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Executives

Kevin Faulkner -

Paul A. Ricci - Chairman and Chief Executive Officer

Thomas L. Beaudoin - Chief Financial Officer and Executive Vice President

Analysts

Nandan Amladi - Deutsche Bank AG, Research Division

Richard H. Davis - Canaccord Genuity, Research Division

Daniel H. Ives - FBR Capital Markets & Co., Research Division

Shyam Patil - Raymond James & Associates, Inc., Research Division

Steven R. Koenig - Longbow Research LLC

John F. Bright - Avondale Partners, LLC, Research Division

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Joanna Makris - Mizuho Securities USA Inc., Research Division

Shaul Eyal - Oppenheimer & Co. Inc., Research Division

Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Daniel T. Cummins - ThinkEquity LLC, Research Division

Brent Thill - UBS Investment Bank, Research Division

Mike Latimore - Northland Securities Inc., Research Division

Nuance Communications (NUAN) Q1 2012 Earnings Call February 9, 2012 5:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Nuance's First Quarter Fiscal 2012 Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. And with us today are Chairman and Chief Executive Officer of Nuance, Mr. Paul Ricci; Chief Financial Officer, Mr. Tom Beaudoin; and Vice President of Investor Relations, Mr. Kevin Faulkner. At this time, I'd like to turn the call over to Mr. Faulkner. Please go ahead, sir.

Kevin Faulkner

Thanks, Doug. Before we begin, I 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 also issued a set of prepared remarks in advance of this call, which are available on our website. Those remarks are not -- are intended to serve in place of extended formal comments, and we will not repeat them here. Now, let me turn the call over to Paul Ricci.

Paul A. Ricci

Thank you, Kevin. Before taking your questions, I might underscore a few points from today's documents. We were pleased this quarter with the strong fundamentals of the business, including double-digit organic revenue growth, year-over-year improved gross margins and operating margins, earnings growth and strong cash flow from operations.

In our last quarterly call and at our recent analyst meeting, we indicated that the pace of market activity suggests to us an unprecedented level of interest in our solutions. That remains our perspective as we continue in our second fiscal quarter.

Activity around our mobile and consumer business, in particular, remained intense as we see smartphone manufacturers, consumer electronics firms and automotive companies race to implement next-generation voice-enabled natural language interfaces.

In healthcare, sales for our solutions, led by record sales of our Dragon Medical products, continues to grow in double digits. Momentum in our imaging business is also quite robust and holds, we believe, the potential for out-performance this year as the combined eCopy Equitrac solution enjoys an especially strong reception from our OEM partners and their corporate customers.

Our second quarter guidance and confirmation of previous full year guidance reflects our increased optimism about the business, and we're now pleased to take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question today comes from Nandan Amladi with Deutsche Bank.

Nandan Amladi - Deutsche Bank AG, Research Division

In -- going into the holiday quarter, obviously, there was a lot of investor expectation for a pretty strong result. I know in the prepared remarks you made reference to some large contracts. But can you provide a little more detail around what happened in the mobile segment this quarter?

Paul A. Ricci

Well, we had a fine quarter in our mobile and consumer segment. Growth was solidly in double digits. Dragon performance was very strong. We continue to see growth in our royalty reports in our various royalty streams in our various partners in the mobile business. I mentioned in the previous quarter that the nature of our relationships with our large OEM customers has grown more complex as we've begun implementing more comprehensive solutions that include embedded technology, network-based technology and engineering services. And that results in 2 things: First, some delay in the achievement of revenues for existing contracts as we have to complete certain revenue milestones. And secondly, prolonged negotiations for newer contracts as these simply have become larger and larger deals. My overall comments about the mobility business remain the same as in the past. It -- the demand for our solutions there is higher than it has ever been and is the strongest demand we're seeing in the company. So I'm not really concerned about what we saw in the first quarter.

Nandan Amladi - Deutsche Bank AG, Research Division

And a quick follow-up, if I might. Some of the newer contracts that you have signed as a result of the pull-through effects, are they structured in a similar fashion as the old one? Or do you still have kind of a mix of fixed-price and device-based licenses?

