What: Shares of Nuance Communications Inc. (NASDAQ:NUAN) were down 10% as of 2:15 p.m. EDT Tuesday after the company announced mixed fiscal third-quarter 2016 results and light forward guidance.
So what: Based on generally accepted accounting principles (GAAP), Nuance's revenue was flat from the same year-ago period, at $477.9 million, and translated to a GAAP net loss of $11.8 million, or $0.04 per share, narrowed from a GAAP net loss of $39.4 million, or $0.13 per share in last year's fiscal Q3.
On an adjusted (non-GAAP) basis, which includes $7 million of revenue excluded from GAAP revenue due to accounting treatment of acquisitions, Nuance's quarterly revenue declined 0.8% year over year, to $484.9 million. Adjusted net income grew 6.6% year over year, to $107.8 million, and -- with the help of share repurchases over the past year -- increased 18.8% on a per-share basis, to $0.38. Analysts, on average, were looking for higher adjusted quarterly revenue of $490.1 million, and slightly lower adjusted earnings of $0.37 per share.
Nuance CFO Daniel Tempesta focused on the good, stating, "Overall, we have delivered a solid performance in our third quarter and year-to-date 2016, particularly in our Enterprise segment and automotive business. Balancing our continued initiatives to reduce costs and improve productivity with investments in our products and growth markets, we believe we are positioning the company for renewed growth and profitability."
Now what: For the fiscal fourth quarter, however, Nuance anticipates adjusted revenue between $498 million and $512 million, and adjusted earnings per share between $0.37 and $0.41. Keeping in mind we normally don't pay close attention to Wall Street's short-term demands, analysts' consensus estimates predicted Nuance would achieve fiscal Q4 revenue of $518 million, and adjusted earnings of $0.42 per share.
Finally, for the full fiscal-year 2016, Nuance now expects adjusted revenue between $1.965 billion and $1.979 billion (a reduction from its previous range of $1.975 billion to $2.005 billion), and adjusted earnings per share between $1.48 and $1.52 (compared to its previous range of $1.48 to $1.56).
During the subsequent conference call, management explained that, while the company entered the fourth quarter with a "robust pipeline," they "cannot predict with confidence" that a number of large deals in the $10-million to $50-million range will close by the end of the fiscal year. As such, Nuance is now forecasting new bookings to exclude several deals, and effectively be flat on a year-over-year basis in fiscal 2016.
That's fair enough, as it leaves open the possibility that Nuance could over deliver on this cautious guidance. But for now, it's no surprise to see our fickle market driving shares down today.