Nuance Communications, Inc. (NUAN)

edwinaanne (82.03) Submitted: 3/27/08 11:18 PM : Start Price: $17.83 NUAN Score: -10.55

Nuance Communications, Inc. (NASDAQ: NUAN) is a leading provider of speech and imaging solutions for businesses and consumers around the world. Its technologies, applications and services make the user experience more compelling by transforming the way people interact with information and how they create, share and use documents. Every day, millions of users and thousands of businesses experience Nuance’s proven applications. Today, through various partnering programs, the company maintains strategic relationships with hundreds of leading companies - including Accenture, Avaya, Canon, Cisco, Hewlett-Packard, IBM, Lexmark, Microsoft, Nortel, Sony and Xerox - that help bring Nuance technologies, applications and solutions to global markets.


Nuance customers: span a range of industries and disciplines with particular concentration in industries that breed information, including financial services, healthcare, government, educations, utilities, travel and telecommunications. Today, more than 16 million people use a Nuance productivity application; more than half the Fortune 100 use Nuance speech solutions and nearly one thousand devices - handsets, printers, automobiles - incorporate Nuance technology.


Revenues: $195.0 million in the quarter ended December 31, 2007, a 46 percent increase over revenues of $133.4 million in the quarter ended December 31, 2006.


Acquisitions of Tegic, Viecore and VoiceSignal


Net loss of $15.4 million, or $(0.08) per share, in the quarter ended December 31, 2007, compared with a net loss of $1.2 million, or $(0.01) per share, in the quarter ended December 31, 2006.


Paul Ricci, chairman and CEO: “Nuance delivered a strong start to fiscal 2008, carrying forward the momentum and favorable trends of 2007 into our first quarter performance,” “In particular, demand for our solutions, especially those delivered within the mobile industry and in healthcare organizations remained strong. The successful integration and performance of recently acquired businesses contributed handsomely to our results and reinforced our ability to extend Nuance’s leadership and to achieve our strategic and operational objectives.”


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


Enterprise Speech – The Company’s enterprise speech revenues were up sequentially and year-over-year owing to expanded customer engagements and contributions from the recent acquisitions of BeVocal and Viecore. In particular, the Nuance On-Demand unit contributed robust revenues with its hosted, transaction-oriented solutions that were fueled by increased traffic during the holiday season. In addition, the team also secured important design wins for new offerings within the quarter and customer satisfaction remains strong as evidenced by the record bookings from the installed base of customers. Important agreements, across the Enterprise division, with new and existing customers include AT&T, Deutsche Bank, Deutsche Telecom, Sprint, the U.S. Census Bureau and XM Radio. Some of the world's leading companies have selected Nuance to automate call centers, directory assistance, consumer devices, automobiles and enterprise auto attendants, including Bank of America, Bell Canada, United Airlines, the Internal Revenue Service, Delphi, Citroen, Chrysler, Sony and Verizon.


? Mobile and Embedded Speech – Nuance revenues for its mobile and embedded solutions were a record for the company, surpassing $43 million, owing to strong organic growth and contributions from its VoiceSignal and Tegic acquisitions. The company continues to benefit from active product cycles and consumer demand for devices and applications from manufacturers, including Ford, LG, Motorola, Nokia, RIM, Samsung and TomTom. In the quarter, Nuance expanded its mobile presence through a partnership with Google and the Open Handset Alliance and through engagements with carriers and mobile operators for new, integrated services to be announced later this year. In addition, Nuance speech solutions continue to gain mainstream visibility through product launches and broadcast advertising for applications such as voice control in Ford Sync and voice-based mobile search with the Palm Centro.





Healthcare Dictation and Transcription – Nuance’s healthcare dictation revenues were robust in the quarter as interest and demand for Nuance’s dictation and transcription solutions continued to grow. In particular, the company experienced strong performance with its iChart on-demand transcription solution. Important contracts in the quarter with new and existing customers include Adventist, New England Medical Center, St. Joseph’s Health and Spectrum Health.


Companies such as Cerner and Misys incorporate Dragon NaturallySpeaking into larger medical systems and EMRs, while thousands of individuals and corporations use the software to prevent or treat repetitive strain injury, or simply to become more productive.





PDF and Document Imaging – Nuance’s PDF and imaging solutions recorded revenues in line with expectations as the company experienced solid performance from its OEM partners, including Brother, Canon, HP and Xerox. In addition, the Company continued to expand its site license program, securing agreements with State Farm, Total France and the U.S. Army.


Companies such as Brother, Canon, Hewlett-Packard, Visioneer and Xerox include our technology in digital copiers, printers and scanners, as well as multifunction devices that combine these capabilities. In addition, companies such as Corel, Kofax, Lockheed Martin, Microsoft and Symantec embed our digital capture technology into their commercial software applications.


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? SaaS and Subscription-based Revenues – The Company continued to experience an acceleration in its revenues delivered as software-as-a-service and through subscription or transaction-based models. Across its enterprise, mobile and healthcare businesses, Nuance saw approximately 19 percent of its revenue delivered in this form, compared to 9 percent in the same period last year.





? Operational Achievement – Nuance sustained a focus on disciplined acquisition integration, cost synergies and expense controls, which resulted in improvements and leverage in its non-GAAP operating margins. Cash flow from operations was approximately $41 million in the first quarter 2008, up 57 percent over the same period last year.


   


Price To Revenue   5.74


Price To Cash Flow   31.87


Price to Book   3.21


Debt To Equity   103.86


Current Ratio   1.64


   


Growth Rates   


5-Year Annual Dividend Growth Rate   .00


5-Year Annual Revenue Growth Rate   41.37

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