Paul A. Ricci

I don't want to talk about our pricing schemes. But what I said previously was that the breadth of these contracts has become greater as we're doing more for these customers. So it involves a technology that's sold on the device, technology that's sold in the cloud, and services to integrate those 2.

Operator

Our next question is from Richard Davis with Canaccord.

Richard H. Davis - Canaccord Genuity, Research Division

On the -- I'm sure you're getting much more questions on mobile, so I'll quickly pivot over to healthcare. That had a good organic quarter. It was a relatively easy compare. Is this a business that intermediate to longer term should be able to grow 15% or can it grow high teens or what's your thoughts there?

Paul A. Ricci

Our growth -- our targeted growth rate for our healthcare business is in the middle teens. It can be a bit lower, a bit higher because there are a number of flows in that business, including Dragon licenses that can go up and down quarter-to-quarter. But I think the kind of growth we're seeing this quarter is reflective of what we anticipate and expect for that business.

Operator

Our next question is from Daniel Ives with FBR.

Daniel H. Ives - FBR Capital Markets & Co., Research Division

I'll switch back over to mobile. When you think about a lot of the newer product launches, some of the recent wins, I mean, are those ones where you think revenue comes in more back end of the year just based on the timing?

Paul A. Ricci

Well, we are going to see growing revenues in our mobile business as we go through the year, as we realize improvements in our royalty reports from greater volumes, as we see the achievement of milestones in some of these complex contracts that have a number of milestones for revenue achievement and as we see additional contracts that are under negotiation that will deliver revenue later in the year.

Daniel H. Ives - FBR Capital Markets & Co., Research Division

Okay. Just switching over to enterprise, can you just talk about what you're seeing there in terms of stabilization? I mean, should we start to see year-over-year growth as we go throughout the year?

Paul A. Ricci

We did reference our expectation of improved growth in the enterprise business over the remainder of the year and that is the case. We actually had reasonable growth in the enterprise business when we net out the decline of one large on-demand customer that we've talked about previously and the revenues for which are now small enough that I think it is a factor. It's simply diminishing. And we will see the benefit also of some newer product offerings and refreshments of offerings in that business as we go through the balance of the year.

Daniel H. Ives - FBR Capital Markets & Co., Research Division

Okay. And then just touching back on mobile, are there some deals just based on the complexity where there's an upfront cost associated with that, that maybe was recognized this quarter? Were the revenues recognized during later periods?

Paul A. Ricci

I did mention in our previous earnings call, and I perhaps should have referenced it again in my opening remarks here that the demand for our solutions is sufficiently high that we've -- we have been staffing at an increased pace in our mobile consumer business over the last 6 months. And that continued in the first quarter. And in fact, I think staffing growth in the mobile business will outpace virtually the remainder of the business combined, so that is true. We are seeing greater expenses there. And you see that in the profitability that's reflected in the segment reports that we now provide.

Operator

Our next question is from Shyam Patil with Raymond James and Associates.

Shyam Patil - Raymond James & Associates, Inc., Research Division

Paul, I think this time last year you kind of had a similar December quarter, where it's a little bit soft from an external estimates standpoint, but you reiterated the guidance and ended up having a great year. Could you just maybe talk about kind of your level of visibility and confidence into kind of the estimates this year, maybe compare them to kind of how they were last year?

Paul A. Ricci

Well, we did, as we do every quarter, we did a lot of work on examining the business and the revenue flows for second quarter and the balance of the year. Our visibility has improved each year because the composition of our revenues has moved more to recurring revenues, more to cloud-based revenues and other forms of revenues that are generally more predictable. But there is some uncertainty. I think Tom and I and the remainder of the management team have a good deal of confidence in our ability to deliver the guidance that we've provided for the remainder of the year. It's hard for me to say how to characterize that as opposed to last year.

Shyam Patil - Raymond James & Associates, Inc., Research Division

Okay. And on the mobile business, there's been a lot of excitement around some of your newer initiatives as it relates to tablets and televisions. I know you don't like to guide on certain pieces within a segment, but just in terms of setting our expectations, how should we think about just how those deals flow to bookings and then to revenue? Is that something that we should look at as being a potential driver in the back half of '12 or do you think that’s more of a 2013 driver?

