in cash, after estimated transaction expenses. On October 1, 2019, we completed the previously announced spin-off of our Automotive business, Cerence, into an independent public company. As a result, the historical results of operations for Imaging and Automotive have been included within discontinued operations in our condensed consolidated financial statements.
COVID-19 Impact
The novel coronavirus ("COVID-19") pandemic has disrupted economic markets, and the future economic impact, duration and spread of COVID-19 is still uncertain at this time. Our fiscal year 2020 results of operations and liquidity position were adversely impacted by the pandemic. During the second and the third quarters, we saw reduced transaction volume in our medical transcription business and PowerScribe radiology solution, as well as well as deferral in professional services and software license transactions. Additionally, our operating cash flows for the second and third quarters were negatively impacted by delayed collections, especially from smaller healthcare providers, as their cash flows deteriorated due to the postponement of elective surgeries and the sharp decline in inpatient visits.
As multiple states commenced phased re-openings, by the end of June, our transaction volumes in medical transcription and radiology businesses mostly recovered from the lows in April. Although during the fourth quarter, we saw our results of operations and liquidity slightly improved from the second and the thirds quarter, we expect the negative effect of the pandemic to continue into the first quarter of fiscal year 2021, particularly if certain markets implement new restrictions to limit the spread of the coronavirus.
As a precaution amidst the pandemic, we ceased our share repurchase activities and borrowed $230.0 million under our revolving credit facility in March, which was fully repaid in June as we became more confident in our liquidity position. We remain committed to maximizing stockholders' return, and may resume our share repurchase activities based upon the prevailing market conditions, general economic conditions, capital allocation alternatives, and other factors.
We estimated our fiscal year 2020 revenue to be approximately $20 million to $60 million lower due to the pandemic. Nevertheless, the negative effects of the pandemic were partially mitigated by our proactive expense reduction and cash management efforts. As a result, our fiscal year 2020 operating margin was approximately 7.6%, compared to 7.0% for fiscal year 2019. Additionally, our full year operating cash flows from continuing operations was $267.9 million, which reflects lower revenue and cash collection delays due to the pandemic, offset in part by our proactive expense and liquidity management efforts. As the pandemic situation develops, we are continuing to monitor the impact on our business, results of operations, and our liquidity position .
Key Metrics
In evaluating the financial condition and operating performance of our business, management focuses on revenue, net income, gross margins, operating margins, cash flow from operations, and changes in deferred revenue. A summary of these financial metrics for the year ended September 30, 2020, as compared to the year ended September 30, 2019 is as follows:
Total revenues were $1,478.9 million for the year ended September 30, 2020, as compared to $1,521.3 million for the year ended September 30, 2019;

21


Table of Contents



Net income from continuing operations for the year ended September 30, 2020 was $28.8 million, compared to a net loss from continuing operations of $12.2 million for the year ended September 30, 2019;
Gross margins for the year ended September 30, 2020 were 56.8%, compared to 55.1% for the year ended September 30, 2019;
Operating margins for the year ended September 30, 2020 were 7.6%, compared to 7.0% for year ended September 30, 2019; and
Operating cash flows from continuing operations decreased by $36.7 million to $267.9 million for the year ended September 30, 2020, compared to $304.6 million for the year ended September 30, 2019.
RESULTS OF OPERATIONS
Total Revenues
The following table shows total revenues by product type and by geographic location, based on the location of our customers, in dollars and percentage change (dollars in millions):
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Hosting and professional services
$
926.0

