More Related Content
Similar to original.pdf (20)
More from MeenuRandhawa2 (6)
original.pdf
- 1. 1 © 2018 Nuance Communications, Inc. All rights reserved
Q4 EARNINGS CALL
11.19.18
- 2. 2 © 2018 Nuance Communications, Inc. All rights reserved
Richard Mack
Senior Vice President
Corporate Marketing and Communications
FORWARD LOOKING STATEMENTS
- 3. 3 © 2018 Nuance Communications, Inc. All rights reserved
3 © 2018 Nuance Communications, Inc. All rights reserved
Statements in this presentation regarding future performance and our management’s future expectations, beliefs, goals, plans or prospects constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements
containing the words “believes,” “plans,” “anticipates,” “expects,” "intends" or “estimates” or similar expressions) should also be considered to be forward-looking
statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements,
including but not limited to: the ability to effect the separation and spin-off of our Auto business; our ability to close the sale of our Imaging business, our ability to
successfully wind-down certain products or business lines, fluctuations in demand for our existing and future products; fluctuations in the mix of products and services sold
in specific periods; further unanticipated costs resulting from the FY17 malware incident including potential costs associated with litigation or governmental investigations
that may result from the incident; our ability to control and successfully manage our expenses and cash position; our ability to develop and execute in a timely manner our
productivity and cost initiatives; the effects of competition, including pricing pressure, and changing business models in the markets and industries we serve; changes to
economic conditions in the United States and internationally; uncertainties associated with the transition of our chief executive officer, and the addition of a number of new
directors; the imposition of tariffs or other trade measures particularly between the United States and China; potential future impairment charges related to our newly
reorganized business reporting units; fluctuating currency rates; possible quality issues in our products and technologies; our ability to successfully integrate operations and
employees of acquired businesses; the conversion rate of bookings into revenue; the ability to realize anticipated synergies from acquired businesses; and the other factors
described in our most recent Form 10-K, Form 10-Q and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-
looking statements as a result of developments occurring after the date of this document.
This presentation also includes certain financial measures that are not calculated in accordance with U.S. generally accepted accounting principles, or GAAP. These non-
GAAP financial measures are in addition to, and not as a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. There are a
number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. We have provided a reconciliation of non-GAAP
measures to the most directly comparable GAAP measures, which is available in the earnings press release and the prepared remarks furnished as exhibits to the
Company’s Form 8-K submitted to the SEC on November 19, 2018. This presentation should be read in conjunction with the earnings release, prepared remarks
and Form 10-K.
FORWARD-LOOKING STATEMENTS
AND NON-GAAP FINANCIAL MEASURES
- 4. 4 © 2018 Nuance Communications, Inc. All rights reserved
Mark Benjamin
Chief Executive Officer
INTRODUCTION
- 5. 5 © 2018 Nuance Communications, Inc. All rights reserved
5 © 2018 Nuance Communications, Inc. All rights reserved
Strong quarter with results at or above expectations
Corporate governance improvements
Organization and culture enhancements
Thorough strategic review actions and outcomes
RECENT HIGHLIGHTS
BUILDING A NEW NUANCE
- 6. 6 © 2018 Nuance Communications, Inc. All rights reserved
Dan Tempesta
Chief Financial Officer
Q4 EARNINGS REVIEW
- 7. 7 © 2018 Nuance Communications, Inc. All rights reserved
7 © 2018 Nuance Communications, Inc. All rights reserved
2018 ACTUAL
2018 GUIDANCE
Q4 18 ACTUAL
Q4 18 GUIDANCE
$517 – $532M
REVENUE
GROSS
MARGIN
EPS
CASH FLOW
FROM OPS
$0.30 – $0.34
$536.2M
65.7%
$0.38
$149.4M
$2.050B – $2.065B
~ 62%
$1.11 – $1.15
$410M – $430M
$2.069B
62.3%
$1.19
$444M
NET NEW
BOOKINGS
5% – 7% 5%
OPERATING
MARGIN
30.5% ~ 25.5% 26.1%
Q4 18 AND FY 2018 GUIDANCE AND ACTUAL RESULTS
- 8. 8 © 2018 Nuance Communications, Inc. All rights reserved
Mark Benjamin
Chief Executive Officer
STRATEGIC AND OPERATIONAL REVIEW
- 9. 9 © 2018 Nuance Communications, Inc. All rights reserved
9 © 2018 Nuance Communications, Inc. All rights reserved
Evaluated growth opportunities
COMPLETED THOROUGH STRATEGIC
AND ORGANIZATION REVIEW