Paul A. Ricci

Well, we anticipate that we will see meaningful revenues over the balance of this fiscal year from contracts that are under negotiation, and for -- in fact, in some cases for which work has already -- engineering work has already been done in anticipation of those contracts.

Shyam Patil - Raymond James & Associates, Inc., Research Division

Great. And then on the enterprise side, these newer applications that you guys have, do you think that the bookings success you had so far is enough to drive kind of mid single-digit growth or higher kind of exiting '12?

Paul A. Ricci

I don't know about higher, but I believe it's sufficient to drive single-digit growth, mid to upper single-digit growth.

Operator

Our next question is from Steve Koenig with Longbow Research.

Steven R. Koenig - Longbow Research LLC

If I could -- can I do maybe one here and one follow-up. The -- I guess the more general question is just trying to drill into the weakness this quarter a bit in terms of being in the bottom part of the guidance range here on revenues. Your execution does tend to -- you do -- when you do have a weak quarter, it does tend to bounce back, and that's the good news. I'm wondering though, when I look at the results, every segment was a little bit below, certainly from where we were. We were fairly close to looks like where the consensus was. I'm trying to understand -- I understand with mobility, the contracts are getting more complex. I'm wondering if you have any color on why kind of the overall weakness in licenses this quarter. And I just have one quick follow-up.

Paul A. Ricci

I don't think we would agree with your characterization. Our healthcare business was quite robust this quarter. As I said previously, I'm quite pleased with the mobile performance and situated in the context of all of the activity there, I remain more enthusiastic about that business for the full year than any business. So I'm -- the imaging business has, as I mentioned, enough dynamism in it that I think the likelihood that we're going to outperform this year is significant. So I'm not really -- I don't think I quite read the situation the way you do.

Steven R. Koenig - Longbow Research LLC

Okay, fair enough. And then if I could, I'm wondering, Paul, any thoughts on the Allscripts' tie up with MModal in terms of what motivations there or how that affects the competitive dynamic?

Paul A. Ricci

So, there are a lot of arrangements in the industry. We see a lot of progress in Nuance and strength among the various EMR vendors for our technology. So I can't speak to that particular agreement specifically. But as we've mentioned in previous calls, this is an area of significant growth for us. So I don't have much more to say about that.

Operator

Our next question from John Bright, Avondale Partners.

John F. Bright - Avondale Partners, LLC, Research Division

Paul, I'm going to stay with the mobile side of the equation. In the beginning of your prepared text, you talked about, again, the delayed revenues due in part to revenues deferred until completion of certain deliverables and in part, to longer negotiation cycles. Maybe try it again. I didn't really understand your explanation on what caused the delayed revenues in the mobile, one. And then two, why would longer negotiation cycles impact the December quarter?

Paul A. Ricci

Well, the answer to your second question is if we had completed the contracts in the quarter, there would be some revenue recognition associated with some elements of the contract. The answer to the first question is that there are 2 things that affect this elongated revenue recognition in the mobile business. The first I mentioned is these are complex agreements, and the nature of accounting is that you can't recognize the revenue until certain milestones are accomplished, or in some cases, all of the milestones are accomplished. Some revenues can be deferred for quite some considerable period of time. And so, the completion of those milestones depends on a number of things, including ourselves, our ability to staff behind them and our partners' ability to complete the work in cooperation with us. The second is that some of the negotiations underway over the last 6 months that might have been completed in the first quarter were not.

John F. Bright - Avondale Partners, LLC, Research Division

Does -- number one, do these revenues show up in deferred revenues? And then number two, is there a catch-up since you weren't able to recognize -- or finish the negotiations this quarter? Is there a catch-up in the revenues in the following quarters?

Paul A. Ricci

I don't know the answer to the accounting question, but the answer to the second question is that yes, we anticipate we will see these revenues. And as I've mentioned in my comments to the previous question that was asked about this, we will see these revenues over the balance of the year.