 
$
913.6

 
$
947.5

 
$
940.0

 
1.4
 %
 
0.8
 %
Product and licensing
296.1

 
338.7

 
359.9

 
375.2

 
(12.6
)%
 
(4.1
)%
Maintenance and support
256.7

 
268.9

 
243.5

 
252.3

 
(4.5
)%
 
(3.5
)%
Total revenues
$
1,478.9

 
$
1,521.3

 
$
1,551.0

 
$
1,567.6

 
(2.8
)%
 
(1.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
United States
$
1,185.8

 
$
1,237.4

 
$
1,270.0

 
$
1,255.2

 
(4.2
)%
 
1.2
 %
International
293.1

 
283.9

 
281.0

 
312.4

 
3.3
 %
 
(10.1
)%
Total revenues
$
1,478.9

 
$
1,521.3

 
$
1,551.0

 
$
1,567.6

 
(2.8
)%
 
(1.1
)%
Fiscal Year 2020 compared to Fiscal Year 2019
For fiscal year 2020, the geographic split was 80% of total revenues in the United States and 20% internationally, as compared to 81% of total revenues in the United States and 19% internationally for fiscal year 2019.
Fiscal Year 2019 compared to Fiscal Year 2018
For fiscal year 2019, the geographic split under ASC 606 was 81% of total revenues in the United States and 19% internationally. For fiscal year 2019, the geographic split under ASC 605 was 82% of total revenues in the United States and 18% internationally, as compared to 80% of total revenues in the United States and 20% internationally for fiscal year 2018.
Hosting and Professional Services Revenue
Hosting revenue primarily relates to delivering on-demand hosted services, such as medical transcription, and automated customer care applications, over a specified term. Professional services revenue primarily consists of consulting, implementation and training services for customers. The following table shows hosting and professional services revenue, in dollars, and as a percentage of total revenues (dollars in millions): 

22


Table of Contents



 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Hosting revenue
$
784.1

 
$
748.8

 
$
771.0

 
$
710.9

 
4.7
 %
 
8.5
 %
Professional services revenue
142.0

 
164.8

 
176.5

 
229.1

 
(13.9
)%
 
(23.0
)%
Hosting and professional services revenue
$
926.0

 
$
913.6

 
$
947.5

 
$
940.0

 
1.4
 %
 
0.8
 %
As a percentage of total revenues
62.6
%
 
60.1
%
 
61.1
%
 
60.0
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Hosting revenue for the year ended September 30, 2020 increased by $35.2 million, or 4.7%, primarily due to a $55.0 million increase in Healthcare, offset in part by a $20.1 million decrease in our Other segment. Healthcare hosting revenue increased primarily due to the continued growth in our Dragon Medical cloud-based solutions, offset in part by a decline in our medical transcription services, which was exacerbated by the transaction volume loss during the COVID-19 pandemic. Other hosting revenue decreased due to the wind-down of Devices and the sale of our Mobile Operator Services business in fiscal year 2019. As a percentage of total revenues, hosting revenue increased from 49.2% for fiscal year 2019 to 53.0% for fiscal year 2020.
Professional services revenue for the year ended September 30, 2020 decreased by $22.8 million, or 13.9%, primarily due to a $23.2 million decrease in Healthcare as of result of the deferrals of EHR implementation projects during the pandemic, as well as our shifting away from lower-margin professional services. As a percentage of total revenues, professional services revenue decreased from 10.8% for fiscal year 2019 to 9.6% for fiscal year 2020.
Fiscal Year 2019 compared to Fiscal Year 2018
Hosting revenue under ASC 606 for the year ended September 30, 2019 is $22.2 million lower than revenue under ASC 605 for the same period, primarily as due to the re-allocation of contract consideration to multiple performance obligations based on standalone selling prices and the timing of revenue recognition for transactions with extended payment terms. Under ASC 605, hosting revenue increased by $60.1 million, or 8.5%, primarily due to a $52.3 million increase in Healthcare and a $29.8 million increase in our Enterprise segment, which was partially offset by a $22.1 million decrease in our Other segment. Healthcare hosting revenue increased primarily due to the continued growth in our Dragon Medical cloud-based solutions, offset in part by a decline in our medical transcription services. Enterprise hosting revenue increased primarily due to the strength in our omni-channel hosting solutions. Other segment hosting revenue decreased due to the wind-down of Devices and the sale of Mobile Operator Services business in Brazil and India in fiscal year 2019. As a percentage of total revenues, hosting revenue under ASC 605 increased from 45.3% for fiscal year 2018 to 49.7% for fiscal year 2019.
Professional services revenue under ASC 606 for the year ended September 30, 2019 is $11.7 million lower compared to revenue under ASC 605 for the same period, primarily due to the loss of deferred revenue upon the ASC 606 implementation as a result of change from completed contract method to the percentage of completion method. Under ASC 605, professional services revenue decreased by $52.6 million, or 23.0%, primarily due to a $58.9 million decrease in Healthcare, offset in part by a $6.5 million increase in Enterprise. Healthcare professional services revenue decreased primarily due to lower revenue from the EHR implementation and optimization services. Enterprise professional services revenue increased primarily due to higher contact center service revenue as a result of the timing of the services rendered. As a percentage of total revenues, professional services revenue under ASC 605 decreased from 14.6% for fiscal year 2018 to 11.4% for fiscal year 2019.
Product and Licensing Revenue
Product and licensing revenue primarily consist of sales and licenses of our technology. The following table shows product and licensing revenue, in dollars, and as a percentage of total revenues (dollars in millions): 
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Product and licensing revenue
$
296.1