Improved organizational effectiveness and culture
Began operationalizing strategic direction
- 10. 10 © 2018 Nuance Communications, Inc. All rights reserved
10 © 2018 Nuance Communications, Inc. All rights reserved
IDENTIFIED WHERE WE HAVE THE RIGHT TO WIN
…providing deep,
vertically-focused
customer insights
… embedded at
mission critical points
of interaction…
Pioneer in
conversational AI and
intelligent
engagement…
- 11. 11 © 2018 Nuance Communications, Inc. All rights reserved
11 © 2018 Nuance Communications, Inc. All rights reserved
THREE STRATEGIC THEMES DIRECT
WHERE WE FOCUS AND WHERE WE DO NOT
Relentless focus
on profitable growth
Continual measurement
of resource allocation
Intelligence in the cloud
Conversational AI
Deeply embedded,
mission-critical interactions
Deep B2B relationships,
contextual expertise
Structurally attractive
vertical markets
Key geographies,
enhanced go-to-market
Disciplined
Reallocation
Winning
Markets
Applied Intelligent
Technology
Expanding sales coverage
- 12. 12 © 2018 Nuance Communications, Inc. All rights reserved
12 © 2018 Nuance Communications, Inc. All rights reserved
Spin
Automotive
Sell
Imaging
Wind-down
SRS and
Devices
Realign operations and organization
Focus on
Healthcare and
Enterprise
OUR STRATEGY MAKES US A SIMPLER,
GROWTH-FOCUSED COMPANY
- 13. 13 © 2018 Nuance Communications, Inc. All rights reserved
13 © 2018 Nuance Communications, Inc. All rights reserved
High growth profile
Robust IP portfolio
Consumer technology
Unfettered investment &
management focus
Create a publicly
traded automotive
technology
business by end of
2019
AUTOMOTIVE SPIN-OFF
- 14. 14 © 2018 Nuance Communications, Inc. All rights reserved
14 © 2018 Nuance Communications, Inc. All rights reserved
IMAGING BUSINESS SALE
Sale for $400M to Kofax
Expected close in Q2 FY 2019
Accretive to growth, neutral impact to margin (1)
1 Assumes no stranded costs
- 15. 15 © 2018 Nuance Communications, Inc. All rights reserved
15 © 2018 Nuance Communications, Inc. All rights reserved
SUBSCRIBER REVENUE SERVICES
& DEVICES WIND DOWN
Wind down over 12 – 24 months
Non-core business
Impact reflected in FY19 guidance
- 16. 16 © 2018 Nuance Communications, Inc. All rights reserved
16 © 2018 Nuance Communications, Inc. All rights reserved
WE ARE UNLEASHING OUR POTENTIAL
AND UNLOCKING SAVINGS FOR REINVESTMENT
Simplifying our
organization and
operations
Closer to the customer
Faster decision making
Greater agility
$50 million of savings
Simplifying our
organization and
operations
- 17. 17 © 2018 Nuance Communications, Inc. All rights reserved
17 © 2018 Nuance Communications, Inc. All rights reserved
Expand
coverage
Drive
adoption
Innovate
Voice Biometrics
Dragon Medical One (DMO)
Computer Assisted Physician
Documentation (CAPD)
Radiology in the Cloud
Ambient for Healthcare
STRATEGIC INVESTMENTS TO ACCESS LARGER,
HIGH-GROWTH MARKETS
- 18. 18 © 2018 Nuance Communications, Inc. All rights reserved
Our Purpose-driven culture aligns
our goals and keeps the team
focused on what we are achieving
- 19. 19 © 2018 Nuance Communications, Inc. All rights reserved
Dan Tempesta
Chief Financial Officer
- 20. 20 © 2018 Nuance Communications, Inc. All rights reserved
20 © 2018 Nuance Communications, Inc. All rights reserved
WIND-DOWN OF SRS AND DEVICES
Impact of the wind-down activities are included in our 2019 guidance
2018 Revenue of $110 million declining in 2019 to $62-$66 million
Approximates 200 basis point reduction in Nuance revenue growth
Revenue reduction estimated to cause $12 to $15 million reduction in FY2019 segment profits
- 21. 21 © 2018 Nuance Communications, Inc. All rights reserved
21 © 2018 Nuance Communications, Inc. All rights reserved
SUMMARY OF IMAGING AND AUTO TRANSACTIONS
Imaging Sale
Information:
Gross Sale Price of $400 million
~$10 million in fees
~$10 million in tax
Target Close is during the second quarter of 2019
2H 2019 Revenue expected to range between $110 - $120 million
2H 2019 Segment Margins expected to be ~35%
Automotive Spin
Information:
Target spin date during Q4 19
2019 Guidance: Our non-GAAP results and guidance do not contemplate the execution of
either transaction
We will update our guidance as we approach closing of each transaction
- 22. 22 © 2018 Nuance Communications, Inc. All rights reserved
22 © 2018 Nuance Communications, Inc. All rights reserved
CONSOLIDATED GUIDANCE
FY19 Guidance FY18 Actual
Revenue $2,055M – $2,105M $2,069M
Organic Growth (1%) – 1% 4%
Gross Margin ~63% 62.3%
Operating Margin 26.0% – 26.5% 26.1%*
EPS $1.19 – $1.27 $1.19*
Note: All non-GAAP results and guidance assumes Imaging and Automotive Segments are owned for the entire year. Cash Flow and GAAP guidance include costs and expenditures associated with
separating imaging and automotive as those activities will occur through 2019.
