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Nuance Communications, Inc. (



Q4 2010 Earnings Call

November 22, 2010 5:00 PM ET


Paul Ricci – Chairman and Chief Executive Officer

Tom Beaudoin – Chief Financial Officer


Daniel Ives – FBR Capital Markets

Richard Davis – Canaccord

Nandan Amladi – Deutsche Bank

Shyam Patil – Raymond James Associates

Gur Talpaz – Stifel, Nicolaus

John Bright – Avondale Partners

Jeff Van Rhee – Craig-Hallum

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Ladies and gentlemen, thank you very much for standing by. And welcome to the Nuance Communications Quarterly Earnings Results Conference Call. At this time, all phone lines are in a listen-only mode. Later, we will conduct the question-and-answer session with instructions given at that time. (Operator Instructions)

As a reminder, today’s conference is being recorded. Speaking on the call today will be Paul Ricci, Chairman and Chief Executive Officer and Tom Beaudoin, Chief Financial Officer.

At this time, then I’d like to turn the conference over to Mr. Ricci. Please go ahead.

Paul Ricci

Thank you. 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.

Before taking your questions I might underscore a few points from the prepared documents. Organic revenue growth improved in the quarter compared to both fourth quarter last year and sequentially from the third quarter driven by two factors.

First, healthcare once again benefited from strong product revenues and experienced another quarter of steady growth in on-demand revenues and secondly, mobile and consumer growth benefited from increased contributions of mobile services, drawing from existing and new multi-year contracts and also benefited from the strength of our Dragon brand and consumer markets. While we continue to have challenges in our enterprise business, we did see improved performance there this quarter over recent quarters.

I would also highlight the strength of our operating cash flow performance in the quarter and the full year, which we detailed in our prepared remarks. Those remarks also highlight our confidence in cash flow growth in fiscal 2011.

Finally, I note that we achieved robust bookings in the quarter across our business lines. The strength of these bookings, the investments we’re making in sales and marketing and the robustness of our product and on-demand service portfolio position us, we believe for strong performance in fiscal year 2011.

We’ll now take your questions.

Question-and-Answer Session


(Operator Instructions) Our first question then is from Daniel Ives with FBR Capital Markets. Please go ahead.

Daniel Ives – FBR Capital Markets

Yeah. Thanks. Good quarter, guys. Talk about the mobile and consumer business, obviously its split out from enterprise, strong year-over-year growth, just talk about dynamics what’s happening in that market and should be -- your growth catalyst going forward?

Paul Ricci

Well, we agree that business should be an important growth catalyst for the company driven by, I think, the increasing interest in speech and language technologies across a broad set of mobile and consumer devises and services. We’ve seen the benefit of that over the last year as the purchase of mobile devices has grown as we’ve come out of the economic recession and we’ve seen the benefit as well from an expansion of the kind of services that carriers and now internet service providers are seeking to offer.

Daniel Ives – FBR Capital Markets

Okay. And then can you just talk about on the enterprise, I mean, because obviously the hosted is where the strength would be. Just talk about, overall bookings anecdotally on the enterprise and just talk about going into next year and the transition as we should start to see some of those on-demand signings come on.

Paul Ricci

Yeah. I think we’ve spoken in past quarters about a number of large contracts that we have signed in the enterprise business, some of which are reflected in the backlog statistics we cite in the prepared remarks and some of which are not because they are already at some state of implementation. We will -- we are beginning to see revenues from those contracts and that revenue generation from those contracts will haste and as we go through this year particularly in the second half of this year.

Daniel Ives – FBR Capital Markets

Okay. Good. Thanks.


Thank you. Our next question is from Richard Davis with Canaccord. Please go ahead.

Richard Davis – Canaccord

Hey. Thanks very much. So other software vendors I’ve talked to say that the automobile companies have kind of come out of their (inaudible) at least in terms of trying to think about doing things and buying stuff and you had, also you’ve seen Ford use SYNC as a differentiator.

Can you talk about, A, the sales cycle in the auto space whether it’s changing hopefully better and then kind of design win to revenues? How should we kind of think about that? So if you get a design win is it two years, one year, five years until it kind of drops into the cars?

Paul Ricci

Well, it is true, I believe that the automotive companies have for a variety of reasons have adopted a much more aggressive posture in terms of the cycle time of their own electronics within the car and the way that manifests in the user interface and you cited Ford and they are an aggressive example. But we’re seeing that activity across a broad set of automotive manufactures.

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