Q2 2020 Earnings Call

Telephone keypad and if you require any further assistance. Please press start zero I would now like to turn the conference over to Tracy for me. Please go ahead.

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Good afternoon, and welcome to our second quarter 2020 call I hope everyone is healthy and the naming safe during this time.

Safety in mind, we are utilized in a virtual approach an exercise in social distance, while conducting next call joining the on the call today to discuss our results and response to the Corona virus Global pandemic is chief Executive Officer, Mark Benjamin and Chief Financial Officer, Damn Pen Pesta.

During the Cuban a portion of the call will be joined by Rob data sheet revenue officer, Robert read them in executive Vice President of Enterprise and Pete their lack senior Vice President of health care.

Before we begin I would like to remind everyone that our discussion includes prediction estimates expectations and other forward looking statements.

Statements are subject to risks and uncertain fees that could cause material differences in our actual results.

Please refer to our recent F.U.P. file and burn discussion of these risks.

All right <unk>. The income statement results are non gap unless otherwise stated.

As noted in our press release, we issued prepared remarks in advance and this call which are available on our on our website that material is intended to supplement our comments on this call today and with that I'm trying to call over to Mark.

Oh, Thank you Tracy and good afternoon. Thank you for joining us before we kick off the call.

No than my thoughts and those of our entire new odds community or with all of those were struggling and have been affected by coded made teams.

We also want to expand our deepest gratitude for all those were working on the front lines, especially doctors nurses in clinical staff.

Are working around the clock to care for those in need well also risking their own health and wellbeing.

These are unprecedented in challenging times that are affecting all of us.

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As we each learn how to live and work with a new reality.

Leadership team your first and foremost committed to protecting the health and wellbeing of our employees their families in our communities and so we made the decision was in early March to transition our global workforce to work from home.

Please to share, but this is gone incredibly smoothly, but testament to the resiliency and spirit of employees as well as our infrastructure and preparedness across the company.

A lot of working remote has its unique challenges are team has remain engaged highly productive and committed to driving business results.

Our actions of also enabled us to dramatically mitigate the spread of the riders amongst our nuance tea.

Fact, the number of our employees worldwide contracted covert 19 to date.

In the single digits, very really except they're all doing well.

Additionally, you have increased the resources available through our employee assistance programs enhanced our benefit offerings to further support or employees and their families.

We are also acutely aware of the significant challenges many of our customers are experience.

We are working around the clock to support them.

Customers operate in the most critical of industries healthcare financial services, telecommunications logistics and travel enabling them to serve their customers and communities is paramount, especially during these unprecedented attacks.

We've taken a number of actions a partner with and provide exceptional support to our customers and we all need regular contact with them to better understand how we can help alleviate the massive amounts of pressure and volume they're experiencing.

Based on those conversations we design several new offerings to support them. During these challenging times, which I'd like to briefly highlight.

We are offering free add on dragging medical licenses and cobin 19 contact packs for all dragging medical customers.

By simplifying documentation and enabling nurse isn't positions to capture the patient story using their mobile phones. These AD on licenses are instrumental and boosting provider efficiency and ensuring the capture crucial data points cobin 19 patients.

The date, we are provided nearly 50000 free licenses across the country to.

Keep clinicians from sharing microphones provide support two additional medical staff and most importantly outfit mobile hospital units such as the job of center in New York City.

Additionally, we're providing complimentary services and access to our solutions to help navigate the current environment, including free power, Mike mogul empower scribe mobile app licenses, which enable radiologist to read diagnostic images and dictate reports remotely.

Similarly are enterprise customers are facing increasing pressures contact centre employees are working from home well organizations cope with a large surges and calls and digital volumes.

We've responded quickly to these challenges by providing temporary volume spike capacity and delivering solutions that automate self service with the expansion of digital virtual agents.

Our ability or willingness to do the right thing and support one another or communities and our customers is unparalleled.

It's going above and beyond to make sure our customers have what they need to care for patients as efficiently as possible handle increasing call volume, despite major spikes or transferring our entire workforce to a home environment and a short period of time.

Are incredible accomplishments and I couldn't be more proud of our nuance team.

The strategic decisions, we made in prior years and quarter's such as simplifying our portfolio everything to the clouds and paying down debt have resulted in a highly recurring revenue model and the strong balance sheet.

We are confident that these decisions have position nuance well from both a financial end the operational perspective, enabling the company to whether any near term type.

Importantly, we believe the market's we serve will continue to be critical to our economies and we will competently retain our market leadership.

As a result, and despite some near term challenges, we feel confident that we will emerge from coven 19, well positions and actually stronger as a company.

Specifically, we believe that the world will look back on covertly team as a key turning point in the ship to cloud based technology.

Digitalisation and automation with A.I. solutions at the core.

As more people turned to tell a health.

See a market expansion opportunity for new subscriptions for dragging and be an experience for <unk>.

Regardless of any near term challenges that both healthcare and enterprise customers pace.

We remain confident that our strategic positioning and importance to our customers revenue in customer service offerings is critical.

