Author Topic: CRNC - Cerence  (Read 1104 times)

spartansaver

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CRNC - Cerence
« on: December 02, 2019, 01:24:31 PM »
-~$600mn market cap spin from Nuance
   - Nuance provides AI voice technologies
-Cerence is the #1 player (claim 52% market share) in the automotive digital solutions market (voice enabled: navigation, heating/cooling, media, communication, info, and tools)
-High margin software business (management guide towards 25% operating margins)
-Negative tangible invested capital (high returns)
-Connected business growing at fast pace (30% in FY18 - 22% of FY18 sales)
   -Connected business links vehicles to online tools and is a platform for 3rd party virtual assistants (Alexa, Siri, etc.)
-Trading at ~9.0x EV to FY21 EBIT



kh812000

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Re: CRNC - Cerence
« Reply #1 on: December 09, 2019, 10:36:06 AM »
Are you concerned about the Legacy connected revenues line where the cash was already collected years ago and now is a rev and CFO headwind until it rolls off?  In 2022 the 65mm revs drops to 40mm and goes to 0 in 2027.

To me the better piece is NUAN.  Launching AI  / Ambient Clinical Intelligence in 2020 and partnered with Epic/Meditech on EHR.  Revenues will accelerate in H220 and become a material driver in 2021.  Trading at 10XFCF and meager single digit revenue growth on the surface is really hiding a dynamic cloud biz growing 100%+ which is hidden by the shift to the cloud from on premise and by the defocus of low margin legacy transcription biz which is dying....


spartansaver

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Re: CRNC - Cerence
« Reply #2 on: December 09, 2019, 10:56:32 AM »
Connected revenues should help offset the legacy declines as connected revenues are also collected upfront and then amortized.

I didnít look at nuance, but thanks for the idea.

kh812000

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Re: CRNC - Cerence
« Reply #3 on: January 13, 2020, 08:47:35 AM »
NUAN Upgraded by MS and the street including MS does not include ANY Ambient Clinical Intelligence revenues expected to ramp in 2020...  Lots of upside here i think.


Over the past 18 months, Nuance has undergone a comprehensive rationalization of its product portfolio which has resulted in the sale of its Imaging business,a successful spin-off of its Automotive unit (CRNC) and a wind down of non-core segments. Out of this process,emerges a leaner, more focused organization that is better suited to grow into its most defensible and attractive opportunities. These opportunities primarily include Healthcare (~63% of FY20e revenue) and the Contact Center (~35% of FY20e revenue) Ė large growth markets where Nuance has long-standing expertise and where its conversational AI technology has an advantage over competitors, in our view. As a result of more focused investment, international expansion and an ongoing cloud transition that carries significant revenue uplift potential, we see annualized revenue growth accelerating to 5% in FY20-FY23 compared to the 1.6% CAGR seen in the FY16-FY19 time frame.Furthermore, management sees ~100 bps of annual margin expansion starting in FY21 which when coupled with share buybacks and the potential for further de-leveraging, results in our 11%
earnings growth forecast thru FY23 compared to the 2% annual growth seen in FY16-FY19.

While Not Assumed in Guidance, Adoption of ACI Solution Represents Significant Upside Potential. Ambient Clinical Intelligence (ACI) technology is a new hardware/software solution that removes all of the friction associated with documenting the patient interaction. Currently ACI is slated for release in 1Q of CY20 and will initially target five specialties: ENT, ophthalmology, dermatology, podiatry and orthopedics.   We do not assume ACI contribution in our base case, traction with
ACI represents a significant revenue uplift opportunity,