NUAN - Earnings call transcript Q1 2018 | Nuance Communications, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to Nuance's First Quarter Fiscal 2018 Conference Call.

As a reminder, today's conference is being recorded. With us today from Nuance are Chairman and CEO, Paul Ricci; CFO, Dan Tempesta; and Vice President of Corporate Marketing and Communications, Richard Mack. At this time, I would like to turn the call over to Mr. Mack. ahead. go Please

Richard Mack

Ryan. Thank you,

issued cause begin, results for in unless includes are I These discussion we of All be a to our that everyone extended call are otherwise results. today not our Please Those repeated references will refer we to discussion stated. to press remind non-GAAP of of available estimates, expectations of Those in comments afternoon intended to could uncertainties serve predictions, and statements. SEC the website. set to this over differences Paul. noted and remarks call. in our subject here. advance actual are filings as our in Before remarks I'll prepared recent risks are our and statement turn material formal a other statements risks. place release, income And this forward-looking these on now

Paul A. Ricci

afternoon Thank you, good and Rick, everyone.

protect key highlight first quarter, ago, to integrated Before our taking our to a undertook the returning We implemented margins. while the implementing organic initiatives, business. footprint, geographic the In your reached few to thoughts year. my and actions years remainder questions, our to to of on plan our I'd and solutions a agenda results Three focus growth. expand share QX growth important we new extend on transform develop points and of milestone productivity the like a company regarding

strong transformation fiscal from quarter vertical market bookings. growth I'm and persistent delivered bookings performance Net and metrics, results EPS the our reflect in solutions realign by were focus, solutions organization. of in up is net We and focus financial our our the Healthcare XX% our XXXX. While made Medical new focus focus, separate Enterprise QX services to key complete, this achievement In structuring Dragon including Drive against a the not support of pleased as to across to our have more led was our say unified business notably notably, in This tied and work telecommunications execution new of plan. market first year unit progress services cloud combining vertical business mobile we've our Dragon our market. and the operator with telecommunications. a Most the in steps on in and division our Automotive security to omni-channel Automotive, taken operating we've revenue,

range the XXXX and And XXXX is future As delivering Enterprise primarily X% approach also guidance. strategy new Automotive our fiscal in midpoint fiscal results. Healthcare, revenue XXXX. EPS previously. confidence to of our with growth that guidance, we raising X%, full this this units. year XXX up our our range We're growth basis look point by X% a QX driven a to raised and our in improvement from for ahead, is to and The FY We've organic guidance X% of organic we from a represents reflected revenue rate

this of solutions. remain support we initiatives, we gains pursuit look towards AI detail common multi-year productivity we funded continue some XXXX. with focus investments as select growth, conversational I'm a Looking technology on these EPS that in last and ahead, stack, produce markets leveraging the accelerating of margins confident focused markets, our and to quarter. will operating vertical attractive fiscal our revenue in analytics-powered We're of by continuation key discussed in which

happy the recent And has March on noted your its Nuance's now in XX its we're comment Before time closing, communications, work to and committee, meet through I search selection questions. want its transition. goal has in a to expects to progressed of succession. take final briefly board, for

Operator

the Please go Our ahead. with Kalia from Saket of first line Barclays. come question will

Saket Kalia

here. questions my Hi, taking guys. Thanks for

can but First, able to a just terms in post been It maybe for you've go segment, your attack. of like the the do expectations segment we the Healthcare well expectations? versus little you, feels performance Paul. Helpful your deeper very commentary in malware bit that on versus

just is you in how coming churn on touch better post-attack? maybe Medical underlying you perhaps performance of perhaps this much from Dragon versus than expected could places So lower like

Paul A. Ricci

both anticipated. the of to think remind Healthcare for and But year some of clearly in Dragon also were say last would year. out had strong we strong I stronger is there's contribution notably, start you would bookings performance from coming I the fourth those. very the quarter I Medical of off in fact than that that a

Saket Kalia

just maybe associated a my different for Got with follow-up, this or you it. malware maybe remediation little business here we guide mix then the we for it. of fiscal bit the slightly lower Are seeing Can you, the a expected in margin is originally costs Dan. And than talk perhaps to some related Got for XXXX? the attack? about

Daniel David Tempesta

demand in particularly our business, type guide the services We're professional seeing. adjusted The we're is in really lower more mix for seeing margin that Healthcare.

relates in those original it in and in were those really As already at the year. margins attack, reflected are beginning malware the the the They were costs baked of there.

a So, that point. we're shift at seeing this mix it's really

Paul A. Ricci

would business, our in And of that's business. I think in that staff just also Enterprise partly we've our we support the the and our professional to growth reflected Automotive services note in Healthcare had margins. business

Saket Kalia

guys. Thanks much, Understood. very

Operator

All right.

