After laying out its fiscal third-quarter 2008 results, speech and imaging solutions firm and Motley Fool Hidden Gems recommendation Nuance Communications
Nuance reported fairly predictably revenue and earnings -- or lack thereof. Revenue was $216.7 million on a GAAP basis, 38% better than last year. The bottom line was in the red by $9.9 million, slightly worse than last year's $7.6 million. But non-GAAP comparisons, which factor out acquisition-related expenses and stock options, were actually slightly ahead of analysts' average expectation.
The regular stream of acquisitions -- though costly -- continues to show fundamental benefits in operations. Nuance has seen its organic business grow by 14% this quarter. The mobile embedded revenue from A-list customers such as Nokia
Offsetting the growth, the company has seen a big drop in sales of its Dragon NaturallySpeaking speech software line, but this was anticipated as Nuance prepares to launch the latest version. Nuance has also seen some weakness in enterprise solutions, as larger economic conditions curtail spending at large firms.
But even dropping sales and dire outlooks from U.S. automakers like GM
On-demand solution sales are also expected to make up 20% of revenue in the next quarter and nearly 30% in fiscal year 2009. New agreements with large clients like Cisco
Nuance is also making a dent in those pesky margins, with operating margins expanding and operating cash flow growing to $48.1 million this quarter. Nuance is still a long-term investment story, but the picture still looks bright.
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Fool contributor Dave Mock doesn't play the lottery so doesn't have to worry about any potential windfall profit tax. He owns no shares of companies mentioned here and is the author of The Qualcomm Equation. Nuance is a Hidden Gems recommendation. The Fool's disclosure policy slays dragons and saves fair maidens.