John F. Bright - Avondale Partners, LLC, Research Division

Okay. Well, a question on the non-GAAP profit by segment in the mobile segment. Is that just seasonality, the step-down from the September quarter to the December quarter?

Paul A. Ricci

No. We had a -- some of it is seasonality, as we saw particularly strong revenues in the fourth quarter of last year. And of course, as I mentioned before, we were -- we have been staffing behind the growth in the mobile business. And as well, there's very large advertising expenses in the December quarter associated with the Dragon product line.

John F. Bright - Avondale Partners, LLC, Research Division

Moving to geographic breakdown of your revenues, 65% in the United States, 35% international. Is that a high watermark? And is that international contribution mostly related to consumer segment or was there a healthcare component meaningful as well?

Paul A. Ricci

Well, it's useful to remember that in our business, our healthcare revenues are predominantly North American. And so that skews the revenue proportion that you might expect to see in a business that's as global as ours. So if -- when one's looking at the revenue composition outside of North America, it is, as you -- as I think your question alluded to, it is weighted more towards the mobile business, the imaging business and the enterprise business.

John F. Bright - Avondale Partners, LLC, Research Division

Final question. Is Vlingo included in either guidance for March or for the year?

Paul A. Ricci

Say the question again, I'm sorry.

John F. Bright - Avondale Partners, LLC, Research Division

Is the, I think, pending acquisition of Vlingo -- is there any contribution from that acquisition included in guidance for March or for the year?

Paul A. Ricci

If it is, it's small.

Operator

Your next question is from Jeff Van Rhee with Craig-Hallum.

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Paul, when you look at the 3-year contract value of the on-demand side, it had underperformed -- I didn’t go back in my notes, maybe 3, 4 quarters ago, I think relative to the expectations and we've been seeing a fairly steady deceleration over what's now a relatively extended period of time. Can you walk through the components in your...

Paul A. Ricci

Can you just repeat the first part of that question again? Say it again. I didn't hear the first part of what you said.

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Sorry, sure. So the value of the 3-year contract value of the on-demand, the backlog, there was a window, I want to say maybe 3 or 4 quarters ago, where expectations were considerably higher than where the numbers shook out. And since then, we've seen fairly steady deceleration in terms of the year-over-year growth of that number. So as obviously, the leading indicator for what you're booking, both enterprise, healthcare, you've got on-demand sort of scattered all over. But can you talk to or give us a little more visibility in terms of what's driving the continued deceleration of that line?

Thomas L. Beaudoin

Again, I think we saw growth again year-over-year in that line. There is some mix issues as you pull contracts on and as you complete some other contracts. I think as Paul talked about, we had a few contracts that pushed out that would have raised that up a little bit in Q1. We would expect -- we've got a very strong pipeline in all of those areas across many of our businesses. So I would expect, going forward, we'd see that coming back to some of the trends that you've seen over the last couple of quarters.

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

There are -- it's particularly difficult, I think right now, looking back at many years of following numbers, but it's particularly difficult to back in to some sense of implicit organic forward. I know you always hesitate to go there, but there are so many moving parts here. Is there anything you can do to narrow in this guide of 16 60 to 17 10, what the implicit organic is?

Paul A. Ricci

Well, what I can tell you is you might try and do a trending across the organic numbers we've posted in over the many recent quarters, and I think you could probably get to a reasonable estimate.

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

Okay. One last one, and Paul, in terms of the development efforts, you plowed a lot of money back into the development side. How do you juggle the balance within development that's allocated towards integration of acquired technologies versus innovation? How's that changing?

Paul A. Ricci

How do we balance -- one more time the second part of that, please?

Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division

The investment in development that's allocated towards innovation as opposed to the integration of the acquired technologies.

Paul A. Ricci

Well, we do both. Our investments are overwhelmingly though on new product development, not on integration work so -- and that's particularly been true over the last couple of years as the amount of technology acquisition we've done as a proportion of the company has slowed. And I would say that the investments for forward organic growth through innovation are higher than they've ever been in the company.

Operator

Our next question, Joanna Makris with Mizuho Securities.

