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Nuance's FQ2 guidance light, but FY14 guidance in-line

  • In its prepared remarks (.pdf), Nuance (NUAN) guides for FQ2 revenue of $476M-$490M and EPS of $0.21-$0.25, largely below a consensus of $497.8M and $0.25. However, FY14 (ends Sep. '14) guidance is for revenue of $2.03B-$2.19B and EPS of $1.07-$1.17, in-line with a consensus of $2.06B and $1.09.
  • FQ1 bookings amounted to $637.3M, +26% Y/Y and eclipsing revenue of $490.1M. Though Nuance states one-time factors lifted bookings, it now has "additional confidence" in its FY14 bookings forecast of $2.15B-$2.25B (+12%-17% Y/Y).
  • The company's deferred revenue balance (boosted by a shift to subscription revenue streams) totaled $484.3M at the end of FQ1, up 29% Y/Y.
  • Healthcare sales (46% of revenue) rose 1% Y/Y in FQ1 after falling 2% in FQ4, but the division's op. margin fell to 35% from 41% a year ago. Mobile & Consumer remains weak: sales -16% vs. -24% in FQ4, with op. margin falling to 12% from 30% a year ago. Enterprise sales -8% vs. -2%, imaging -9% (unchanged).
  • Nuance notes its mobile/consumer ops continue to be pressured by a shift to connected (cloud-based) solutions from pre-installed apps, a trend that lengthens revenue recognition times. Consumer PC weakness and higher spending to deploy "large, custom solutions for key customers" (Apple?) are also hurting the division's profits.
  • R&D spend rose 17% Y/Y to $80.7M (contributed to margin pressure). Sales/marketing rose 2% to $118.9M.
  • NUAN +0.3% AH. CC at 5PM ET. FQ1 results, PR.
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