Nuance (NUAN -1.8%) is now down just slightly after providing soft FQ4 guidance (attributed to a sales shift towards recurring revenue) to go with an FQ3 beat.
Though lowering its PT to $23 from $25, Oppenheimer thinks 10%+ shareholder Carl Icahn could soon push for a sale of the company.
FBR (Market Perform) argues the voice recognition software/services leader is "well-positioned given good secular trends and a strong product cycle," but remains cautious on account of "execution issues and a painful transition to a subscription model."
Nuance mentioned on its CC hosting-based sales now make up 32% of revenue (30% a year ago), and that the estimated 3-year value of its on-demand contracts is up 11% Y/Y. Also, professional services backlog grew 35% Y/Y in FQ3, and the number of "unique connected devices" relying on Nuance's cloud services doubled.
CEO Paul Ricci admitted "transitions and execution issues" affected Nuance's guidance, and that the company recently replaced a senior manager in its European sales ops. Ricci also reiterated Nuance is willing to let mobile deals "be delayed for the sake of price discipline."
In prepared remarks, Nuance (NUAN) guides for FQ4 revenue of $470M-$500M and EPS of $0.24-$0.32, below a consensus of $519.8M and $0.38.
The company blames its shift to recurring/subscription-based revenue streams, which leads to lower up-front sales. Mobile/consumer is singled out as an area where the shift "has the effect of elongating revenue."
FQ3 healthcare sales +2% Y/Y (boosted by acquisitions), even with FQ2; division made up 55% of segment profit. Mobile/consumer sales slumped: revenue -19% vs. -2%. Enterprise improved: revenue +7% vs. -20% in FQ2. Imaging -4% vs. -10%.
Healthcare transcription sales still weak, Clintegrity and Dragon Medical stronger. 1.8B cloud mobile/consumer transactions in FQ3, +80% Y/Y. Enterprise lifted by demand for Nina voice assistant apps.
Deferred revenue balance (stems from subscriptions/recurring revenue) was $396.5M, +2% Q/Q and +32% Y/Y. Operating cash flow was $85.5M vs. $141.5M a year ago.
Nuance (NUAN) -13.7% following its FQ2 miss. In prepared remarks, the company guides for FQ3 revenue of $480M-$495M and EPS of $0.30-$0.34, below a consensus of $554.1M and $0.49. FY13 guidance is for revenue of $1.96B-$2B and EPS of $1.33-$1.45, below a consensus of $2.16B and $1.80. Preliminary FY14 guidance is for organic growth in the "mid- to upper-single digit range;" consensus is for revenue of $2.44B. Mobile & Consumer sales -4% Y/Y in FQ2 after rising 17% in FQ1, and Enterprise -20% vs. +10% in FQ1. Healthcare (over half of profits) +2% (+3% prior); Imaging -10% (+6% prior). Buyback currently good for repurchasing 7.8% of shares.
The Street showed no mercy to Nuance (NUAN -18.5%) in response to its EPS miss and forecast for multiple quarters of weakness in healthcare and EMEA sales. Goldman thinks Nuance's goal of $1B in FY13 healthcare sales is now at risk, and Needham (downgrading to Hold) is concerned about guidance for a 200-250 bps FY13 gross margin drop, worse than a prior forecast. Management suggested on the earnings call it's counting on clinical documentation software sales and PC/mobile OEM deals to drive future growth.
Nuance (NUAN) now -14.6% AH thanks to its FQ1 EPS miss and light FQ2/FY13 guidance. On its earnings call, management blamed the guidance on declining healthcare transcription volumes thanks to the adoption of electronic records and Dragon, soft EMEA sales due to macro issues, and declining Windows software sales due to PC demand. The healthcare issues are expected to last a few quarters. Healthcare sales (51% of profits) +3% Y/Y in FQ1, Mobile/Consumer +17%, Enterprise +10%, Imaging +6%. On-demand solutions now 31% of sales (27% a year ago).
Nuance (NUAN): FQ1 EPS of $0.35 misses by $0.01. Revenue of $492.4 (+28.9% Y/Y, lifted by acquisitions) in-line. Guides in prepared remarks for FQ2 revenue of $500M-$533M and EPS of $0.36-$0.45 vs. consensus of $524.3M and $0.44. Also guides for FY13 revenue of $2.146B-$2.196B and EPS of $1.76-$1.87 vs. consensus of $2.19B and $1.89. Shares -7.5% AH. (PR)
More on Nuance: FQ1 guidance (provided in prepared remarks) is for revenue of $484M-$500M and EPS of $0.33-$0.37 vs. a consensus of $472M and $0.41. FY13 guidance is for revenue of $2.17B-$2.22B and EPS of $1.84-$1.94, largely above a consensus of $2.04B and $1.84. Mobile & Consumer main growth driver in FQ4, +24% Y/Y, but down from FQ3's +34%. Healthcare +11%, Enterprise +7%, Imaging +5%. On-demand (cloud-based) revenue +35% Y/Y and now 29% of total - estimated 3-year contract value at $1.91B. NUAN -2.6% AH. CC at 5PM ET (webcast). (PR)