Joanna Makris - Mizuho Securities USA Inc., Research Division

Your hosted revenue was up obviously very nicely. Can you talk a little bit about how you see growth looking at the full fiscal year? And where are you seeing the greatest demand in terms of industry verticals? Is it still primarily healthcare and enterprise or are you seeing demand for hosted solutions sort of outside some of those core verticals?

Paul A. Ricci

Well, the healthcare business, just by virtue of its size, will continue to contribute a disproportionate amount of growth in the -- in our cloud-based revenues. But as we've talked about in recent quarters, there has been a significant shift towards mobile services, cloud-based services in our mobile segment as well. And in fact, much of the growth this year is coming from there. Our voicemail-to-text business is growing very handsomely, for example.

Operator

Our next question is from Shaul Eyal with Oppenheimer & Company.

Shaul Eyal - Oppenheimer & Co. Inc., Research Division

A couple of quick questions on my end. Tom, Paul, how should we be thinking about kind of the profitability and kind of operating margins for later on this year if you guys are talking kind of a higher level of customization? Is it basically what you have been saying during your Analyst Day or there's any kind of deviation from that view?

Paul A. Ricci

I think what we told you in Analyst Day still pertains. We -- it's not the factor that you mentioned so much, although there's some of that. It's that we believe the opportunities for growth are so significant that we should continue to invest in pursuit of that growth for future years. And that's really what has caused us to want to be cautious about suggesting operating margin gains that -- of the magnitude that we've seen in previous years. Having said that, I do believe our operating margins were up 200 basis points in -- or so year-over-year in the first quarter.

Shaul Eyal - Oppenheimer & Co. Inc., Research Division

Got it. And with respect to DSO, taking the spike this quarter, how should we be thinking about that heading to -- forward into 2012 fiscal year?

Thomas L. Beaudoin

Yes, this is Tom. I think you should really think of this quarter as a significant anomaly. If you look at our trends, this was one of the worst quarters we've had. There's a couple of factors there. We had -- we've seen it now 2 years in a row, a delay of payments by some of our customers who are on year ends, calendar year ends. And then there were just a couple of other minor operational factors in that. But I think you should see, going forward, us returning back to what our trends have been.

Shaul Eyal - Oppenheimer & Co. Inc., Research Division

Got it. And maybe kind of a broader question with respect to kind of the complexities on the mobile division contracts. What are -- really just kind of trying to get a better sense and color about it. What are the complexities? Is it kind of price thing or the features involved or kind of all of the above, the duration? What's behind it?

Paul A. Ricci

I think you answered the question well yourself. It's -- they're complex, multi-year contracts that involve a number of elements, some of which I've referenced before, ranging from embedded technology to the development of cloud-based services, the implementation of these services in a global network, the integration with software, the partner itself, and they're just big complex arrangements.

Operator

Our next question is from Tom Roderick with Stifel, Nicolaus.

Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division

I was wondering if you could break up -- break out a little bit of detail in terms of the mobile/consumer segment. How much or what percentage of that business is unit-driven royalties versus design win services and perhaps more kind of fixed fee engagements at the enterprise level? Can you give us what that breakout looks like today and how that's trending for unit-driven royalties?

Paul A. Ricci

I apologize for disappointing you, but the short answer to your question is no.

Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division

Can you perhaps provide, at least give us a little bit of a sense of as you look at the pipeline of opportunities, will that be more design win services, revenues coming in the coming quarters then? Or is that something you can't break out either?

Paul A. Ricci

Well, what I can say is this, and it's consistent with the previous comments I've made, that as we’ve looked at the evolution of our arrangements in the mobile and consumer segment, it's included a greater proportion of the delivery of network-based, cloud-based services, and it's concluded additional engineering services. And that's a trend that we expect to continue. At the same time, the overall volumes in that business continue to grow just because the usage of our technologies in -- broadly in the mobile and consumer electronics world are continuing to grow.

Tom Roderick - Stifel, Nicolaus & Co., Inc., Research Division

Okay. Tom, just a follow on, on mobile/consumer here. The segment margins here were down quarter-on-quarter pretty notably. But then if I look back at Q1 last year, it was sort of in the same ballpark. Is this a seasonal element to the segment margins in mobile/consumer? Or is there something else going on that we should be aware of when we look at profitability there?