 
$
338.7

 
$
359.9

 
$
375.2

 
(12.6
)%
 
(4.1
)%
As a percentage of total revenues
20.0
%
 
22.3
%
 
23.2
%
 
23.9
%
 
 
 
 

23


Table of Contents



Fiscal Year 2020 compared to Fiscal Year 2019
Product and licensing revenue for the year ended September 30, 2020 decreased by $42.6 million, or 12.6%, primarily due to a $45.6 million decrease in Healthcare and a $4.9 million decrease in other, offset in part by a $7.9 million increase in Enterprise. Healthcare product and licensing revenue decreased primarily due to the continued transition from term licenses to cloud-based solutions. Enterprise product and licensing revenue increased primarily due to the growth in our digital engagement solutions. Other product and licensing revenue decreased primarily due to the wind-down of Devices during fiscal year 2019. As a percentage of total revenues, product and licensing revenue decreased from 22.3% for fiscal year 2019 to 20.0% for fiscal year 2020.
Fiscal Year 2019 compared to Fiscal Year 2018
Product and licensing revenue under ASC 606 for the year ended September 30, 2019 is $21.2 million lower compared to revenue under ASC 605 for the same period, primarily due to the loss of revenue as a result of the upfront recognition of term license revenue on the opening balance sheet under ASC 606. Under ASC 605, product and licensing revenue decreased by $15.3 million, or 4.1%, primarily due to a $23.7 million decrease in Other and a $12.3 million decrease in Enterprise, offset in part by a $20.7 million increase in Healthcare. Other segment product and licensing revenue decreased primarily due to the wind-down of Devices and the sale of Mobile Operator Services business in Brazil and India in fiscal year 2019. Enterprise product and licensing revenue decreased primarily due to the timing of contact center license deals signed in fiscal year 2018. Healthcare product and licensing revenue increased primarily driven by higher Dragon Medical software license revenue from international markets. As a percentage of total revenues, product and licensing revenue under ASC 605 decreased from 23.9% for fiscal year 2018 to 23.2% for fiscal year 2019.
Maintenance and Support Revenue
Maintenance and support revenue primarily consist of technical support and maintenance services. The following table shows maintenance and support revenue, in dollars, and as a percentage of total revenues (dollars in millions):
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Maintenance and support revenue
$
256.7

 
$
268.9

 
$
243.5

 
$
252.3

 
(4.5
)%
 
(3.5
)%
As a percentage of total revenues
17.4
%
 
17.7
%
 
15.7
%
 
16.1
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Maintenance and support revenue for the year ended September 30, 2020 decreased by $12.2 million, or 4.5%, primarily due to $20.6 million decrease in Healthcare, offset in part by a $8.6 million increase in Enterprise. Healthcare maintenance and support revenue decreased primarily due to the continued transition from term licenses with maintenance and support to cloud-based solutions in Healthcare. Enterprise maintenance and support revenue increased primarily driven by the growths in digital engagement and security biometrics license transactions. As a percentage of total revenues, maintenance and support revenue decreased from 17.7% for fiscal year 2019 to 17.4% for fiscal year 2020.
Fiscal Year 2019 compared to Fiscal Year 2018
Maintenance and support revenue under ASC 606 for the year ended September 30, 2019 is $25.4 million higher compared to revenue under ASC 605 for the same period, primarily due to the re-allocation of contract consideration to multiple performance obligations based on standalone selling prices. Under ASC 605, maintenance and support revenue decreased by $8.8 million, or 3.5%, primarily due to customers' continued transition from licenses to cloud-based solutions in Healthcare. As a percentage of total revenues, maintenance and support revenue under ASC 605 decreased from 16.1% for fiscal year 2018 to 15.7% for the fiscal year 2019.


