From Fly on the Wall:
11:52 EDT NUAN Nuance shares fall over 10% as Q3 results, guidance disappoints
Shares of voice and language solutions provider Nuance (NUAN) are sharply lower after the company's guidance missed analysts' expectations. WHAT'S NEW: The company reported third quarter earnings per share 27c on revenue of $486.8M, against analysts' estimates of 27c and $498.56M, respectively. The company's Q3 non-GAAP operating margin was 23.5%, down from 28.1% in the year-ago period. Despite the underperformance in revenue, Nuance said its EPS came in at the midpoint of its guidance range as a result of cost reductions and expense control. The company also reported year over year bookings growth of 17% and deferred revenue growth of 32%. WHAT'S NOTABLE: Looking ahead, Nuance forecast fourth quarter EPS of 24c-29c and $500M-$520M, both falling well short of analysts' estimates of 34c and $540.49M, respectively. The comany also sees fiscal year 2014 EPS of $1.03-$1.08 on revenue of $1.97B-$1.99B, below estimates of $1.13 and $2.02B. In prepared remarks, the company said the transition to recurring revenue models continue to happen faster than it had anticipated, weighing heavily on near-term revenue growth and a bookings growth rate for recurring revenue type that is higher than overall bookings growth rate. ANALYST OPINION: This morning, Craig-Hallum shared its concerns about the competitive and operating environments in both Healthcare and Mobile segments. Although the firm said bookings were not as bad as the top-line miss suggests, Nuance's results open "another series of questions as to how far we really are through this transition." It maintained its Hold rating and cautious stance on the company. Canaccord analysts, meanwhile, view the sell-off as an over-reaction and believes the higher booking numbers make the stock relatively inexpensive. The firm is confident in Nuance's pipeline heading into Q4 and 2015. PRICE ACTION: In late-morning trading, shares of Nuance dropped $1.94, or 10.72%, to $16.16.
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