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Executives

Kevin Faulkner - VP, IR

Paul Ricci - Chairman & CEO

Tom Beaudoin - EVP & CFO

Analysts

Daniel Ives - FBR

Shyam Patil - Raymond James

Nandan Amladi - Deutsche Bank

Brent Thill - UBS

John Bright - Avondale Partners

Jeff Van Rhee - Craig-Hallum

Dan Cummins - ThinkEquity

Tom Roderick - Stifel Nicolaus

Mike Latimore - Northland and Capital

Scott Zeller - Needham & Company

Gray Powell - Wells Fargo

Nuance Communications, Inc. (NUAN) F3Q12 Earnings Call August 7, 2012 8:30 AM ET

Operator

Ladies and gentlemen, we would like to thank you for standing by and welcome to Nuance's third quarter fiscal 2012 conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, today's call will be recorded.

With us today are the Chairman and Chief Executive Officer of Nuance, Mr. Paul Ricci and CFO, Mr. Tom Beaudoin; 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

Thank you. Before we begin, I remind everyone that matters we discuss this morning 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 and are also on file with the SEC. Those remarks 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 Ricci

Good morning. Before taking your questions, I might underscore a few points from today's documents. For the second consecutive quarter, we delivered non GAAP revenue and EPS above our guidance range. We were gratified this quarter was strong fundamentals throughout our business including accelerated mobile revenue growth, very strong bookings performance, significantly improved operating margins and operating cash flow, strengthened competitive posture across our markets and heightened customer interest in our solutions, especially in our newest innovations in natural language processing and clinical language understanding.

On this last point in previous quarters we have indicated that the pace of the market activity suggest to us an unprecedented level of interest in our solutions. We have also suggested that market interest in intelligent voice-driven personal assistant solutions stand our market. This remains our perspective, activity around our mobile and consumer business in particular remains intense as we see smart phone manufacturers, television and consumer electronics firms and automotive companies racing to implement next generation virtual assistant interfaces.

In healthcare, sales for our solutions led by record sales of our Dragon Medical products, robustly strong bookings for our ondemand solutions and increased demand for our radiology systems should fuel strong growth exiting this year and entering fiscal year 2013.

In enterprise we have seen exceptional early interest in our mobile, consumer care, customer care platform Nina which combines voice, natural language, biometrics and multi-modal output to deliver a rich user experience.

Within imaging our MFP solutions enjoy expanding reception from our OEM partners and their corporate customers. Overall, our fourth quarter and full-year guidance underscore my increased confidence and optimism in the business.

Finally let me comment briefly on the debt offering we have undertaken. We decided to act now on this offering because of the attractive credit terms available to us and because of our strong cash flow performance and our confidence that our track record of strengthening cash flows will continue unabated.

But you may also assume that notwithstanding the favorable credit terms available to us that we would not have undertaken this offering and the additional interest expense it entails unless we had conviction in our ability to pursue attractively accretive acquisitions within our site on the horizon. We will now take your questions.

Question-and-Answer Session

(Operator Instructions). Our first question will come from the line of Mr. Daniel of FBR.

Daniel Ives - FBR

Could you just give more clarity around your mobile strength, I mean whether the two big deals that came through this quarter. Just need to get some comments on that?

Paul Ricci

Our mobile business is driven by a large set of OEM contracts, several hundred and in any given quarter some number of those among our larger customers contribute proportionately greater revenues and in some instances we see particular (inaudible) deals we have done in that quarter or contributions because of milestones reached.

Daniel Ives - FBR

And then just on the acquisition front, I mean obviously you're doing the debt deal, is it because there is a specific acquisition that you see or is it more just in step with how you viewed acquisitions over the last few years, there is a number of attractive ones and you decided it's a good to raise the debt.

Paul Ricci

We decided to raise the debt now as I said in my opening comments because the credit terms are extraordinarily attractive right now and there is a window of opportunity and one can’t be certain how long these windows remain open.

But as I said, we were informed and we were informed in pursuing the debt by the extent of our pipeline for acquisitions. We’re particularly interested in the opportunities to expand our offerings in the healthcare market, but elsewhere in the business as well.

Operator

Our next question comes from the line of Shyam Patil of Raymond James. Please proceed.

