Business

How the Math Adds Up for Nuance Communications Inc. (NASDAQ:NUAN)

Nuance Communications Inc. (NASDAQ:NUAN) is one of the more exciting players in the “cutting edge” region of the tech sector. The company just hit the market with its Q3 report, and its worth reviewing given the importance of the name of spec traders and investors, and the company’s increasingly telling role in helping us understand the vital stats for the AI-augmented cloud services marketplace.

In straight terms, the company reported Q4 (Sep) earnings of $0.38 per share, excluding non-recurring items, $0.06 better than the S&P Capital IQ Consensus of $0.32; non-GAAP revenues rose 13.0% year/year to $536.21 mln vs the $525.05 mln S&P Capital IQ Consensus.

Nuance Communications Inc. (NASDAQ:NUAN) issues guidance for Q1 (Dec) under ASC 605 standard only: sees EPS of $0.27-0.29, may not be comparable to $0.28 S&P Capital IQ Consensus; sees Q1 non-GAAP revs of $497-511 mln, may not be comparable to $519.50 mln S&P Capital IQ Consensus.

Interestingly, the company also may be understood as issuing guidance for FY19 using the ASC 605 standard: NUAN sees FY19 non-GAAP EPS of $1.19-1.27, may not be comparable to $1.23 S&P Capital IQ Consensus; sees FY19 non-GAAP revs of $2.055-2.105 bln, may not be comparable to $2.13 bln S&P Capital IQ Consensus. Using the ASC 606 standard, NUAN expects non-GAAP EPS of $1.02-1.21 and non-GAAP revs of $1.995-2.075 bln.

In terms of a review of the portfolio, after conducting a strategic business review, Nuance created a plan to simplify its operations. NUAN will maintain its Healthcare and Enterprise business segments, however, the co will spin-off its Automotive segment. Co says becoming a pure-play next generation automotive software company represents an important step in this segment’s growth.

Accordingly, NUAN will spin off the Automotive segment into a new, independent, publicly-traded company. The standalone entity will be a pure-play, next-generation automotive software company. Immediately following the transaction, which is expected to be completed before the end of fiscal 2019, Nuance shareholders will own shares of both companies. The transaction is intended to be tax-free to Nuance shareholders.

Imaging Business Sale: As announced on Nov 12, Nuance is selling its Imaging business to Kofax for $400 mln, in a transaction that is expected to close by the end of Q2 19.

Subscription Revenue Services (SRS) and Devices Wind-Down: During Q4, Nuance decided to wind down the Subscription Revenue Services (SRS) business because it is non-core to Nuance’s AI strengths. The Company is also commencing the wind-down of the consumer-focused Devices business.

Organizational Transformation Program: In tandem with its portfolio review, Nuance is optimizing its organizational structure. This process has identified $50 million in cost savings that will be implemented in fiscal year 2019, primarily during the first and second quarter.

 

Giant’s Ground View

Nuance Communications Inc. (NASDAQ:NUAN) trumpets itself as a company that provides voice recognition and natural language understanding solutions worldwide.

It operates through four segments: Healthcare, Mobile, Enterprise, and Imaging.

The Healthcare segment offers transcription solutions, which enable physicians to streamline clinical documentation with medical transcription platform; Dragon Medical, a dictation software that empowers physicians to capture and document patient care on various devices; clinical document improvement and coding solutions that ensure patient health information; diagnostic solutions that allow radiologists to document, collaborate, and share medical images and reports; and professional and personal productivity solutions to business users and consumers.

The Mobile segment provides virtual assistants and connected services built on voice recognition, text-to-speech, natural language understanding, dialog, and text input technologies to automotive manufacturers, consumer electronic companies, and mobile and cable operators.

The Enterprise segment offers On-Premise solutions and services, an automated customer service solution comprising speech recognition, voice biometrics, transcription, text-to-speech, and dialog and analytics products; and On-Demand multichannel cloud, a platform that offers enterprises the ability to implement automatic customer service.

The Imaging segment provides multi-function printer (MFP) Scan automation solutions to offer scanning and document management solutions; MFP Print automation solutions to deliver printing and document management solutions; and PDF and OCR software, a technology that enables the capture, creation, and management of document workflows.

The company has a strategic agreement with Partners HealthCare and SDL plc. The company was formerly known as ScanSoft, Inc. and changed its name to Nuance Communications, Inc. in October 2005. Nuance Communications, Inc. was founded in 1992 and is headquartered in Burlington, Massachusetts.

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