Authors: Jonathan Sheets, Bobby Fitzpatrick, David Paolella, and David Tumm.

1. CHAMPION
Jonathan Sheets Bobby Fitzpatrick
David Tumm David Paolella

2. EXECUTIVE SUMMARY
• Recommendation - Nuance Technologies (NUAN) is
a strong buy at a current range of $26-27.5 with a 6-
12 month target of $39 (+45.1%).
• Recent drop in price ($36 to $26) provides favorable
risk/reward opportunity
• Catalysts:
• Short term 1Q lower revision will not prevent full year
guidance
• Apple upcoming Ipad 3 release
• Voice technology hardware and software

3. NUANCE COMPANY
• Nuance • Dedication to
Communications is becoming a lifestyle
the market leader is product maker that
speech, imaging and transcends setting
keypad solutions • Android Dragon
• Licensing business • Apple’s Siri
• 4000 patents in • Dictation
portfolio, none set to • Voice to text
expire in the next 15
years • Multi-level command
• 200 speech scientists • Concurrent processes

4. CUSTOMERS DEPENDABILITY
• Sexiest Customers: • Xerox
• Amazon • Motorola
• Apple • Rogers
• Audi • Vodafone
• BMW • Vonage
• Ford • BestBuy
• Garmin • Wal-Mart
• HTC • Exxon
• LG • IBM
• Mercedes Benz • Bank of America
• Nokia • Cigna
• Samsung • The City of Zurich
• T-Mobile • Mayo Clinic
• Tom Tom • Cleveland Clinic
• AT&T • FedEx
• Citibank • United Airlines
• Disney • Wells Fargo
• Brother • US Army
• HP • Federal Bureau of Investigations (FBI)
• Canon
• Dell

5. AREAS OF BUSINESS
Health Care Enterprise
• 3rd largest business segment
• Largest business segment
• 75.8 million in sales (19.84%)
• 145.3 million in sales (38.03%)
• 81% of segment has fixed contracts
• Non-cyclical nature provides through 2016, this secures revenue
market downturn protection nicely
• 23.3% earnings growth last quarter • 4.6% earnings growth last quarter
Mobile & Consumer Imaging
• Second largest business segment • Smallest business segment
• 108.5 million in sales (28.4%) • 52.4 million in sales (13.71%)
• 8 largest handset makers are all • Portable document formatting and
customers applications to speed and reduce
• 10 largest auto makers are all cost of creating, using and sharing
customers documents
• 23.7% earnings growth last quarter • 33.3% earnings growth last quarter

6. EXECUTIVE PROFILE
• Paul A. Ricci, CEO and Chairman of the Board;
been with Nuance as CEO since 2000.
• $62.33 Million
• Thomas L. Beaudoin, Chief Financial Officer; been
with Nuance since 2008, has 30+ year of
experience.
• $21 million stake
• Steve Chambers, President Enterprise Division; been
with Nuance since 2003, voted as one of the “Top
Influencers in the Speech Industry”
• $12.3 million

7. INSIDER TRANSACTIONS
• Net Insider Selling – bonuses, retiring, need cash
• Recurring pattern of insiders (mostly directors)
exercising stock options near year end as bonus,
stock still goes up.
• Chambers (-$700K)
• Beaudoin (-$213K)
• CEO ($62.33 Million), CFO, and CTO still heavily
invested in Nuance

8. INSTITUTIONAL OWNERSHIP
• Increasing 628 to 732 in
9months.
• GARP (Growth at A
Reasonable Price) Funds
recognize that NUAN still
reasonably valued.
• Aggressive Growth
• Value Funds
• Established LT PE firm
invested in 2004 & 2009
• Two board seats
• Current $1.7 Billion stake

9. 2011 ACQUISITIONS

10. LAST QUARTER DROP
Positive View
• Buying opportunity
• Long-term growth
• Market demand “never
been greater”
• One-time, lower revenue
because of prolonged
Negative View timing deals and revenue
• Excluding revenue growth from recognition.
acquisitions mobile 16% from 27%. • Will continue to maintain
• Therefore demand slowing for
products.
FY growth estimates
• Product releases later in
year