Thomas L. Beaudoin

Yes, you're correct. There's some seasonality there, as we increase our investments in the consumer demands activities to support the holiday periods.

Operator

Our next question from Scott Sutherland, Wedbush Securities.

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Not to beat a dead horse in the mobile side, but can you talk about since Siri has obviously creating more awareness and interest in the space, what was the interest you started to see after that launch from other device manufacturers? And how long is a sales cycle from the initial interest to maybe closing new deals with them?

Paul A. Ricci

Let me make sure I understand your question. You're asking me how long the sales cycle is in -- among our partners in the mobile world?

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Yes, especially if Siri drove increased interest by them. How long is it? Obviously, this last quarter, mobile slowed down and next quarter looks to be more in-line. So kind of wondering how long it takes to maybe start to end, to start seeing revenue from those deals?

Paul A. Ricci

Those are 2 different questions. And the first question is a little difficult to answer. We -- these customers, for the most part, in many cases, have been customer of ours for years. And so we have ongoing -- we've had ongoing negotiations in previous contracts. But given the complexity of the new solutions we're doing, it's fair to say that the negotiations around those are more prolonged than in the past. With respect to the question of when you first see revenues from a negotiation -- from a new contract, it very much depends on the particulars of the new contract. But typically, we see some revenues early and then the remainder of the revenues spread out over the period of contract associated with the completion of engineering services, the delivery of network-based services and royalties associated with volumes, as well as some other factors.

Scott P. Sutherland - Wedbush Securities Inc., Research Division

Okay. A 2-part question on Vlingo and then a quick CapEx question. On Vlingo, can you talk a little bit -- can you confirm are you sure that's in the guidance going forward or not? And how much legal costs are you going to save by not having to battle with them anymore? And separately for Tom, on CapEx, CapEx jumped pretty significantly. What drove that?

Paul A. Ricci

I can't really comment on the legal costs. And I think I answered the question with respect to guidance, to the extent that it's in our guidance, it's not a material amount of revenue this year.

Scott P. Sutherland - Wedbush Securities Inc., Research Division

And Tom, the CapEx going up a lot this quarter with the...

Thomas L. Beaudoin

No. The CapEx, there was a onetime corporate asset purchase that we committed to in Q1 that won't recur.

Operator

Our next question from Dan Cummins with ThinkEquity.

Daniel T. Cummins - ThinkEquity LLC, Research Division

Yes. I was going to ask a bunch of questions about time-to-value on mobile but also enterprise. So we discussed a fair amount of mobile. On the enterprise side, can you -- I noticed the announcement on the Kraft application, very interesting. I think you previewed a lot of those themes at the Analyst Day. But can you give us a sense of how much pickup in time-to-value Nuance can see from an event like iPhone 4S? And I have a follow-up.

Paul A. Ricci

Well, I think what I would say, if I understand your question correctly, I think what I would say is this: The enterprise business in Nuance is increasingly focused on providing mobile-enabled solutions that, that are being required by the call center customers that we primarily serve. And it's fair to say that some amount of additional energy around those solutions in large corporations, who are our primary customers, has occurred because they've begun to think about what Siri-like applications might look for -- look like for the enterprise.

Daniel T. Cummins - ThinkEquity LLC, Research Division

Right, no, I think that makes perfect sense. I don't know if you can comment. I know you don't like to comment about anything specifically client-wise but the Kraft -- using Kraft as an example, maybe when did they get the idea? When did the idea pop into their head or your head, here we are and we have a new app?

Paul A. Ricci

I apologize, I don't know the answer to the Kraft or when -- what the timing was on that. I just don't know.

Operator

Our next question from Brent Thill with UBS.

Brent Thill - UBS Investment Bank, Research Division

Paul, on the healthcare business, you showed a nice organic re-acceleration. Can you just talk through how you're thinking about the shape of the year for the healthcare business? And you talked a little bit about some of the relationships with 3M, and some of the other partners. Can you just bring us up to speed in terms of when those all start to have an impact?