Even in a worst case scenario, where some hospitals and enterprises, where to close we don't envision a scenario, where the number of doctors change or they demand for customer service automation goes down over the mid to long term.

Oh and markets May experience, some short term disruptions, but our positioning within them has never been stronger.

And when they returned to normalcy in whatever form that ultimately tags, we believe we will emerge stronger and more insert girls to our customers than ever before.

Turning out or acute two results.

Despite cogan 19 challenges, we hadn't other strong quarter.

Point out a few highlights.

Exceeded the high end of our guidance for revenue margins any P.S.

Made continued progress and octave it to the cloud with strong dragging medical one performance, which has contributed to our solid first half or grow.

We had another strong quarter for enterprise with 19% here every year organic growth the highest and over 10 years, driven largely by strong performance and intelligent engagement.

Stacks and I've already had comments recording significant improvements in a position satisfaction patient throughput in time required for completion of their clinical documentation.

Or international markets continued to scale as we launched dragging medical clout in five you European countries.

And finally in line with our focus on Capitol occasion, we pay down 170 million up to that and we purchase 3 million shares before these programs were put on hold on the covert 19 outbreak became a pandemic in March.

To preserve liquidity paused, our share repurchase activity for the near term.

Despite volatility within the broader market.

Very pumping.

Liquidity position in the overall strains of our business model.

As a reminder, significant and growing part of our revenues recurring.

Provides an element of stability and this unprecedented time gives us visibility into future performance.

In this regard during the quarter, we took several key actions to also protects our financial straights and positioning.

First me greatly reduced our hiring across the company, except for a strategic priorities in an issue.

We defer to all merit increases for all employees worldwide.

Limited all discretionary spending across the organization and finally, we drew 230 million from our revolving credit facility, bringing our cash balance to over 500 million at quarter N.

Scandals speak to these actions and further detail, but we feel these steps were prudent and responsible to preserve cash during this time.

Turning out or health care of business. Despite cobin 19 challenges, we deliberately another solid quarter of growth with Q2 revenue up 10 per cent here every year.

In particular, we benefited from notable strength and dragging medical one which was up 46% you're over here.

In spite of the surrounding turbulence or strategy for accelerating A.I. innovation in M.L. based tools to improve work flow and productivity remain intact.

We were excited turnouts during the quarter, the general availability and accelerated delivery of our cats ambient clinical intelligence or H.C.I. solution.

Although cams was cancelled due to coordinate too we were able to life stream the demo to over 300 customers for more than 150 organizations.

I'm extremely proud of our team per quickly pulling together this alternative plans.

The demos when it falls to the leaving our customers impressed as well as adding to their level of interest, which <unk>, which continues to remain very high.

No of on Health Rush University Medical Center, and S.S.M. are among the many leading healthcare organizations that have signed up for decks.

Healthcare organizations, such as Nebraska Medicine, and others are already realizing the benefits of the technology reporting in 88% increase provider satisfaction scores for clinical documentation and patient consent rates are more than 90%.

In the corridor, we also announced a partnership with the American Medical Association or A.M. may to integrate backs, but they are integrated health model an issue.

You believe this collaboration is further validation of our solution. It serves as another key step to increase market adoption.

Oh and now like to highlight a few other exciting healthcare developments beyond x.

We continue to execute on our international market expansion.

Drag and medical cloudy and five new European countries, Germany, Austria, Denmark, Finland and Sweden.

On the heels of our recent launching France, Belgium, the Netherlands in Australia.

Additionally, we continue to have success with our new cloud base power scribe, one platform with numerous wins in the core.

Powershare our club they emit sharing solution also had a strong quarter.

Overall I'm pleased with the progress being made on these initiatives in a positive feedback we continued to receive from our radiology clients.

Before moving to the enterprise business I'd like to briefly highlight the near term impacts of Coven 19 on our health care business.

Well, we don't expect the material impacts from our subscription based businesses, we expect our him and powers probably volumes to decrease given a significant reduction in elective and non coated related procedures.

Additionally, we expect near term pressure on new bookings as our healthcare customers Reprioritized projects focus on Coca 90.

We continue to monitor our sales pipeline closely and maintain engagement with customers throughout this process.

Danville speak to the financial implications in more detail and a few minutes and Rob daughter will be available for Q. in a for any go to market questions.

Moving to the enterprise business, new wants deliver to record corridor with Q2 revenue up 19% year over year.

Performance was in line with the trends and initiatives laid out at our Investor day in December.

Specifically I have your voice performs in line with expectations.

Strong growth and intelligent engagement.

Strength in our security and blind metrics and digital engagement solutions.

Multiple security and buy a metric wings from both existing and new customers, including there's our games and wings financial <unk>.

We also saw increased demands and new markets, such as large grocery stores, where customers like albertsons transition to online ordering bottles.

In April we launched dark cloud days Mic G. I write tool set which enables organizations to integrate conversational <unk> into self service workflows.

As global organizations increasingly look to integrate conversational <unk> into their digital and voice customer engagements the ability to build a conversational experience once and deploy it across channels and modalities has become critical.

It's solution has already been successfully deployed to a customer Bader program, including a large airline putting nuance mix at the center of its V.A. or virtual assistant and I.D.R., how many channels strategy.

