It must be an excruciating exercise. Every three months, speech and imaging specialist Nuance Communications
On a GAAP basis, Nuance reported a 40% jump in revenue this quarter, to $179.9 million. On the bottom line, the company lost $3.4 million, or $0.02 per share. When one-time items such as stock compensation and acquisition-related expenses are removed, the company brought in $37 million, demonstrating that there are significant costs associated with Nuance's intensive acquisition pace.
To make the operational picture a little clearer, Nuance's management also noted that organic revenue growth was 18% this quarter and 19% for the full year. This growth excludes the benefits of recent acquisitions, so investors get a flavor of growth in existing business units. Ultimately, management's goal is to maintain 20% organic growth across all business segments.
While much of the rapid growth has come from acquisitions, CEO Paul Ricci also noted that the company continues to win new designs and expand relationships with customers such as AT&T
Even with the continued strong growth at the early stages of many speech markets, the stock certainly carries risks. One of the brightest opportunities ahead for Nuance is in mobile search, which lies squarely in the crosshairs of Google
And with multiple acquisitions clouding the financials, it's difficult to value the profitability of the underlying business. Management itself has even stated that it is getting more and more difficult to separate organic from non-organic revenue. Ultimately, investors need a little faith that growth in the various speech recognition markets will make up for the investments Nuance is plowing into the business today.
Nuance is up 197% since first being recommended as a Motley Fool Hidden Gems pick. Check out what other gems lead analysts Tom Gardner and Bill Mann are recommending today with a free 30-day trial of the service.
Fool contributor Dave Mock doesn't put much weight behind items labeled "organic" anymore. He owns no shares of companies mentioned here. He is the author of The Qualcomm Equation. Disney is a Stock Advisor recommendation. Bank of America is an Income Investor pick. The Fool's disclosure policy is a natural synthetic.