Shyam Patil - Raymond James

On the debt Paul, should we be thinking of the acquisition target maybe being a large transaction, and if it is in healthcare, what kind of gives you confidence that any kind of large acquisition there, would be able to clear regulatory hurdles?

Paul Ricci

Well, I didn’t make a comment about the size of the transaction. I simply said that there was a robust pipeline of opportunities available in healthcare and we were committed to pursuing those opportunities. I don't think that we will face substantial regulatory issues in the acquisitions that we’re contemplating.

Shyam Patil - Raymond James

And just a follow up. You talked a little bit about fiscal 2013 in your prepared remarks. When you look out to next year, do you feel comfortable kind of maintaining the current organic growth rate and then on the margin side, do you remain comfortable with the kind of with the annual stated goal of about 100 points of expansion annually?

Paul Ricci

We, certainly are comfortable that we will continue to see the kind of organic growth that we’ve built up in the company over the last couple of years and looking at it on a annual basis is I think the right way to do that. With respect to operating margins, I think it’s a bit early to be talking about operating margin expansion.

We have signaled to investors that we anticipate our operating margin expansion slowing. That hasn’t actually worked out to be the case to the extent that we had signaled in part because we have had strong growth and strong growth in particular in areas of the business with high margins. But we are very focused on revenue growth and on reinvesting for accelerating organic growth.

Simply without going too deeply in the fiscal 2013, I would tell you to focus on the revenue potential and less on margin expansion.

Operator

Our next question will come from the line of Nandan Amladi of Deutsche Bank. Please go ahead.

Nandan Amladi - Deutsche Bank

A question on the Dragon TV and the gaming consoles and these are the new opportunities, new design wins that you announced. When should we expect to start seeing revenue from them?

Paul Ricci

We are seeing revenue from our Dragon TV contracts already and the revenues will accelerate as we go into fiscal ’13 because we will start to see royalty, significant royalties from shipments of devices beginning in this holiday period.

Nandan Amladi - Deutsche Bank

And a short question on enterprise with significant new products that you announced Nina, Prodigy, and the new biometric capabilities all of which really seem to be better implemented in a cloud environment, how are your bookings trending and as far as mix of license versus on demand because last quarter maybe for two quarters now you've said that on demand bookings were a little bit slower than you expected.

Paul Ricci

That was true but we've, the pipeline for opportunities and I think we addressed this in our prepared remarks but in any case, the interest in our on demand solutions over the last few months in enterprise and in particular the interest for our biometric solutions and for the virtual assistant the enterprise virtual assistant have been extremely strong. I think internally we view the reception among the beta customers to our Nina solution that we announced earlier this week is really quite exceptional and I think that will in fact drive proportionately greater growth in our on demand bookings. We are also just seeing a stronger interest among enterprises away from conventional on premise licensing towards one of two alternatives. One, a hosted cloud solution or a second the on-premise solution delivered by us in the form of a managed service.

Operator

Our next question will come from the line of Mr. Brent Thill of UBS.

Brent Thill - UBS

Thanks. Paul just on the healthcare business, the organic growth fell below 10% and which you haven't seen for quite some time, can you just give us a sense of what caused them and if you could also give us a sense of what the Transcend transaction resulted for in the quarter?

Paul Ricci

With respect to the first question, you may recall at the end of the second quarter conference call last three months ago, we advised that you should expect somewhat slower organic growth in the year-over-year comparison for this quarter and we did that because there were some seasonally unexpected licensing deals in the third quarter of last year and so the year-over-year comparison was somewhat challenging. Having said that, the fundamentals in the business are exceptional. The performance of our Dragon Medical Solutions suite is unprecedented and the demand continues unabated, the on-demand bookings were very strong and we go into this quarter with expectations for similarly strong on-demand bookings.

We've seen a resurgence in our radiology and diagnostic solutions and we will begin to see contributions from our clinical understanding solutions that address the broader work flow in clinical documentation. So the business is doing really quite well and performing as we expect it to and your second question had to do with what?

Brent Thill - UBS

With Transcend impact the quarter?

Paul Ricci

I think Transcend was performed in the quarter roughly where we expected it to and I think on the full second half of the year, it will deliver results basically in line with what our acquisition plan was.

Brent Thill - UBS

Okay, just one quick clarification. From the first question I recall I couldn’t hear just on the mobility side that was the strongest organic growth you've seen in the long time that was across the board and there were no one time contract impacts is that correct?