And and Entertainment company, you're saying, it's a power voice control and it's gaming consoles.

We are incredibly excited to watch more success stories unfold as organizations integrate this cloud ignostic technology into their workstreams.

Now I'd like to shift gears to discuss the near term covered 19 effects and the enterprise business.

While our enterprise revenue can fluctuate from period to period based on customer service volumes, we have a diversified customer base, providing stability. During these challenging times, Furthermore, or some of the voice and digital volume surges, we experience our transients nature, we expect the broad shift to digital to remain.

In the key seeing it emerges out of this pandemic instilling confidence in our intelligent engagement growth strategy and go to market.

In conclusion, despite the uncertain near term operating environment or long term fundamentals and growth opportunities remain very strong.

While we continue to exercise prudence and managing this environment, we are not taking our foot off the gas and we will continue to execute against our focus strategy.

Dancing, our state of the art conversational, a guy in handy and technologies.

We remain highly competent long-term trajectory and continued progress or goals and initiatives.

<unk>, making some changes to our near term guy.

Reiterating our mid term outlook that we provided I'd investor.

I truly believe our markets are going to expand post covert 19 as customers. Appreciate the critical need four hour A.I. based solutions remote access capabilities for health care workers and increased demand for tell her how and security in fraud protection.

This is the value we provide each and every day and we are in a great position to meet and exceed our customers needs now in in the future.

We remain an incredibly resilient company and I'm confident that we will not only whether these near term challenges that we all emerge from this pandemic stronger than ever.

I'd like to turn the call over to Dan discuss our financial results and guidance.

Thanks, Mark and thanks, everyone for joining us today.

Spend a minute talking for acute your results then I'll spend the balance of my time discussing how we expect the current coded situation to impact our results as well as provide some analysis to help you understand or liquidity position.

Are cute you reported results for strong with revenues of $370 million in earnings per share of 21 sense, both coming in above the high end of our guidance range.

Or health care business grew 10% in generally performed in line with our high expectations, while our enterprise business crew, 19%, which was better than we expected.

Our healthcare results were driven by a very strong dragging medical cloud revenue growth a 46% in line with our expectations.

Additionally, we saw revenue growth of power scribe, one in C.B.E. one.

As our early customers in these cloud offerings have begun to go live.

We also experienced growth in our radiology in other category.

Driven by the timing of multi year term license renewal.

Which was hired this quarter than a year ago.

I would like to remind you that the revenue in this category will continue to be lumpy in the near term.

Due to the timing of term licenses as well as the effective converting our radiology in C.D.I. on premise install base to our new cloud solutions.

Until the Covitz situation really took hold in March the quarter was progressing nicely across all categories.

Once the healthcare system started to become taxed.

We saw reduced volume activity in our him transcription business as well as our on premise power scribe radiology reporting business.

However, these reductions only had a modest effect in our second quarter.

Or health care segment margins were 32%.

Driven primarily by the ratio of high margin cloud business relative to our lower margin him transcription in E.H.R. implementation services.

Turning to enterprise the business crew, 19% year over year as we saw a strong revenue from our digital engagement and security and biometrics offerings.

Similar to Q1, we experienced very strong licensing and related implementations from a couple of large on premise customers.

We are pleased with these results, especially with the demand in our intelligent engagement business lines.

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Enterprise remains at lumpy business subject to fluctuation from theory to period do the timing of large license activity.

Lastly for enterprise or segment margins were 28% and benefited from strong license revenue.

At March 31st we had cash and marketable securities a $526 million, which included $230 million from our evolving line of credit, which we drew down at the end of March.

Had we not drawn in the revolver are cashing marketable securities balance <unk>.

Landed at the mid point of our cash guidance range of $250 million to $350 million.

Well D.S. So is 54 days in very strong this quarter due to better than expected collections and enterprise.

We did see some hospitals begin to slow payment towards the end of March, which I'll discuss more and a few minutes.

Turning to A.R.R. as you will recall, we ended fiscal 2019 with era of $298 million in guided growth for fiscal year 2020 of 26, 34% or mid point growth rate of 30%.

Due to the uncertainties created by Cohmad, we are adjusting our guidance to a growth rate of 13% to 21%.

Well I get into the assumptions beneath our broader guidance range in a few minutes I think it's important to know that we've already booked enough air are so far this fiscal year.

Hit the low end of our revised range, leaving that's very confident in the adjusted growth expectations.

No, let's step back and discuss the path forward.

As Mark pointed out we feel very good about the long term health of our business, especially as it relates to our critical positioning within the health system, and then to price customer engagement.

The basic tenets of the business model laid out during our Investor day still hold true when you look past the virus impacts.

Are 2020 progress through the beginning of March only reinforces our confidence.

Furthermore, we do not for C. amid or longterm reduction in the number of doctors.

Then for hospital procedures or patient encounters and therefore, we believe than any covert impacts on our business will be short term in nature.

With that said, we do expect a few near term headwinds that I'd like to walk you through.

First hospitals are reprioritizing some of their projects to address their immediate needs related to the virus.

