DOW JONES NEWSWIRES
Nuance Communications Inc. (NUAN) swung to a fiscal second-quarter profit as strong bookings in the health-care business more than offset rising operating costs, and the speech-software company disclosed the acquisition of printing-services software provider Equitrac Corp. for $157 million in cash.
The company, which makes software that converts speech into text, said the deal will strengthen its partnerships with multifunction printer vendors that current sell both Equitrac and Nuance eCopy scanning services. It will add 4 cents to 5 cents a share in earnings and $27 million to $29 million to its revenue in fiscal 2012. It is expected to close late in the fourth quarter.
Nuance's shares surged Monday on weekend reports from TechCrunch about recent talks with Apple Inc. (AAPL). Although analysts don't generally think an acquisition is in the works, they suggested an expanded licensing deal that could shape the future of its mobile operating system is a possibility.
Nuance had raised its outlook for the period late last month, saying results benefited from improvements in imaging, health care and enterprise and continued strength in the mobile and consumer segment.
The company has reported steady revenue growth over the years but has struggled to turn a profit.
For the quarter ended March 31, Nuance posted a profit of $1.74 million, or a penny a share, compared with a year-earlier loss of $15.4 million, or 5 cents a share. Excluding stock-based compensation, acquisition-related costs and other impacts, earnings rose to 32 cents a share from 28 cents. Revenue climbed 17%, to $319 million, while adjusted revenue increased 13%, to $332 million.
The company's boosted April outlook called for per-share earnings of 31 cents to 32 cents on fully reported revenue of $316 million to $319 million.
Gross margin narrowed to 60.8% from 62.1% as operating costs rose 4.7% to $183.9 million.
At Nuance's health-care solutions unit, its largest business, adjusted revenue grew 13%. The mobile and consumer segment's revenue surged 16%, while it rose 3.8% for enterprise. The figures are adjusted for revenue lost to accounting treatment for acquisitions.
In February, Standard & Poor's Ratings Services lifted its junk-level credit ratings on Nuance, saying the market for speech recognition technology is still rapidly evolving and could open to much wider competition. As a result, it viewed Nuance's leading position in the market, a significant level of recurring revenue and a diverse customer base as ratings support.
Shares were down 1.9%, at $21.20 in after-hours trading, and have climbed 19% so far this year.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356; lauren.pollock@dowjones.com
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