24


Table of Contents



COSTS AND EXPENSES
Cost of Hosting and Professional Services Revenue
Cost of hosting and professional services revenue primarily consists of compensation for services personnel, outside consultants and overhead, as well as the hardware, infrastructure and communications fees that support our hosting solutions. The following table shows the cost of hosting and professional services revenue, in dollars and as a percentage of professional services and hosting revenue (dollars in millions): 
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Cost of hosting and professional services revenue
$
518.1

 
$
551.4

 
$
554.5

 
$
608.3

 
(6.0
)%
 
(8.8
)%
As a percentage of hosting and professional services revenue
56.0
%
 
60.4
%
 
58.5
%
 
64.7
%
 
 

 
 

Fiscal Year 2020 compared to Fiscal Year 2019
Cost of hosting and professional services revenue for the year ended September 30, 2020 decreased by $33.3 million, or 6.0%, primarily driven by lower transaction volume and professional services project deferrals due to the COVID-19 pandemic, as well as our costs reduction efforts. Gross margin increased by 4.4 percentage points primarily due to a favorable shift in revenue mix towards higher-margin Dragon Medical cloud-based solutions from lower-margin medical transcription and EHR implementation services.
Fiscal Year 2019 compared to Fiscal Year 2018
Cost of hosting and professional services revenue under ASC 606 for the year ended September 30, 2019 is $3.1 million lower than the amount under ASC 605 for the same period, primarily due to the upfront recognition of costs upon the ASC 606 implementation as a result of change from completed contract method to the percentage of completion method. Under ASC 605, cost of hosting and professional services revenue decreased by $53.8 million, or 8.8%, primarily due to lower revenue related to EHR implementation and optimization services, offset in part by higher costs related to our Dragon Medical cloud-based software. Under ASC 605, gross margin increased by 6.2 percentage points primarily due to a favorable shift in revenue mix towards higher-margin Dragon Medical cloud-based solutions from lower-margin medical transcription and EHR implementation services.
Cost of Product and Licensing Revenue
Cost of product and licensing revenue primarily consists of material and fulfillment costs, manufacturing and operations costs and third-party royalty expenses. The following table shows the cost of product and licensing revenue, in dollars and as a percentage of product and licensing revenue (dollars in millions): 
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Cost of product and licensing revenue
$
62.0

 
$
71.3

 
$
65.4

 
$
55.7

 
(13.0
)%
 
17.5
%
As a percentage of product and licensing revenue
20.9
%
 
21.0
%
 
18.2
%
 
14.8
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Cost of product and licensing revenue for the year ended September 30, 2020 decreased by $9.3 million, or 13.0%. Gross margin increased by 0.1 percentage points year-over-year. The decrease in cost and increase in gross margin were primarily due to the upfront recognition of certain project costs associated with digital engagement in the third quarter of fiscal year 2019.
Fiscal Year 2019 compared to Fiscal Year 2018
Cost of product and licensing revenue under ASC 606 for the year ended September 30, 2019 is $5.9 million higher than the amount under ASC 605 for the same period, primarily due to the upfront recognition of third-party license royalties in connection with the upfront recognition of term license revenue. Under ASC 605, cost of product and licensing revenue increased by $9.7 million,

25


Table of Contents



or 17.5%, primarily due to higher royalty costs in Healthcare. As a result, under ASC 605 gross margins decreased by 3.4 percentage points.
Cost of Maintenance and Support Revenue
Cost of maintenance and support revenue primarily consists of compensation for product support personnel and overhead. The following table shows cost of maintenance and support revenue, in dollars and as a percentage of maintenance and support revenue (dollars in millions):
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Cost of maintenance and support revenue
$
31.0

 
$
33.4

 
$
33.5

 
$
39.2

 
(7.1
)%
 
(14.5
)%
As a percentage of maintenance and support revenue
12.1
%
 
12.4
%
 
13.8
%
 
15.5
%
 
 

 
 