While our sales professional services and implementation teams have proven to be very effective working remotely. This reprioritization by hospitals will likely cause near term pressure on bookings and it will therefore impact our new air our growth.

Second hospitals are seeing a reduction in their elective procedure volumes.

This impacts us in the following ways.

With fewer elective procedures and patient encounters to transcribe our him transcription revenues are expected to be down more than originally planned for the year.

Beginning in the Middle of March we saw a sharp decline in him in mind transcribed.

Shopping to a level is the lowest 50 per cent of normal volume, but the middle of April.

Since that time, we've seen a slight up chicken volumes, although we are not ready to say the s. tick represents the start of a recovery.

Similarly imaging activity in a hospital has a direct correlation to the volume of elective procedures. Therefore, we expect the amount of radiology reports generated well also come down.

This will impact the portion of radiology business, where revenues are recorded on a per report basis.

We saw a comparable declined to that of H. I am with radiology reports being reduced by as much as 55% from normal levels through the middle of April.

And consistent with H. I am we have recently seen a slight uptick an activity.

We have also seen some electronic health record implementations being deferred.

This can be due to both the change in the hospitals priorities as well as the requirements to be on premise for these types of services.

They should lead to some short term pressure on our professional services revenues, particularly with R.E.H.R. implementation services.

All these trends have an obvious and significant financial impact in our hospital clients.

Since elective surgeries and procedures provide high profit margins to hospitals reductions in procedure volume negatively impact hospitals profitability in cash flows.

We see these financial pressures impacting our various segments in the provider space differently.

For smaller hospitals, and ambulatory centres, which are not capitalize to the same expenses their larger peers. You would expect this segment to be more susceptible to financial stress in the near term.

This is a small portion of our health care customer base.

In fact hospitals with 100 beds or less.

It or not affiliated with the large hospital system represent approximately 3% of our healthcare revenue.

And unaffiliated physician practice customers represent approximately 4% of our healthcare revenue.

With larger hospitals and systems.

Tend to operate with higher margins and have more access to capital then they're smaller peers.

They can also reallocate cash previously earmarked for large capital projects to focus on operations in business continuity in the near term.

In both segments hospitals are likely to request extended payment terms from their vendors to bridge their own cash flow gaps.

We have started to see these requests come in from a small number of our customers.

Our policy with these types of request is to support our customers in the best way possible, while ensuring we don't jeopardize their own business.

With that said, we do expect our healthcare D.S.O.'s to expand during our third and fourth quarters.

Shifting to our enterprise business for a moment as Mark mentioned, we have seen strength from customers and some industry verticals offset by weakness in other industry verticals.

We expect this trend to continue into the second half of our fiscal year.

Although we anticipate the licensing portion of this business to remain lumpy.

The Furloughing of call Center agents is driving the need for increased automation.

Oh diversification across various industries provides us with an attractive hedge.

The decline volumes from industries like travelling hospitality more than offset by strength and financial services.

Telecommunications.

From a cash collection standpoint, we do expect some extension to our enterprise D.S. shows, but not for the same level has that in health care.

Turn anything guidance, we are providing revenue in earnings per share guidance for both Q3 in full year 2020.

Taking into consideration the recent trends I just discussed.

We are also providing wider ranges than normal due to the uncertainties that exist in the current environment.

Lastly, while we will continue to provide full your health care and enterprise revenue guidance.

For now we are collapsing our healthcare revenue business line guide fewer categories, given the wider range of variability within those individual lines.

Please note that we will continue to provide guidance on our dragging medical cloud revenue line item, which you can find in our prepared remarks document.

Our guidance framework, starting with healthcare includes the following assumptions.

Gray R.R.S. previously discussed the low end of our guidance assumes no new bookings are required from this day forward, whereas the high end assumes continued new bookings activity, albeit it's significantly lower levels during the second half and we originally planned.

For our cloud subscription based businesses like D.M. low power scribe, one and C.D.E. One there is no material revenue impact from covert 19.

In fact, despite reducing R.A.R. outlook, we are raising our dragging medical cloud revenue forecast by $3 million.

Well, we do not currently breakout revenue from power scribe, one C.D.E. one in the remaining emerging air our businesses, we are expecting similar overachievement across all healthcare cloud subscription businesses.

Due to a strong first half and faster time to go live than originally planned.

For volume driven businesses like him in parts of our on premise radiology business.

The low end assumes that volumes continue at their April lows for the remainder of the fiscal year.

The high end assumes a continuation of the improvement trends we saw at the end of April and into early May.

For our book and shit businesslike dragging medical licenses.

The low end as soon as a meaningful reduction from our original plans, whereas the high end assumes a gradual return of bookings activity over the course of the fiscal year.

For our services business.

The low end assumes that non critical health care workers continue to be prevented from entering the hospital.

Whereas the high end as soon as an easing of those regulations and a gradual returned to on premise activity throughout the year.

And finally for our enterprise business, a low assumes some licensing implementation deferrals by our clients through the second half of the year.

For the high end, our plans remain largely unchanged as we have a natural hedge occurring within industry segments as I previously discussed.