Paul Ricci

No, I didn’t say that, I said that we have 300 contracts and each of them contributes to that total result and there were a number of contributory factors in the third quarter many of which will continue into the fourth quarter and those include over performance in the mobile segment broadly in the royalty reports we are seeing an expansion in the number of contracts we have as we move into new segments particularly television and contributions from new agreements we have done that we have been talking about for some quarters now that are much larger in scope but what you are linked in many cases to percent of completion accounting or other forms of staged revenue milestones and all of those came into play in the third quarter as they were in the fourth quarter.

Operator

Our next question will come from the line of Mr. John Bright of Avondale Partners. Please go ahead.

John Bright - Avondale Partners

Paul, could you walk us through an enterprise use case example of Nina?

Paul Ricci

Sure. The world is migrating as you know to one in which large companies seek to address their customers and their employees increasingly through a mobile device give that they are doing that what they would like is to have a voice enabled intelligent interactive system that helps that customer or that employee get to the specific information they are seeking in a compelling way.

And Nina integrates a combination of voice recognition, natural language understanding, dialog management, some knowledge representation in order to enable that. So there are for the financial services industry in particular you might imagine customers using the system to find out the status of their accounts, their balances, flows that they are expecting to monitor, transactions that they want to perform, insurance payments they want to make and so forth. All using a mobile device, it's very voice centric but has other modalities of interaction to help compliment them.

John Bright - Avondale Partners

And does the sale or the business, you will be paid by the enterprise in question not necessarily the mobile OEM?

Paul Ricci

Precisely, the enterprise that’s exactly right. So this is a business that it's an early call questionnaire noted this is a business that is primarily cloud based and will be paid on a recurring transactional per user model.

John Bright - Avondale Partners

Also during the quarter, are you seeing any macro weakness in and if so, where?

Paul Ricci

I don’t think I would suggest you that we have seen anything precipitous. But I do think there is, it is a cautious environment when it comes to enterprise capital purchases and I alluded to that point a bit ago in saying that we were seeing, as we have seen in previous periods of economic challenge a migration of customer interest to cloud based solutions and as well to manage service solutions where the customer instead of making capital purchases hands the on-premise solution over to us and in the form as an operational expense, typically on a transactional basis.

John Bright - Avondale Partners

Looking in a case where Nuance spends as much money on hosted solution might make it a variable cost that is more attractive in this environment?

Paul Ricci

Yes, a recurring operational expenses right. And I do think that in this environment, there is a migration to that. As we talk about in previous calls, we consider that to be a favorable long-term trend for us because we filled up long-term recurring revenue streams which we can augment with additional functionality and by outperforming in the automation where we are delivering to the customer.

John Bright - Avondale Partners

Again to build off of a couple of questions that have been asked, on the front page of your prepared text, you talked about in the value growing demand contracts of 43% and you also alluded to the growth benefiting from the strong bookings, healthcare mobiles, specifically Transcend and Vlingo, how important were they or what, how much were they a part of that growth?

Paul Ricci

I can’t break them out in numeric before you but the big contributors to the growth in our on-demand contract valuations where bookings, organic bookings in our healthcare business, organic bookings in our mobile business, additional contracts that came in through the Transcend acquisition and contracts that came in through the Vlingo acquisition.

John Bright - Avondale Partners

Non-GAAP net income versus operating cash flow, what does it look like this quarter and what should we expect looking forward?

Tom Beaudoin

We had a very strong quarter. As you saw, we had operating cash flows of $142 million against non-GAAP net income of about $144 million, so very, very close. And as we talked about, there was some cash that had moved from last quarter to this quarter. As we said, historically it’s a strong focus for the company and it should be consistent less the acquisition and restructuring costs which are the adjustment there.

John Bright - Avondale Partners

And the order of magnitude, what are the credit terms going to look like of the debt you are raising?

Paul Ricci

Well, we are raising $600 million. What else are you asking?

John Bright - Avondale Partners

The terms?

Tom Beaudoin

Well, it’s $8 million; just went to market today. The market’s very favorable. We have included what we think the interest cost is for Q4 in the guidance model that we gave you.

John Bright - Avondale Partners

Last question Paul, you alluded to organic growth in FY13, do you feel comfortable that that's going to double digit organic growth?

Paul Ricci

Yes; quite comfortable.

