Nuance Communications Inc (NASDAQ: NUAN) stock fell over 2% in the pre-market session of Feb 2nd, 2021 (Source: Google finance) post first quarter of FY 21 performance. Healthcare revenue declined 7% compared to Q1 a year ago, again, driven by the government coding contract that did not renew.
However, due to a recent request by the government for an extension, the company now expects to receive additional revenue from this contract in fiscal year ’21. Healthcare Cloud revenue grew 28% year-over-year in the quarter, driven by strong performance from the Dragon Medical One and CDE One offerings. Overall, Healthcare segment profit in Q1 was very strong and came in at 37.5%, up over 6 percentage points quarter-over-quarter and 3 percentage points compared to Q1 of last year. These higher profits are on the back of the mix shift away from the on-premise coding business and towards high-margin cloud revenues, particularly within Dragon Medical One. Enterprise business revenue was of $139 million, which was flat year-over-year due to a strong Q1 a year ago, driven primarily by strength in Security & Biometrics. Enterprise segment profit in Q1 was 29.8%, which is up 7 percentage points quarter-over-quarter, but down 40 basis points compared to Q1 of last year. The company ended the quarter with a cash and marketable securities balance of $374 million.
NUAN in the first quarter of FY 21 has reported the adjusted earnings per share of 20 cents, beating the analysts’ estimates for the adjusted earnings per share of 18 cents, according to the Zacks Consensus Estimate. The company had reported 4 percent decline in the adjusted revenue to $345.75 million in the first quarter of FY 21, beating the analysts’ estimates for revenue by 2.09%. This decline was mainly due to a non-strategic healthcare coding contract with the government that did not renew, creating a difficult compare versus Q1 of last year. The company posted the non-GAAP gross margins of 65.2% and non-GAAP operating margins at 26.4%.
On the other hand, the company announced the acquisition of Saykara, Inc., a startup focused on developing a mobile AI assistant to automate clinical documentation for physicians. The acquisition will help in Nuance’s ongoing expansion of market and technical leadership in conversational artificial intelligence (AI) and ambient clinical intelligence (ACI) solutions that reduce clinician burnout, enhance patient experiences, and improve overall health system financial integrity.