*Q4 Devices source license deals contributed 40bpts of operating margin and $0.03 of EPS
- 23. 23 © 2018 Nuance Communications, Inc. All rights reserved
23 © 2018 Nuance Communications, Inc. All rights reserved
REVENUE GUIDANCE BY SEGMENT
2016 2017 2018 2019 LOW 2019 HIGH
Healthcare $973.3 $899.3 $984.8 $989 $1,011
Enterprise $396.0 $474.3 $483.2 $490 $500
Automotive $214.3 $252.2 $279.4 $306 $312
Strategic
Yr/yr Organic Growth
$1,583.6 $1,625.9
-1%
$1,747.4
6%
$1,785
2%
$1,823
4%
Imaging $241.6 $217.7 $212.9 $208 $216
Other $154.4 $133.8 $109.1 $62 $66
Total Nuance $1,979.6 $1,977.4 $2,069.4 $2,055 $2,105
Recurring % 70% 73% 72% 74% 73%
Yr/yr Organic Growth -3% 4% -1% 1%
($ in millions)
- 24. 24 © 2018 Nuance Communications, Inc. All rights reserved
24 © 2018 Nuance Communications, Inc. All rights reserved
HEALTHCARE REVENUE DETAIL
2016 2017 2018 2019 Estimate
Clinical Documentation Capture
Yr/yr Organic Growth
$595.6 $511.8
-15%
$523.2
2%
$538
3%
Dragon Medical Cloud
Yr/yr Organic Growth
$14.5 $64.1
342%
$138.1
115%
$205
48%
Dragon Medical M&S
Yr/yr Organic Growth
$75.6 $73.4
-3%
$57.2
-22%
$43
-25%
Dragon Medical Product & Licensing
Yr/yr Organic Growth
$77.1 $60.2
-22%
$64.4
7%
$72
12%
HIM (Hosting and M&S)
Yr/yr Organic Growth
$428.4 $314.1
-28%
$263.5
-16%
$218
-17%
Radiology and Other
Yr/yr Organic Growth
$210.8 $211.3
-1%
$234.0
7%
$256
9%
Professional Services
Yr/yr Organic Growth
$89.4 $96.0
-4%
$144.9
51%
$118
-19%
Other Maintenance & Support
Yr/yr Organic Growth
$77.6
$80.3
3%
$82.7
3%
$88
6%
Total Healthcare Revenues $973.3 $899.3 $984.8 $989 – $1,011
Yr/yr As Reported Growth
Yr/yr Organic Growth
-8%
-9%
10%
8%
0% - 3%
0% - 3%
($ in millions)
- 25. 25 © 2018 Nuance Communications, Inc. All rights reserved
25 © 2018 Nuance Communications, Inc. All rights reserved
DRAGON MEDICAL CLOUD TRANSITION
HIM
Conversion
On Premise
Conversion
Greenfield
Expansion
2.5x profit uplift
over 5 years,
revenue neutral
2 – 2.5x revenue
and profit uplift
per year
100% Accretive
Dragon Medical
Cloud
Multi-Tenant SaaS
Offering
- 26. 26 © 2018 Nuance Communications, Inc. All rights reserved
26 © 2018 Nuance Communications, Inc. All rights reserved
DRAGON MEDICAL CLOUD
ANNUAL RECURRING REVENUE (ARR)
Annual recurring revenue is the
annual run rate of recurring revenue
for all existing clients at a given
point in time. The difference
between ARR and subscription
revenue is a matter of timing.
Subscription revenue begins, on
average, 90 days after we sign a
contract and is recognized ratably
over the lifetime of that contract.
ARR shows the annual recurring
revenue at a particular point in time.
$245M to $255M
$44.3M
$109.4M
$186.1M
0
20
40
60
80
100
120
140
160
180
200
2016 2017 2018
2019 ARR Guidance
($ in millions)
- 27. 27 © 2018 Nuance Communications, Inc. All rights reserved
27 © 2018 Nuance Communications, Inc. All rights reserved
ARR EXAMPLE
$1.2M Deal
ARR = $1.2M
Rev recognized
in year 1 = $900k*
Rev recognized in
subsequent years = $1.2m
Oct 1 April 1 July 1
DATE SIGNED DATE SIGNED DATE SIGNED
ARR = $1.2M
Rev recognized
in year 1 = $300k*
Rev recognized in
subsequent years = $1.2m
ARR = $1.2M
Rev recognized
in year 1 = $0*
Rev recognized in
subsequent years = $1.2m
*Assumes a 90-day implementation period.