Operator

Our next question will comes from the line of Jeff Van Rhee of Craig-Hallum.

Jeff Van Rhee - Craig-Hallum

Just one or two clarification and another question; Paul just back to the question around the three year value of the backlog as well as the lines transcribed, if you adjust for the acquisitions is it your sense that the growth rates in each of those table was stable with prior quarters or accelerated?

Paul Ricci

I think the growth rate was up from prior quarters after adjusting for those acquisitions.

Jeff Van Rhee - Craig-Hallum

Okay. And then Tom just you were just touching on the debt what is the incremental debt inclusion related to this race; incremental interest expense I should say?

Tom Beaudoin

I think for Q4 we've modeled about $4 million.

Jeff Van Rhee - Craig-Hallum

Okay, great. And then just lastly Paul, in terms of the, again sort of the global macro as you progressed through the quarter, was there any sort of notable swings late in the quarter one way or another?

Paul Ricci

There were some enterprise licensing deals that we anticipated doing in the quarter that slipped out of the quarter; I think that is the primary effect. May be there were also some enterprise transactions in the imaging business that we are anticipating in the quarter to push out of the quarter.

Jeff Van Rhee - Craig-Hallum

And then I guess just lastly in terms of the longer term growth rate; when you look at the healthcare you have longed thought of that as a 15% plus grow on the enterprise side; I think that’s varied, but had seemingly had pushed back into the double-digit roughly organic growth range; is there anything you have seen this quarter that slays you one way or another from those longer term projections?

Paul Ricci

I think the second part of your question was about the enterprise?

Jeff Van Rhee - Craig-Hallum

Yes.

Paul Ricci

I think that you have that right; I think the mobile business will continue to be our highest growth segment followed by healthcare and after that by enterprise and I do believe that as we transition to the new solutions we will see improved growth in the enterprise business. We will see some amount of variability in that, because it does have on-premise licensing and that is a phenomena of it that has some variation quarter-to-quarter, but I think as we look out over a period of quarters that that’s a business that ought to be around a 10% growth.

Operator

Our next question will come from the line of Dan Cummins of ThinkEquity. Please go ahead.

Dan Cummins - ThinkEquity

First question for Paul, regarding your fourth quarter optimism on mobile and consumer; I was just curious how much of that is fueled by the OEM pigments versus something that’s more of a recurring nature?

Paul Ricci

I can’t be specific in the composition of the fourth quarter; as I said in response to a couple of earlier questions, we have a complex of tributaries that flow into our mobile and consumer business and what I can say is that what we have seen over a long period of time now is that those tributaries are delivering very strong growth in the business and we anticipate that to continue.

I think the fundamental reason is that there is, we are serving OEM’s who are enjoying growth and therefore we are seeing in the aggregate and we are seeing therefore growth in our underlying royalty contracts. And secondly, there is increase demand for the kinds of complex solutions that I’ve talked off late about and those are contributing additional revenues as we deploy new solutions and recognize cloud based services and professional and engineering service revenues from the creation of those solutions.

Dan Cummins - ThinkEquity

Okay and then looking ahead to next year Paul on enterprise, do you anticipate the business being up out of that kind of long standing range of $70 million to $80 million; I heard you for the reasons why it fell back this quarter but, do you think you are on the cusp of more of a step up kind of permitted step up in that business?

Paul Ricci

I do think that the combination of our biometric solutions, voice biometric solutions, our new mobile enterprise solutions as well as the demand we're seeing for on-demand deployments increase and the demand for our professional services are going to enhance growth. So I don't know about a step-up, but I do think we’re going to be on stronger growth factors as we look out over the next four quarters or so.

Dan Cummins - ThinkEquity

Okay, thanks, and then Tom just for you. The deferred revenue was down quarter-on-quarter on the cash flow statements. I got back I think one or two years, I don’t see that happening previously in the recent past. Can you give us some color there? I understand why it's quarter-on-quarter with trends then, but why down on the cash flow statement? Thanks.

Tom Beaudoin

Well, I think it was down just slightly because we have a lot of M&S renewal that come up in Q4. I think that’s the only reason.

Operator

Our next question will come from the line of Tom Roderick of Stifel Nicolaus. Please go ahead.

Tom Roderick - Stifel Nicolaus

A quick question just on the mobile side; can you give a break out as to what Vlingo contributed in the quarter and how we should think about the annual run rate contribution of Vlingo?