Fiscal Year 2020 compared to Fiscal Year 2019
Cost of maintenance and support revenue for the year ended September 30, 2020 decreased by $2.4 million, or 7.1%, primarily due to the continued transition from license transactions with maintenance and support to cloud-based solutions in Healthcare. Gross margins increased by 0.3 percentage points, primarily driven by higher margin on Dragon Medical maintenance and support services in Healthcare.
Fiscal Year 2019 compared to Fiscal Year 2018
Cost of maintenance and support revenue under ASC 606 for the year ended September 30, 2019 is $0.1 million lower than the amount under ASC 605 for the same period, primarily due to the timing of recognition of third-party service costs. Under ASC 605, cost of maintenance and support revenue decreased by $5.7 million, or 14.5%, primarily due to customers' continued transition from licenses to cloud-based solutions in Healthcare. Under ASC 605, gross margins increased by 1.7 percentage points, primarily driven by higher margin on Dragon Medical maintenance and support services in Healthcare.
Research and Development Expenses
Research and development ("R&D") expense primarily consists of salaries, benefits, and overhead relating to engineering staff as well as third party engineering costs. The following table shows research and development expense, in dollars and as a percentage of total revenues (dollars in millions): 
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Research and development expense
$
226.2

 
$
192.6

 
$
192.6

 
$
207.2

 
17.4
%
 
(7.0
)%
As a percentage of total revenues
15.3
%
 
12.7
%
 
12.4
%
 
13.2
%
 
 

 
 

Fiscal Year 2020 compared to Fiscal Year 2019
R&D expense for the year ended September 30, 2020 increased by $33.6 million, or 17.4%, primarily due to higher compensation costs as we continued to invest in our core technologies to power new products and solutions.
Fiscal Year 2019 compared to Fiscal Year 2018
R&D expense for the year ended September 30, 2019 decreased by $14.6 million, or 7.0%, primarily driven by lower compensation costs due to our recent costs saving initiatives, offset in part by our continued investment in product development and new technologies to support our long-term growth.

26


Table of Contents



Sales and Marketing Expense
Sales and marketing expense include salaries and benefits, commissions, advertising, direct mail, public relations, tradeshow costs and other costs of marketing programs, travel expenses associated with our sales organization and overhead. The following table shows sales and marketing expense, in dollars and as a percentage of total revenues (dollars in millions): 
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
Sales and marketing expense
$
273.3

 
$
274.0

 
$
279.2

 
$
286.6

 
(0.3
)%
 
(2.6
)%
As a percentage of total revenues
18.5
%
 
18.0
%
 
18.0
%
 
18.3
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Sales and marketing expenses for the year ended September 30, 2020 decreased by $0.7 million, or 0.3%, as lower traveling and entertainment expenses during the COVID-19 pandemic were mostly offset by our investment in sales force to support new products and solutions.
Fiscal Year 2019 compared to Fiscal Year 2018
Sales and marketing expense under ASC 606 for the year ended September 30, 2019 is $5.1 million lower than the amount under ASC 605 for the same period, primarily due to the amortization of capitalized sales commission expenses over the period of benefit. Under ASC 605, sales and marketing expenses decreased by $7.5 million, or 2.6%, primarily driven by lower sales headcount as a result of ongoing portfolio review and optimization.
General and Administrative Expenses
General and administrative ("G&A") expense primarily consists of personnel costs for administration, finance, human resources, general management, fees for external professional advisers including accountants and attorneys, and provisions for doubtful accounts. The following table shows G&A expense, in dollars and as a percentage of total revenues (dollars in millions):
 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
 
(ASC 606)
 
(ASC 606)
 
(ASC 605)
 
(ASC 605)
 
(ASC 606)
 
(ASC 605)
General and administrative expense
$
156.4

 
$
172.6

 
$
172.6

 
$
213.8

 
(9.4
)%
 
(19.3
)%
As a percentage of total revenues
10.6
%
 
11.3
%
 
11.1
%
 
13.6
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
General and administrative expenses decreased by $16.3 million, or 9.4%, primarily driven by decreases in compensation and professional services costs due to our cost saving initiatives, and lower traveling and entertainment expenses during the COVID-19 pandemic.
Fiscal Year 2019 compared to Fiscal Year 2018
General and administrative expenses decreased by $41.2 million, or 19.3%, primarily due to higher professional service costs incurred in fiscal year 2018 related to evaluating strategic alternatives for certain businesses and legal expenses related to enforcing our intellectual property rights. Also contributing to the decrease was lower employee-related costs as a result of our cost saving initiatives.
Amortization of Intangible Assets
Amortization of acquired patents and technologies are included within cost of revenue and the amortization of acquired customer and contractual relationships, non-compete agreements, acquired trade names and trademarks, and other intangibles are included within Operating expenses. Customer relationships are amortized based upon the pattern in which the economic benefits of the customer relationships are expected to be realized. Other identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortization expense was recorded as follows (dollars in millions): 

