When Nuance Communications (NUAN) recently reported earnings, it acknowledged that many of its customers have begun updating their compensation agreements with the company.
Instead of being paid upfront in a lump-sum payment, customers are opting to compensate the voice-recognition technology company on an on-demand basis, meaning that they will pay only for the services they use over the life of their contracts. As a result, Nuance was forced to lower guidance for its next-quarter and current-year results, indicating that this revenue shift is putting pressure on near-term results. Going forward, Nuance expects that this shift will ultimately benefit the company on a mid-term and long-term basis.
In the following video, Fool contributor Steve Heller discusses Nuance's revenue transition and how investors can tell whether the longer-term revenue growth story will remain intact.