Paul Ricci

No, we can’t, other than to tell you it was very modest revenue in the quarter.

Tom Roderick - Stifel Nicolaus

Okay, that’s helpful directionally. So and thinking more broadly Paul about the mobile market here, it seems like there is a healthy debate in the market about the Android side of the market, and maybe there is a good opportunity for you to talk about maybe, number one, how many Android design wins do you have to date for speech recognition? Number two, how do you look at the pipeline of opportunities and I guess the third part of the question would simply be, as you stack-up relative to functionality that Google was building out on its own, how would you encourage the market to think about competitive differentiation advantages that you guys bring to the marketplace?

Paul Ricci

With respect to the first question, I believe we’re shifting something in the neighborhood of 70 Android devices right now. With respect to the broader question of the space, I think Nuance is a very different position in the business than Google. We are a partner that works in tandem building highly engineered customized solutions for our partners that help them express their brand affiliation through that device to their consumers.

That complex task I talked about at a great length before, you've seen it very visibly in the automotive market in which we participated, in which we have extraordinary market share, because we provide not just technology, but work in close partnership to help those companies express their design aesthetics to their customers.

We are doing the same thing in the Android market on smartphones, on other devices that are built on top of the Android platform and I think that the same differentiations is going to apply for us there. And we are seeing that just in the first wave of the solutions that are coming out over the next three, six, nine months. So I feel a lot of optimism about that.

With respect to the comparison of our capabilities, I largely will leave that that for others, but I do think that the market has said Nuance is the leading technology provider in this area both in the quality of its underlying speech recognition and in the complementary of the language understanding systems that it’s incorporating with that speech, and in fact as recently as the last couple of days in which there was a bulletin published by one of the technical marketing firm, the technical advisory firms in the speech industry I think that there was acknowledgement of that very point in comparing the capabilities of Nuance with the capabilities of Google and Microsoft.

So I think we feel quite confident in the quality and strength of our solution and even more so in the unique position we hold with these companies as a trusted partner who is not in competition with them, but in fact working in tandem with them to help them achieve the design objectives they had in expressing their brand to their customers across a multitude of platforms that they are bringing to market.

Operator

Our next question will come from the line of Mr. Mike Latimore of Northland and Capital. Please go ahead.

Mike Latimore - Northland and Capital

Paul can you just talk a little bit about the FX influence on revenues or EPS, was there anything material in the quarter?

Paul Ricci

With respect to EPS it’s relatively neutral because of our expenses balance with our revenues and with respect to revenues, it’s obviously been a drag on revenues this year as compared with last year. I don’t know the quantity. Tom?

Tom Beaudoin

It’s a relatively a small amount which is why we don’t report it because it goes both ways when it's positive but it did have a small negative impact on year-over-year revenue.

Mike Latimore - Northland and Capital

And from a tax rate perspective what do you expect the tax rate to be in 4Q and then in fiscal 2013.

Tom Beaudoin

So we are a little less than we guided for the year. It's just the function of a lot of the work we have done on our global tax strategy. So it should be about 4% for this year and as we talked about for next year it goes up into the very low kind of double digits.

Mike Latimore - Northland and Capital

And I know you basically just launched your new Dragon product recently, but in any way do you compare how this release compares to the last release a couple of years ago in terms of demand or interest level?

Paul Ricci

I think the early numbers are reported in the first week or so suggested that the comparable results from the launch last year were up 25% to 30%. And not last year -- the last to last launch -- it's not last year.

Mike Latimore - Northland and Capital

And then earlier this year, you know some of the mobile projects got bigger and meant to percent of completion, I guess have those bigger projects sort of normalized now in terms of you know the timeframes to get things deployed and implemented or are they still getting bigger and maybe extending out over time?

Paul Ricci

They are continuing to get -- we are continuing to do larger and larger -- more and more large projects. They are pretty big in their scope and we have projects for example that involve in the order of hundred technical staff. And I think that's going to continue as we see this universal race among device manufacturers, automotive manufacturers, other electronics manufacturers to enable a new generation of interfaces that are consistent with their own brand identity and design and aesthetics as I mentioned earlier in this call.

Mike Latimore - Northland and Capital

Did you have a rough split within the mobile business of revenue from mobile handset manufacturers versus sort of everything else?