Please from the with Rhee ahead. comes go line of question Craig-Hallum. Jeff Van next Our

Jeff Van Rhee

Whoops. I on had mute you there.

me. Just a couple for

up to commented operating I margins. Just that with respect to mix question the overall down driving bit think on follow a you last Healthcare, a it's the

at this the Just specifically that do in a as looking respect? margins for What's segment, how operating outlook itself Healthcare you segment? view

Paul A. Ricci

But for margins margin I protecting expect do year-over-year can see growth, see as to beginning don't we've to you margins. We segment overall, to improvement, have given modest material investments results. guidance predictions is to which want that. balance we the operating make we and between that particular fuel enabling Well, as don't our

Jeff Van Rhee

of for variables in growth there for new. the look at the top top other you we safe Okay. acceleration XX% With segment, that overall levels? say to Enterprise as you Obviously, line line. But play think I net current from script from are respect to can it is into come Enterprise, in commented look that

Paul A. Ricci

about had over we've going of for particular to about there. always cautioned growth top we're to more We've see predictions We want continue to quarters. really we line mentioned that. are Well, I in to a don't difficult. number we've the when quarters year. make performance comparables And become now. going And the top began quarter year-over-year last Enterprise good line mentioned Enterprise

may but continue business. to it's the So, we seven saw see quarters, six of to growth or we over going a growth not last kind the sustained be

Jeff Van Rhee

the with respect an growth confirm to to think double-digit of Auto rumors had but talk in commented Auto? Okay. won't ask the I sale. to sort it, I thoughts certainly One, market And was on prior. then you you you can your

slicing entity as be or commentary by not separate as respect other still a I Maybe opposed your that to you're business? think you, its off in extent script, And color perhaps value a of deceleration, can, any within logic a with this just that the then of the if as the division just you little and own that or it's that to owned this may high someone with else optimization at you to quarter. whether about double-digits. say lower comfortable than level

Paul A. Ricci

Okay.

Let me if I turn, take might. them in

this much First, growth has growth have annual of say course, double-digit that that's rate business this with an year, respect about to a we growth, we quarter-to-quarter. being don't to and anticipate One to double-digits previous we flows but year. to any quarter, in a and it grow high look recurring in in and the comparables business at the expect particular quarter with it's revenues

this in some focused now, Your at second very focus, requires we moving to question speed moving automotive to on separate believe likely rumors, in why technology is did business. With I operate all can't recap we quarter talk a last to the achieve the business but which more respect just markets. it markets the that. a rapidly into really that, separate dynamic It's and a of And comment to it the form unit. that course. very own were independent are ability about its We

Jeff Van Rhee

Thank Okay. you. All Thanks, Paul. right.

Operator

Singh Morgan Sanjit Please comes Next line go Stanley. question ahead. with the from of

Sanjit K. Singh

cars when those that we Thank Auto Automotive DSOs, up. to view also two continuing the collections then secondly, therefore being And start that's I growth you that's taking in by and on business deferred of that had start particularly revenue Obviously deferred collections. to revenue with stabilize? some year, to could could my impacted slower cash dive flow cash that improve. when and triggering start revenue event shipped to function coming the a related a in wanted you expect in on of pick this growth, flow see to being into One I is wondering terms a to And things. respect Healthcare we for questions. if to dynamics Paul, of in was

Daniel David Tempesta

Hey, Dan. Sanjit. It's

that of we're taper still DSO, malware. is that QX. the We would remainder effects the saw First, say the going in down DSO year. throughout of the yes, to the feeling I

should you think quarters we back really get run generally high couple so XXs. the to that back coming low that to next XXs, – about So will of over And that's low normal. XXs,

in when and business the years amortization similar deferred this a the at to side then that's because level, about level that generating relates the revenue, some it exactly, the at And car we kicking As over period time. amortization. And time, of collecting for advance but now in we revenue The connected of some a ships caught billing. now been paid. the up, the in cash to been similar the not get billings for Auto is we've talking have we've been

modest it there's this stay increase X% the that's space. it billings. And that some or auto is But slightly into It's future the we then and in decrease flatten pattern year. out time, to why guide growth will growth flat then And So XXXX. in or we over flat if still the year. could this more could have that