Taking all that into consideration I'll revise fiscal 2020 revenue guidance is a range of 1.405 billion to $1.485 billion.

Compared to our previous guidance misrepresented decline of $70 million a revenue at the mid point of the range.

And almost half of that reduction relates to our nonstrategic low margin.

Transcription in the H.R. implementation services business.

We are also revising our operating margin in earnings per share guidance.

And the lower revenue expectations.

Offset by certain expense reductions.

While we are committed to our strategic priorities and investments in the second half a fiscal 2020.

We are significantly cutting costs by eliminating certain discretionary spending items.

Reducing hiring across the company.

Bring all merit increases for employees.

Vastly reducing our travel budgets.

And then impact is a revised operating margin guidance range of 23, 24% in earnings per share of 76 to 86th sense.

R. Q3 guidance also takes these factors into consideration.

As well as the incremental visibility we have.

Twin since we are already five weeks into the quarter.

For two three we are expecting revenue between 302 and $328 million in earnings per share of 10 cents to 14 cents.

With regards to cash flow, while we have confidence in receiving payments from our customers. We are withdrawing our full year cash flow guidance due to the uncertainty related to the timing of payments from our hospital customers.

With only two quarters left in our fiscal year.

Range of possible outcomes related to timing of payment is considerable and therefore potentially too wide to predict.

However to help you understand our liquidity position under a severe stress tests.

Wanted to provide you a framework.

If you were to assume the low end of our revenue and profit guidance.

And you also assumed a situation where healthcare D.S. those tripled through the remainder of our fiscal year.

It would still have ample liquidity with cash 'em marketable securities in excess of $300 million at the end of our fiscal year.

This analysis provides this high confidence that our current cash balance of $526 million positions us well to withstand extreme liquidity circumstances if required.

It's marked discussed earlier, we are encouraged by the resilience of our business and we remain confident in our mid in long term strategic outlook.

That I'd like to turn the call back over to the operated take your questions.

Oh. This time, if anybody has a question <unk> on your telephone keypad again that would be star wine on your telephone. Okay. Alright. Please let me a question too wine and one Hello inference question comes from keep Italia come back. Please.

Nine or something.

Okay, Hey, guys. Thanks for taking my questions here how are Ya.

Hey socket.

Oh, Hey, maybe maybe first for you Mark.

Can you just talk a little bit about your conversations with healthcare customers on on maybe how their technology workflows might change. After <unk> you know I guess the short term impacts are understandable now with sort of less elective procedures, but maybe longer term how do you think the corporate experience.

Might change how clinicians want to use tools like dragging medical one or a c. I.

Sure sure. So I appreciate the question Yeah for starters, my conversations with or health care customers. You know over these past several weeks have gone from can you help us with P.P.E.N. other critical.

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And now the conversation and most of our markets have shifted to how they reopen their hospitals and start to bring back elective and and non essential procedures and and patient visit. So you know we are certainly seeing you know that return as far as the topic.

Discussion, but more importantly into your question.

And sprinkled through my comments here on the call already is that.

Conversation really in many ways gives us great confidence that we're we're in the in the right place with the rice solutions and technology and that Unfortunately, while cogan 19 that terrible then.

The importance of efficiency at work flow and productivity.

Iraq and using our solutions with with I A.I. based.

Capabilities really super critical so I I think that is too.

Yeah that physicians were already largely burned out and suffering and certainly this is now highlighted yet again that we need to free up positions to to hire valley work, which is obviously being with their patients. So I think that's one two certainly the capabilities of cloud in Rainbow.

You know capabilities of the of the workforce is critical and certainly healthcare I think that gets.

In many ways accelerated.

We're seeing examples of that I've, just whether o. solutions relate to the cloud, but you even with you know or large radiology base Oh, that's lovely <unk> and just yeah. The the sense that we're going to accelerate the cloud transitions into digital transitions within the hospital systems.

And I'd say probably socket.

One other many others is tele medicine so.

Solution, that's been out in the market you know very low adoption and some some use you know certainly the the ability for patients to be sure to meet with their conditions in their positions without perhaps going into a facility and get.

Getting treated over over a phone over a computer screen. You know is going to become I think you know, it's you know very rapidly utilize the N.R. solution.

Bundled in with Tele Medicine, you know with the massive reduction in clinical documentation among other things will become an expansion opportunity for us and we're already working with.

Many different tele medicine solutions and and companies that provide these channels. If you will to put the X. you know embedded into that so I think we're gonna see you know I think a a great value opportunity coming out of this.

Got it so it makes a ton of sense, maybe from my call up for you down.

You know obviously a lot of recurring revenue here, that's helping to to weather the storm, but I Wanna, maybe touch on on how big the variable parts of the business or and I, I think you'd you'd steps and those with with with someone like him transcription, but I'm interested in in maybe the radiology part of the business and enterprise.

You just say they give some broad brush strokes on on how much of those businesses are sort of volume dependent or non recurring if you will.

Sure Spank suck a good question when we think about enterprise and we've talked about this in the past.

You know about 65% of that business is returning.

In in in in over 40% of the business now is it's hosted now that's variable host, but posted but that's been doing very very well.