Paul A. Ricci

As I've mentioned previously, I think the healthcare business, which is our biggest business, I think that you should look for a continuation of the kinds of trends you've seen over the last few quarters. And I think this quarter's a good indication of what we anticipate from the business. There will be further announcements and some revenues associated with the joint work that Nuance and 3M have done in the second half of this year.

Operator

Our next question is from Barbara Coffey with Brigantine. It looks as though we lost Ms. Coffey's line.

We'll go next then for our final question from John Bright with Avondale Partners.

John F. Bright - Avondale Partners, LLC, Research Division

Paul, Tom, just a follow-up on -- to the organic growth question a second ago, would you want to share with us your expectations for overall organic growth this year? And then maybe just tier the different segments in which ones you think would grow the fastest and down to the slowest?

Paul A. Ricci

Well, I'm -- we're not going to give you a specific organic forecast. What I did said -- what I did say in response to a previous question was that I think there's enough data in recent quarters and trending that you can make some reasonable estimates based on that. And I think we've indicated to you in the past and in the recent past, in this call and at the analyst meeting, that we're pretty bullish about improvements in organic growth in the company based on the demand we're seeing and the opportunities we're seeing. With respect to the relative ranking, I think what we've indicated in the past remains consistent, which is that we're -- mobility and healthcare are likely to lead organic growth in the company, followed by imaging and enterprise.

Operator

And speakers, we do have further question, we'll go to the line of Mike Latimore with Northland Capital.

Mike Latimore - Northland Securities Inc., Research Division

Just, I guess, on the larger mobile deals. I think it was asked a little bit earlier, but just try again here. I mean, how much bigger are these deals getting? Are they getting 20% bigger, 50% bigger? Is there any way you can quantify just the size you're talking about in terms of how much bigger they are getting?

Paul A. Ricci

I really can't. I apologize. I -- we've done a variety of deals over the years of various magnitudes. It depends on the size of the partner. It depends on the complexity of the arrangements. What I can say is on average, they're getting larger and there are more of them.

Mike Latimore - Northland Securities Inc., Research Division

Got it. Then on the imaging business, I assume there's a lot of kind of license software revenue in there. So how far out can you see in terms of your imaging business? And what percent of, say, your forward guidance you see at this point in time? Or do you have in hand now?

Paul A. Ricci

Well, the revenues in the imaging business are driven by a variety of streams, one of which increasingly is the bookings of our eCopy and Equitrac business. And those revenues are not all recognized in current quarters. So it does, in fact, increase the visibility in that business. And it is one of the reasons that we've been optimistic about the improved performance of that business. We had a great year last year, and we think that the combination of the eCopy and Equitrac are uniquely positioned among our partners, and we expect them to perform well this year. And as I alluded to in previous comments, they may indeed outperform this year.

Mike Latimore - Northland Securities Inc., Research Division

Can you talk about a cloud-based product in your imaging business? Is there any kind of cloud application going to be a material part of imaging revenue?

Paul A. Ricci

I don't think it will be a material part of imaging revenues. It's an exciting part, and it's part of the overall architecture and offerings that we're working with our OEM partners on. But I don't think it'll be a material revenue contribution this year.

Mike Latimore - Northland Securities Inc., Research Division

I noticed you mentioned Microsoft as a customer in your mobile and consumer segment. What's the application you're working on there with Microsoft?

Paul A. Ricci

Well, I can't comment directly on what we're doing with them. But we've had a relationship with Microsoft for many years in the mobility segment, and -- so that's not necessarily new.

Operator

At this time then, speakers, I'll turn the call back to yourselves for closing remarks.

Paul A. Ricci

Okay. Well, I want to thank you all again for joining us today. And we look forward to speaking with you again this time next quarter. Thank you.

Operator

And ladies and gentlemen, today's conference call is being made available for replay starting at 7:00 p.m. in Eastern Time zone today. It will run for 3 weeks until March 1, 2012. That's a Thursday. You can access our service by dialing (800) 475-6701 within the United States or outside the U.S. at (320) 365-3844, and in either case, enter the access code for today's conference, 235385. That does then conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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