11. DCF

12. DCF

13. COMPS
*Does not have a comparable company in niche regarding size or business*
Price Shares
Mkt. Value Diluted EV Sales/Revenue EBIT EBITDA EV/EBIT EV/EBITDA
Outstanding
International Business
09/2011 192.25 1,160.0 223,010.0 1,204.9 241,954.0 106,448.0 20,842.0 25,704.0 11.61x 9.41x
Machines Corp.
Microsoft Corp. 12/2011 30.05 8,390.8 252,142.7 8,465.0 211,653.7 72,052.0 27,409.0 30,222.0 7.72x 7.00x
Nortel Networks Corp. 09/2011 0.02 498.2 9.6 535.0 -260.4 52.0 -225.0 -174.0 - -
Image Recognition
06/2011 33.08 1.9 61.7 1.8 51.9 191.0 5.9 10.1 8.81x 5.16x
Integrated Systems S.A.
Omtool Ltd. 12/2008 3.70 4.7 17.5 - 15.9 15.2 -2.0 -1.3 - -
Google Inc. Cl A 12/2011 605.56 258.0 196,889.8 397.0 156,467.8 37,876.0 11,713.0 13,564.0 13.36x 11.54x
Adobe Systems Inc. 11/2011 32.46 493.8 16,028.8 503.9 14,631.5 4,216.3 1,197.1 1,467.3 12.22x 9.97x
Transcend Services Inc. 09/2011 21.85 10.7 233.6 11.1 221.3 119.1 22.7 25.7 9.74x 8.59x
Nuance Communications Inc. reports amortization of its intangible assets (patents and speech technology) that adjusts their earnings 88% lower. This gives
NUAN a P/E of 179 when in reality it is trading at 19 times earnings. Also, as a growth stock with much smaller market cap it appears quite expensive in
relation to the multiples of many of its competitors. Therefore, we found it best to use the DCF as the core reference for valuation. This list of comps is present
to reflect upon the cheapness of the software space as a whole, including NUAN.

14. GENERAL STATISTICS
• P/E 19
• Current Ratio 1.8
• Earnings growth between 12-25% over the last 5
years, predominately in ascending fashion
• Sales growth between 18-20% over the last 5
years, predominately in ascending fashion
• 80% of the company is owned by funds and
management (55% funds, 25% management)
• RS: 91
• 34% debt
• Beta: 1.37
• ROE: 18%

15. MARGINS
• Huge Gross Margins, Nice EBITDA
• Net Margin only 3.5% because of huge R&D investment.
• Margin compression by megacap customers are a problem
faced by many suppliers, especially in the tech space
• Unlike hardware manufacturing (chips, motherboards etc.), a
real competitor in the advanced nature of Nuance’s
technology does not exist
• This will allow them to maintain healthy margins even as they acquire
enormous customers

16. TECHNICAL ANALYSIS
• Support 50-dma • Well above 200 dma
• Strong uptrend since August

17. RISKS
• Market downturn
• Tech industry, but hedged with contracts
• Contractual Fee Based Agreement
• Not sales based, double-edged sword
• New competition
• Apple trying to make own technology, IBM entering market
• Lawsuits
• Take time and resources, but Nuance effectively enforces
patents regularly.
• Buy opposing company.

18. Q&A SESSION
• Appendix
• Warburg Pincus Private Equity further information
• Further 2011 Merger Information
• All Acquisitions since 2004
• CEO Q1 Guidance Quote

19. WARBURG PINCUS INFORMATION
• Myriad of Private Funds equating to $30 Billion
• Strategy: Long-Term Growth Investing
• In all stages – venture capital, middle road, late-stage
buyout transactions, special situations
• Notable Investments: Amtek Auto,
Bausch + Lomb, Coyote Logisitics,
ITC Nexus, Laredo Petroleum, Targa
Resources, Transpacific.

20. FURTHER INFO 2011 ACQUISITIONS
• Vlingo (Dec 2011) – main competitor, years or litigation
over voice technology.
• Swype (Oct 2011) – text “key-board swiping” technology
competing with their T9 autoinput $165 million
• Loquendo (Aug ’11) – TTS and ASR technology €53
million, breaking research done in Italian lab.
• WebMedx (July ’11) – medical transcription service (not
disclosed)
• SVOX (June ’11) – automotive TTS recognition
• Equitrac (June ’11) – print/cost recovery software, law
firm market leader $157 million

21. ALL ACQUISITIONS SINCE 2006

22. CEO GUIDANCE QUOTE
“Global interest in our mobile and consumer technologies and
solutions has never been greater. Our Dragon consumer
revenue is benefiting from unprecedented response rates to our
advertising and from our past investments in global language
expansion. Revenues this year will include a materially greater
proportion of mobile services, new product introductions, and a
heightened interest in deeper strategic relationships. In
particular, we have seen a significant and accelerating shift
towards broader and more extensive engagements with
partners, which involve a combination of licensing, network-
based services and engineering and research services,
spanning several years. We note, though, that the accounting
for these arrangements tends to prolong revenue recognition. In
addition, our Mobile & Consumer business should benefit from
product releases later in the fiscal year.”