And then if you add professional services, which you have to book well in advance you know you're over 80% of that business see a very good recurring visible types of business. There. So that leaves you with less than 20 per cent that are license type activities that you might have to go get.

In in health care.

If you think about the recurring invisible businesses like hosting or clouds subscription businesses professional services in term life since you're well over.

80 per cent in that area. So I think.

No the variable businesses that you were referring to we discussed in in the guidance discussion number one of course is to him transcription activities.

Which we laid out number two is the dragon medical licenses a lot of that you have to book in period in in score and we disclose that and that number shrinks as we make our moved to the cloud and then the last place really isn't that radiology. Another line and there's and we talked about some of the radiology recording activities the n. period activities.

That to a smaller extent.

Have some variability to it so I think that's the summary, as it relates to health care.

Super helpful and get back and Q. Thanks, guys.

They socket.

Mhm crashed in a conference center neat thing that I'm Morgan Stanley.

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Thank you for taking the questions and hope everyone is staying a safe and healthy and congratulate strunk. He won I I really liked when I saw across the board, maybe just a talked a little bit about guidance and and then he did you did a great job sort of laying out the underlying assumptions behind the guidance and I understand almost.

Everything, especially around sort of the near term obstacles or risk in the healthcare business.

The the him business plus radiology business licenses. This all of that makes sense, what I'm a little confused on it is the commentary around the D.M.L., just being more resilient and yet the healthcare A.R.R. cutting down by roughly 10% or something if it could help me.

Line, there's there's two statements, particularly with with the overall <unk> revenue died it's holding in I'm actually living up by 3 million can give it some context around the air art items for the years I think that'd be really helpful.

Sure I think well, let me start with P.A.R. guidance very quickly. This is Dan by the way Thanks, SEC <unk> [noise].

D.A.R.R. is really a function of of robs Ah sales organization going out there and fucking period in scoring that A.R.R. and then of course implementing implementing the the D.M. old offering that as we've said in the past can take 90 days or so that's our assumption sometimes it's faster.

Times, it's slower.

But that of course is getting impacted mainly by deferrals not by a losing deals in this period of time. So we're seeing the a. ours come down.

But the good news is we've done such a good job booking earlier in the year as well as the backlog of D.M.O. that we had that as that's coming on line because of that timing.

We're able to maintain and even be on that revenue guidance. So that's the that's the delta there where you book today, but you don't get it up and running for some period of time and that lag a while impacting A.R.R. is is not really had a big impact works you know.

Understood Oh, not that that's certainly helpful and then or.

In terms of as we think about sort of the medium term of the next call. It two to four quarters. However, long this last.

Tracking medical or transcription as a category from nuance anyway to sort of frame how much of the I.T. budget that represents for your customers I mean, there's a big budget category that people are looking to really rationalize in a more conservative I'm spending.

Firemen or is this I'm not a large parts of the budget and all things equal they would like to grill or even expand this category.

Yeah.

And it does mark and maybe because we have Peter lock on the call. A hill added comments, you know I would say that our our solutions them. So.

Incredibly high or.

And you know and and it's not just a P.N. now <unk>.

Hospital or practice it it also manifests itself.

You know you know a physician satisfaction many other aspects, yeah, but relative to how we price or solution to other costs within the health care systems. We certainly don't don't typically make the first page.

Oh, they are they call. It you know algorithm if you well.

So you know this is you know this is not necessarily something that.

Healthcare would look to reduce costs us something very embedded within a very complex work flow environment.

We had we yeah Mars.

The devices you have many different aspects within within the system. So it's it's certainly not near the top it's an important part for sure. So Pete you have any comments to add.

Yeah, Yeah, Mark. Thanks, Yeah. In addition to you know reinforcing marks point about where we sit in the.

Hierarchy of payments I think I'm certainly not on the first page I think because they'll let us first point, which is really critical as we sit in the middle of their rubbing your cycle. So we directly affect their ability to generate revenue for from two reasons. One is we increase the productivity of a condition. So they can see more patients and we also increase the quality of the notes that drive.

They get paid so we're one of the last thing was that someone would cut as they think about all moving into kind of revenue recovery mode, which is where most of the clients are today as a transition many of them out of.

Covert world and just to add a little bit on to Dan's prior comment that they just <unk> enforcement, we're not seeing any reduction I'm sure robl out to this interest sport demo at all the issue is just as they went into crisis mode to keep their provider say to take care of patients. They just didn't have the bandwidth to you know to.

Worry about certain things they how to survive right. So that's really where the guidance, it's coming from and again Rodman Rob me out to that later thanks for.

Super helpless <unk>. Thank you appreciate it.

Yep.

Next question will come from Daniel <unk> thing.

Thanks, and I I assume robs on as well right on the on the call Yeah, Yeah, Yeah, yeah. Okay.

Great Great. So maybe I mean, you you mark it.

Just walk through.

Sale cycles to I mean from your perspective like how will you navigating almost the other day, maybe just get a little more Grand you are in terms of obviously no face to face mean some of these are more complex outside close now going over tool maybe you can use hit on that and just pivoting.

Given the current environment.