Paul Ricci

No, we don’t break that out in finer granularity.

Operator

Our next question in queue will come from the line of Scott Zeller of Needham & Company. Please go ahead.

Scott Zeller - Needham & Company

Thank you. Another question on the mobile business and I apologize if it have been touched on earlier but when you look at what you had mentioned Paul previously about larger deals and how they’re done, as project based revenue and percent of completion. When you look at the strong rebound this quarter, would you attribute that rebound to what you told us as far as some of these large projects being completed and the revenue flowing through? Or should we also think of this as a combination of that plus perhaps some traditional large OEM type deals in mobile?

Paul Ricci

Well, I think we’ve addressed this question before but just to reiterate, the performance in mobile as a result of stronger than expected royalty reports from a broad underlying foundation of royalty streams we recognize, new royalty reports from new devices, new design wins in past quarters, contributions and achievements or milestones or some of these large contracts that I referenced including prepayments in some new deals and its all that mixture of contributions that we have on a quarterly basis in the business and the combination of this quarter was quite strong and I think but I think as I mentioned earlier, the mobile business is a business that I think is going to continuously generate strong growth because overall looking over a period of time over a number of quarters, those fundamentals remain intact.

Scott Zeller - Needham & Company

I may have missed this but on the imaging business, I know we discussed enterprise but on the imaging business, any color on the next few quarters and the prospects for that business we expect it to continue to growth and strengthen but it did decelerate a bit?

Paul Ricci

Yeah, it did. You know, we think of the imaging business as a business that are to achieve growth not only organic quarters but over a period of time in the upper single-digits and I think if you average out a number of quarters now, you will see that that’s been the case and that’s my anticipation for the future.

Operator

And our last question in queue will come from the line of Mr. Gray Powell of Wells Fargo. Please go ahead.

Gray Powell - Wells Fargo

In the healthcare segment, is there a point where your market share of strength transcription services or just your sheer size versus other players in the space can limit your ability to grow by acquisition to regulatory concerns and so how close do you think you are at that point today?

Paul Ricci

I don't think regulatory issues are going to be the constraint on our ability to grow in healthcare. There is an extraordinary amount of opportunity out there. We are early in seizing that opportunity. We’re going to continue to pursue it aggressively as we can. Furthermore, there is a considerable additional value to be had by the expansion of our participation in the workflow and the value chain of clinical documentation in a very broad sense and we talked previously about technologies that we’ve been bringing to market in the area of clinical language understanding to facilitate that participation and the franchise that Nuance’s created at the physician desktop with the brand of Dragon Medical is a foundation for additional growth in capabilities and solutions as well. So I am very optimistic about our ability for near and medium term growth in the healthcare business.

Gray Powell - Wells Fargo

That's very helpful. So let me just to make sure I am thinking correctly like, if there is one or like a combination of deals that could help you double the size of that business, you don't think you would see any regulatory pushback?

Paul Ricci

I don't think we would undertake any deals that we think create regulatory concerns for the business and I think there is plenty of business to be had both organically and inquisitively without facing any significant regulatory challenge.

Operator

There are no further questions in queue. I would like to turn the call back to you Mr. Faulkner.

Paul Ricci

Okay. Well, I might just summarize by reiterating the confidence that I and the management team have in this business as we look out over the closing of this fiscal year and the next fiscal year. We see in a very broad sense an increasing demand for voice and language technology solutions.

We think that that demand is being driven by the confluence of a number of factors including the ability to harvest new technologies, new algorithmic developments, enormous amounts of data using unprecedented levels of computational resources, exploiting the proliferation of mobile devices, immigrating into mixed modality designs and leveraging the research which we've been doing for a number of years in natural language understanding, all of which have enabled us to build very rapidly a much larger developer community that's creating an ecosystem around our platforms and are helping us to develop new used cases.

Used cases that include clinical language solutions for the healthcare market, conversational interfaces for the mobile devices and voice driven personal assistance for our enterprise customer service. So it’s a very exciting time for us and one in which we are going to continue to invest for increased organic growth in that environment. And we thank you all for taking the time this morning and look forward to talking to you again in the next quarter.

Operator

Ladies and gentlemen that does conclude our conference call for today. On behalf of today’s panel I would like to thank you for your participation and thank you for using AT&T Executive Teleconference. You may now disconnect.

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