Nuance Communications, Inc. Beats Q2 Estimates, Sets Modest Q3 Goals

Image source: Nuance Communications.

Nuance Communications (NASDAQ: NUAN  ) just reported results for the second quarter of fiscal year 2014.

The provider of voice and language technologies saw non-GAAP sales rising 1.2% year over year, to $490 million. Adjusted earnings decreased 18%, to $0.28 per diluted share. Analysts were expecting earnings of $0.23 per share on $484 million in sales.

Order bookings increased 43% year over year, driven by high demand for health-care and automotive solutions. The resulting 1.34 book-to-bill ratio is firmly in positive territory. Book-to-bill figures higher than 1.0 are seen as harbingers of growing revenues, and often provide visibility into strong sales in upcoming quarters.

The solid bookings growth also shows strong uptake of long-term license subscriptions, which Nuance now prefers over the perpetual licenses it sold in the past. Recurring revenue under these long-term contracts now accounts for 64% of the company's total sales.

Looking ahead, Nuance raised the midpoint of its full-year bookings guidance from $2.2 billion to $2.3 billion.

In the third quarter, the rapid adoption of long-term contracts will put pressure on revenue, even as bookings grow. Adjusted revenues should stop near $498 million, short of the Street's $527 million target for the period. Non-GAAP earnings guidance points to roughly $0.27 per share in the third quarter, also below analysts' $0.30 projections.

"Balancing more aggressive moves to reduce costs and improve productivity with investments in our products and markets, we believe we are well-positioned for renewed growth and profitability," said Nuance CFO Tom Beaudoin in a prepared statement.

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Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

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