Sanjit K. Singh

Great. that XXXX is layered be And these you be on. we business? efficiencies should or going of you enabling that's to guys we efficiencies benefits fiscal like event, in that year XXXX where have It think the you of into could operational doesn't guys some into look in working year of that invest out, are might to laid then efficiency the some a that those about back fiscal but further programs terms see the of of terms in something

Paul A. Ricci

Yeah.

we've the of modest allowing services and expansion that that products, as meeting of taking clearly expect earlier at some operating we demand is, a between question Of XXXX the balance capacity, the of reaffirmed XXXX. perhaps The in gains XX suggested, same time for of our course, we expanded margins and some margins. we've and sales guidance perhaps as that productivity indication reinvesting in margin into previous your improvement about operating basis given that points today spoke foundation new

opportunity to modest margin the balance to seize additional trying growth we're So with expansion.

Sanjit K. Singh

it. Got you very much. Thank

Operator

from ahead. question Tom line with Next of Please Roderick Stifel. comes the go

Thomas Michael Roderick

wins big Hi, the unit like look several gentlemen. design wins new themselves? Thanks It a segment, for to can that to the bit opposed that a But in number you when provide taking past of growth over wondering wins detail are new of seems business growth my design on at what comes how speaking advanced little from what pre-existing helped. terms the much of more you're if wins of we the Paul, some volume drivers had certainly questions. you today. I'm from Auto that as years, logo now reporting

Paul A. Ricci

today a additional of don't the design you wins perimeter of because are contributing Remember what elements of models. bookings mostly you, are tell we're can of wins XXXX wins. doing for course XXXX out precise number revenue, now not models a this to design is is are. but to growth I the that activity There of today, design in space. I those One and lot have

the have new design course those in wins last second those design few for the but now. The successive wins or we years been contributions design is, over and winning are kicking of wins

is within second had. designs deployed The being expanded is penetration more we've the Speech broadly.

include hybrid working third manufacturers both expansion of Our is the element. the solutions notably the more we're within the solutions And cloud-based the a that broadly of then have with. deployed in-car and to an solutions, being are functionality

Thomas Michael Roderick

noted Thank little of XXX helpful. lower very script That's was question points decreased year-on-year, services profit gross result it guess I a the here on largely whole the more in segment. broadly speaking margin Perfect. a for that professional as this basis you. Follow-up Auto. margins. over there the is Mobile But

to ought themselves? of margins the can those some to away reflection driving Is being speak work gross that So shift done? going you from we a of talk to that's services that how then what's a it segments? mix you forward? Is and lower think different a that Can of reflection about

Paul A. Ricci

in and of the the elements order We're margins and One the seize two investments R&D to solutions to were to new marketing related in our both There of particularly advance about was in in doing talked to segment and Automotive. are those investments opportunities Mobile. there. we've that contribution and lower speed

on The demand greater demand second I which vendors, is doing with that earlier that initial in backlog we're as for professional business. have and we trials the the commented to services serve staffing, well need as new for

Thomas Michael Roderick

Excellent.

So, the will coming quarters online, to like. productivity in presumably up it start as go sounds those come

Paul A. Ricci

Yes. gains We'll have – the see been be may from and efficiency. high professional sustainable margins services But Automotive in margin margin professional We'll that somewhat see staffing. additional very in services business lower.

Thomas Michael Roderick

it. helpful. you. Got Thank Very

Operator

go we queue from question comes of in have ahead. And Please Hynes line the the David Canaccord. with final

David E. Hynes, Jr.

guys. Thanks, Hey.

I three healthcare, have the you and you worry keep in me, from moat about do best which if in consider competitive contact competitive one you Just auto, your which center, Paul, do high franchises; level. core threats? think it most I'll

Paul A. Ricci

Sorry. half of question. I the again? not hear did your Could say first you it

David E. Hynes, Jr.

Yeah.

three which of competitive the franchises, threats you which competitive worry do Just center, the best In do in healthcare, you most? those moat? core contact auto, about have

Paul A. Ricci

business we of businesses. combination stack. We I confidence our those of of core a vertical of differentiation three deal go-to-market I in that you've through great of technology durability markets. identified our competition of strength the the our three But our are all the focus, think have all differentiated franchises and presence of in our have in And think

David E. Hynes, Jr.

leave I'll it there. Yeah. Okay.

Operator

Okay.

no questions further in have queue. We

Paul A. Ricci

then. Okay, taking Take thank us care. want the with today. you I for all time to

Operator

and does Executive conference. Thank AT&T Ladies for you gentlemen, today's that participation, for and conclude using your Teleconference.

You may now disconnect.

Nuance Communications (NUAN) 8 Feb 182018 Q1 Earnings call transcript