Yeah sure well you know first off it's been a great learning experience for everyone not just a us says sellers, but the buyers and just the entire system.

I'm extremely proud you know no smoke extremely proud of how our team was able to pivot very quickly. This is a is a heavy duty salesforce that's used to getting on a plane and closing a deal.

But they very very I would call it almost seamlessly made the transition to to working remotely and virtually.

But what was really important as we were able to me, even though we were not maybe selling directly or or closing to deal down but as the band with it Peter mentioned earlier, we were staying very much in contact for other reasons to support them with with licenses and other things that they needed to we were very much engage with our customers even threw out.

[noise] there was no period, where you know they just said hey come back in in in three or four months and talk to me. So we kept the level of conversation going and that was really important for a number of reasons first I'll be able to support our customers, which is really you know the most important thing, but it helped a the team morale and you know it meant that what they were talking about every day.

Day mattered, because a lot of this and psychological and sales.

And you know they were they were having you know really positive feelings about their ability to help and support in a very difficult time. So you know there that's kind of the the foundation of it but how it impacted the cycles absolutely as Peter mentioned earlier, it's really a matter of band with more than anything not not a single inflight deal did we.

Take off of our our forecast or pipeline. It just moved it out in our forecast and so yeah. We believe what we what we were talking about before has even more relevant in the future and in some cases as different markets opened backup.

We're starting to actually see that you know kind of motion back in the right direction or probably even faster than we thought so it depends on the the area. The market. As you know you can you have access to some of the same information you see so hot some hot spots and those are as you would imagine you know probably not the place that's engaging right now.

But there are other places that are open them back up other places that weren't hit the same and so we have an opportunity to have a conversation as it relates to the healthcare side, but on the enterprise side, you know, it's a completely different story, where a lot of what we had and what we have to sell matters more than ever and it's helping them whether they be storms and so.

They need to talk to us because we're creating the opportunity for them to be able to go remote to be able to scale with their own bandwidth as they take on additional volume and so you know we had the opportunity all across the board to maintain relevant and we think that that will matter as we go back into whatever the new normal looks like going forward.

Then the our ability to pick back up on sales losses.

Yeah, Dan Hey, Dad. This is mark so.

Hope, you're well you know rather than usually let me answer any sales questions I'll sneak on in at the at the end of his comment.

You know a lot of our solutions when we talk about C.A.P.D. surgical C.P.D. As one example, you know a lot of this special is you know or not active in the hospital systems today.

You know why the ice you use in the you know E.D.'s are are slammed, obviously with Kobe it impacts.

<unk> you know region.

York, a certain geography is obviously or or have been Sam not not many markets have had that same sex. So.

Salesforce impressively has really taken advantage a lot of these specialties that have down time.

And they've turn this into opportunities to educate really spread the word about some of our solution. So one example, I. That's still you know it blows me away is we we hold the web in R. series for surgeon for surgery for our new surgical C.P.D. solution are relatively new we had.

Over a thousand surgeon.

10.

The web in R. and and that's just one example, so enterprises doing the same way that's new mixed platform because it's just while there's there's obviously a lot of works, though to be done the opportunity to capture mind share right now and what Rob is doing with this sales forces.

Impressive I mean, and that's putting it light so I.

I think it the pipeline is definitely a good it'd be a positively affected here and deal kind of make it's just a question of when.

Great.

Is there are there examples, especially on on the clouds tied were occurring environment.

Salaries.

<unk>.

Yeah, I mean, <unk> accelerates irrelevant, obviously, the the fact that we it's in rare situations at the at the you know initial <unk> everyone's just try to assess.

What they're what they're overall needs are and this is part of it but even in some markets you know international markets. It actually absolutely. So they called it out as a reason because they had the opportunity.

<unk> more quickly on funding so that's on the health care side, and then on the enterprise side I think again. It was just a it was a matter of like life and death for the actual companies themselves to make contact with their customers. So they needed what we had and if anything it it it definitely accelerated not only <unk>.

What.

She or or or pipe, but our ability to help them.

Yeah, and and maybe maybe rubber lederman Dan.

Runs our enterprise business comment is real peace on this as well because I think it's a great question.

Sure.

And Hello.

So we knew what we saw happened in the enterprise business is you know.

Especially during the acute phase what was going on call volumes, just went to record levels across the board around the world people were on hold for 234 hours that increase demand for self service version, but more importantly, there was and we helped ship people from being sent through the I.B.R.M.

Being sent instead to the digital channels. So we expanded in in a number of our customers not only the number of agents that could service the digital channel, but also increase the number of applications redeployed nine.

But specific virtual assistance that.

Answered questions. So financial services people were calling about how do I access the phones with my four one k. based on the government programs are allowing that.

Yeah in in in insurance very similar activities in fact, the social you know we have we have large customers and government agencies and social services around the world.

They they they really accelerator their digital footprint in terms of number of agents, we actually helped a large telco movies 2500 agents that we're working in the centralized contact centers for three centralize contact centres in India to work from home configuration in three days and so.

I think you're seen some of the results and then I know some results enterprise or <unk>.

