Nuance Communications' CEO Discusses F3Q12 Results - Earnings Call Transcript

Nuance Communications, Inc. (NUAN)

F3Q12 Earnings Call

August 07, 2012 08:30 am ET

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

Presentation

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.

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