- 28. 28 © 2018 Nuance Communications, Inc. All rights reserved
28 © 2018 Nuance Communications, Inc. All rights reserved
SEGMENT MARGINS AND GUIDANCE
Similar to FY18
21% to 24%
35% to 37%
Similar to FY18
Similar to FY18
32%
26%
39%
29%
34%
Imaging
Other
Automotive
Enterprise
Healthcare
2018 2019 GUIDANCE
- 29. 29 © 2018 Nuance Communications, Inc. All rights reserved
29 © 2018 Nuance Communications, Inc. All rights reserved
CASH FLOW
CASH FLOW
FROM OPERATIONS
FY’19 GUIDANCE
$390 million – $435 million
Includes the following non-recurring expenditures:
$40–55M to enact the separation of the
Imaging and Automotive businesses
$60-70M related to restructuring activities
FREE CASH FLOW
FY’19 GUIDANCE
$315 million – $370 million
Includes the following capex expenditures:
Approximately $55 million of normal capex
$10-$20M of automotive stand-up (IT and facilities)
- 30. 30 © 2018 Nuance Communications, Inc. All rights reserved
- 31. 31 © 2018 Nuance Communications, Inc. All rights reserved
APPENDIX
11.19.18
- 32. 32 © 2018 Nuance Communications, Inc. All rights reserved
32 © 2018 Nuance Communications, Inc. All rights reserved
CASH FLOW FROM OPERATIONS AND FREE CASH FLOW
FY 2019 GUIDANCE RANGES
Low High
Combined CFFO Before Adjustments (1) $515 $535
Corporate Restructuring + Savings Program (70) (60)
Imaging Separation (20) (15)
Auto Separation Costs (35) (25)
Subtotal Separation Costs (55) (40)
Combined CFFO (2) 390 435
Normal Capex (55) (55)
Automotive IT Systems and HQ Costs (20) (10)
Subtotal Capex (75) (65)
Combined FCF (3) 315 370
Imaging lost CFFO (assuming 3/31 close) (23) (23)
+ Half-year of interest payment savings 8 8
Pro Forma FCF (4) $300 $355
(1) Combined CFFO Before Adjustments represents
estimated Cash Flows from Operations of
Nuance in 2019, assuming no Imaging Sale,
Automotive Spin or Restructuring and Other
related cash payments
(2) Combined CFFO represents estimated Cash
Flows from Operations of Nuance assuming
Imaging Sale and Automotive Spin do not close
in 2019, but the cash payments related to
separation activities for Imaging Sale and
Automotive Spin, as well as Restructuring and
Other payments, are made
(3) Combined FCF is Combined CFFO less
estimated capital expenditures as well as certain
expenditures related to establishing standalone
Automotive IT systems and headquarters
(4) Pro Forma FCF is Combined FCF less the
estimated effects of Imaging Sale, assuming
March 31, 2019 closing date
($ in millions)
- 33. 33 © 2018 Nuance Communications, Inc. All rights reserved
33 © 2018 Nuance Communications, Inc. All rights reserved
PRO FORMA USE OF PROCEEDS AND ESTIMATED
CASH BALANCES POST IMAGING SALE
Imaging Use of Proceeds, Assumes Close March 31
Gross Sale Price $400
Estimated Fees (10)
Estimated Taxes (10)
Net Proceeds 380
*Pay Down $300 million of 53/8 notes (300)
Cash Available from remaining Imaging Proceeds $80
Low High
Cash** @ 9/30/2018 $473 $473
+ Pro Forma FCF 300 355
+Cash Available from remaining imaging proceeds 80 80
- Other investing and financing activities (33) (28)
Pro Forma Cash @9/30/2019 $820 $880
*Assumption only – currently under evaluation ** Includes marketable securities
($ in millions)
- 34. 34 © 2018 Nuance Communications, Inc. All rights reserved
34 © 2018 Nuance Communications, Inc. All rights reserved
ASC 606 GUIDANCE
Adopting ASC 606 using cumulative catch-up (modified retrospective) transition method
Lost revenue estimated between $300M and $375M, primarily over 3 years
• Decrease in deferred revenues on Oct 1, 2018 of $80M to $110M
• Decrease to off balance sheet backlog on Oct 1, 2018 of approximately $220M to $265M
Capitalized commissions as of October 1 estimated between $35 – $45M
• Future expense recognition from this asset will be as follows:
• FY’19 between $10M and $15M
• FY’20 between $10M and $15M
• FY’21 and after between $12M and $15M
- 35. 35 © 2018 Nuance Communications, Inc. All rights reserved