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Nuance Communications, Inc. (NUAN)
F3Q10 (06/30/10) Earnings Call Transcript
August 9, 2010 5:00 pm ET
Paul Ricci – Chairman and CEO
Tom Beaudoin – EVP and CFO
Daniel Ives – FBR
Nandan Amladi – Deutsche Bank
Shyam Patil – Raymond James & Associates
John Byrne [ph] – UBS
Derek Bingham – Goldman Sachs
Jeff Van Rhee – Craig-Hallum
John Bright – Avondale Partners
Scott Sutherland – Wedbush Securities
Ilya Grozovsky – Morgan Joseph
Brad Whitt – Gleacher & Company
Mike Latimore – Northland Capital Markets
Mark Murphy – Piper Jaffray
Craig Nankervis – First Analysis
Tom Roderick – Stifel Nicolaus
Previous Statements by NUAN
» Nuance Communications, Inc. Q1 2010 Earnings Call Transcript
» Nuance Communications, Inc. F4Q09 (Qtr End 09/30/09) Earnings Call Transcript
» Nuance Communications, Inc. F3Q09 (Qtr End 06/30/09) Earnings Call Transcript
Thank you. Before we begin, I’d remind everyone that matters we discuss this afternoon include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to our recent SEC filings for a detailed list of risk factors.
As noted in our press release, we issued, along with our release, a set of prepared remarks in advance of this call. Those remarks are intended to serve in place of extended formal comments, and we will not repeat them here.
Before taking your questions, I might underscore that we are seeing growing strength in our bookings as evidenced by the supplementary backlog metrics we published today. In particular, I would note that we had a very strong bookings quarter in our enterprise on demand offerings. We anticipate strong bookings in Q4 as well, which we believe should provide momentum for revenue growth in FY ’11.
Additionally, Nuance’s healthcare business provided especially robust performance in the quarter, drawing upon strength across most of our healthcare products and service offerings. We believe we are uniquely positioned to serve the healthcare market with our leadership in quality, capabilities and cost.
Finally, I want to comment on the volume of opportunities in our mobile business as the reception to our solutions in mobile devices continues to grow. You can see some evidence of that in the range of activities cited in our prepared remarks. All of these factors give us increased confidence as we complete FY ’10 and look towards fiscal year ’11.
We will now take your questions.
(Operator instructions) And our first question comes from the line of Daniel Ives with FBR. Please go ahead. Your line is open.
Daniel Ives – FBR
Thanks. Few questions. So Paul, when you look at the revenue range that you gave, and obviously you came in on the low end. I know the FX issue. How can you kind of reconcile that range with the bookings performance? Was there – can you quantify a certain amount of revenue that you expected to come in the quarter that ultimately was off balance sheet?
The most germane area where the bookings performance diverges from revenue is in enterprise, and we talked about that before. We are seeing a growing increase in the demand for enterprise-hosted solutions as compared to on-premise solutions. As I’ve said in previous quarters, I think that trend is going to continue. And that will have an effect on elongating revenues as compared with bookings.
Daniel Ives – FBR
So, was that more than expected, that trend?
I think that there has been a continuation of that trend from previous quarters. There were several elements contributing to some weakness in our enterprise revenues in the quarter as compared to our backlog in bookings. And that included, again, a preference for our hosted solutions. Some ramping delays in our existing on-demand contracts that we’ve won over the last 18 months. And as we referenced in the prepared remarks, there is continued softness in our channels, which is increasingly of course being replaced by our own direct revenues and services.
Daniel Ives – FBR
Okay. And then just talk about cash flow, with those expectations in line, with your thoughts going into the quarter? And then how should we think about cash in Q4? I know you don’t guide, but just directionally.
Sure, Daniel. Cash flows, we diverge this quarter of about $27 million from non-GAAP net income. That was slightly less than last quarter. It’s predominantly in three areas. So, about $11 million of it was working capital. So, an increase in working capital. And we did see, for the first time this quarter, a couple of large customers who have historically paid us the last week of the quarter pushed payments by just a few days, and so that cash came in. That was about $7 million came in, in the first week of Q4. So about $11 million for working capital, about $11 million associated with SpinVox, and we continue to work through some of those acquired liabilities and the other impacts of CFFO from SpinVox. That should be probably about half of that or significantly improved as we go into Q4.
And then the last piece, which is just the restructuring and acquisition-related cost that was about $6 million this quarter. And that will continue, but will fluctuate based on acquisitions. You can see that line historically on the P&L if you look at the acquisition and restructuring-related costs. This quarter, there was just a very small amount associated with the non-GAAP revenue. So we are pretty much through the revenues that come through purchase accounting, for which there is no cash. And that should –borrowing any other services-type acquisitions would bring a lot of deferred revenues, and that impact on cash flow is pretty much behind us.