27


Table of Contents



 
Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2018
 
% Change 2020 vs. 2019
 
% Change 2019 vs. 2018
Cost of revenues
$
27.8

 
$
27.4

 
$
40.2

 
1.4
 %
 
(31.8
)%
Operating expenses
50.9

 
54.2

 
65.2

 
(6.1
)%
 
(16.8
)%
Total amortization expense
$
78.7

 
$
81.6

 
$
105.4

 
(3.6
)%
 
(22.5
)%
As a percentage of total revenues
5.3
%
 
5.4
%
 
6.7
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Amortization of intangible assets expense for fiscal year 2020 decreased by $2.9 million, primarily due to certain intangible assets having been fully amortized or written off during fiscal year 2020.
Fiscal Year 2019 compared to Fiscal Year 2018
Amortization of intangible assets expense for fiscal year 2019 decreased by $23.8 million, as certain intangible assets became fully amortized in fiscal years 2018 and 2019.
Acquisition-Related Costs, Net
Acquisition-related costs, net include costs related to business and asset acquisitions. These costs consist of (i) transition and integration costs, including retention payments, transitional employee costs, earn-out payments, and other costs related to integration activities; (ii) professional service fees, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities; and (iii) fair value adjustments to acquisition-related contingencies. A summary of the Acquisition-related costs, net is as follows (dollars in millions):  

Fiscal Year 2020
 
Fiscal Year 2019
 
Fiscal Year 2018

% Change 2020 vs. 2019

% Change 2019 vs. 2018
Transition and integration costs
$
3.8

 
$
7.6

 
$
14.4

 
(50.1
)%
 
(47.6
)%
Professional service fees

 
1.9

 
1.0

 
(101.2
)%
 
97.4
 %
Acquisition-related adjustments
(0.9
)
 
(1.5
)
 
(3.4
)
 
(43.6
)%
 
(54.8
)%
Total acquisition-related costs, net
$
2.9

 
$
8.0

 
$
12.0

 
(63.8
)%
 
(33.7
)%
As a percentage of total revenues
0.2
%
 
0.5
%
 
0.8
%
 
 
 
 
Fiscal Year 2020 compared to Fiscal Year 2019
Acquisition-related costs, net decreased by $5.1 million, primarily due to overall reduced acquisition and integration activities as we focus on portfolio optimization and organizational simplification to drive organic growth.
Fiscal Year 2019 compared to Fiscal Year 2018
Acquisition-related costs, net decreased by $4.0 million, primarily due to reduced acquisition activities during fiscal year 2019.
Restructuring and Other Charges, Net
Restructuring and other charges, net include restructuring expenses together with other charges that are unusual in nature, are the result of unplanned events, or arise outside of the ordinary course of our business. While restructuring and other charges, net are excluded from segment profits, the table below presents the restructuring and other charges, net associated with each segment (dollars in thousands):

28


Table of Contents



 
Personnel
 
Facilities
 
Total Restructuring Expenses
 
Other Charges
 
Total
Fiscal Year 2020
 

 
 

 
 
 
 

 
 

Healthcare
$
1,953

 
$
2,819

 
4,772

 
$

 
4,772

Enterprise
1,417

 
1,998

 
3,415

 

 
3,415

Other

 
(63
)
 
(63
)
 

 
(63
)
Corporate
1,935

 
777

 
2,712

 
6,844

 
9,556

Total fiscal year 2020
$
5,305

 
$
5,531

 
$
10,836

 
$
6,844

 
$
17,680

 
 
 
 
 
 
 
 
 
 
Fiscal Year 2019
 

 
 

 
 
 
 

 
 

Healthcare
$
4,679

 
$
191

 
$
4,870

 
$

 
$
4,870

Enterprise
5,037

 
933

 
5,970

 

 
5,970

Other