Our ability to do that with our distributed 800, a person freshman service team and or cloud infrastructure made it very very flexible for us to to pursue these opportunities.

That's great insight thanks again.

Thank you.

Next question connection. Okay, then rocky from crank Helen your line is helping.

Great. Thanks, He got it so a couple from me maybe on the health care Aside just want to touch on docks, obviously hymns cancellation wasn't you know time. When this would work wasn't great for that launch, but you've got a lot of demos done and as you said I think it's damn only extremely well getting your.

<unk> docks you know in these virtual demos you know can you talk a little bit more about what you've seen there in terms of a adoption you know what have you done in terms of wins talk a little more precisely lots of magnitude of the pipeline just a bit more cold there.

Yeah, Hey, John This is Mark you know with that you know obviously is as I said and and as you followed on I mean, it was disappointed enough they get the in.

Orlando events that obviously is an exciting place for us with tax, but yeah. We were certainly able to do literally reach hundreds of customers. We did lied them a report on tape them or.

We have demos you know being created now over multiple specialties.

So I think the pipeline is it certainly building as we'd expected to be you know certainly there'll be a little bit a lag time decision, making just given the distractions that hospitals are under so there's no question that.

The interest is incredibly high we've had examples are.

Doing demonstrations, where the C.E.O. or they're you know the chief of a certain special departments says well you know once I'm out of his coded environment, we gotta get going with this so we feel great. Yeah. I mean, we're we're we're really ontrack, we we're now available.

Specialties so.

I know in the last call a I mentioned the one to two.

Per month and certainly.

You know, we're on track to to meet those commitments and and and additional specialties, but.

You know I think you know, we'll certainly have a wagon decisions, but we're still getting decisions. We're still building pipeline, maybe they'll let rob common if he's got any additional pretty color on it.

Yeah, I I don't like to a follow up on Mark's very comprehensive statements typically I'll just add that we were obviously you know very excited to be able to to you go to hands and display and when we weren't able to do that the team reacted very quickly was able to go remote and.

Use a lot of that material to help us continue to spread the word we have a fairly healthy still pipeline of interest and what we're what we're looking to do and so I think you know that hasn't although maybe people in terms of being able to come in and physically see <unk>. The the product lives yeah I see no.

Possible now, we're still having you know regular and and Indepth conversations with multiple institutions and so obviously, there's a lot. There's a lot of activity around that but as you could imagine covert definitely has put some somewhat of a kind of slowness in the system, but not in interest.

We have people still exploring we have people you know basically coming off their I phones that they have to to do it. So it's it's been exciting to still have that you know pretty heavy heavy level of interest.

Yeah, how just to follow up on that how do you how do you envision sorta likely fill cycles as I think back I know a couple of quarters ago, maybe even further back than that but you know some a lot of customers had some exposure to the product and I think your comment was we haven't had a customer who seen that that doesn't want it. So it sounded like there was a lot of pent up demand you eat you've got some people out there they're fairly visible.

Talking about how it's working and and now does it. It's gone G.A. is it is it a situation where that until command was Bush you know sort of 90% of the weight of the finish line and you got a lot of them there or was it really more of a we needed to have it live G.A. and then we can start building sales cycles are we sort of more one or the other of those two.

Yeah.

Well, we had you know obviously, we had we have customers union. It now. So it's you know this wasn't like kind of tucked away and then we just don't bailed it and so you know we have customers using it I think we definitely had momentum.

You know this is is is not just a a you know a replacement drag it and this is this is a comprehensive system and when we come in and deploy it requires you know a fair amount of thought on that side of the institution. They definitely have the interest. They just have to have you know that kind of sit the organizational readiness is this comes in.

I think you know there's again not one group has come in and said Hey. This is it for me. It. It you know either resources or timing you know organizationally might not make sense like next week, but everyone stays engage no. One comes off of a conversation. It's just a matter of when they're ready to their boy I think you know.

Definitely some of the specialties matter.

But I think you know I think we're we're really well position.

Yeah.

Just.

P. Why don't you make a comment here.

Yeah, just just to add on that Jeff a couple other things. The in addition to kind of.

Momentum we have the Tele health thing is you know is really exploded. So we've gotten tremendous interest in deploying this.

Against the Tele help he was case you may have seen I'm sure. The announcement that we may that we're supporting that so there's a tremendous ability now to deploy that's even in the cases, where the physical volume that takes a while to get back the second point I'd like to make as a as Rob knows we started to see significant.

<unk> being created by the Microsoft relationship on the channel side. So we have.

Calls every week, we have many many clients that have been driven to us by Microsoft or cold worked on so we're really starting to see significant activity I'll pick up on this and and the other big piece of this not just tied to a tax itself, but we have this because of our h. I am and D. a mole volumes, you know where we have.

90% of all hospitals and 60% of off position, we have effectively what's a fish finder that we use with rods team, but we can see on a daily basis volume increases or decreases on a site splice site or state by state basis. So I'm actually looking at a map of the country in front of me right now where I can see hour by hour a day by day, where volume is coming.

So we can then focus our team not I'm just going after those backs accounts, but any of the accounts again to drive up the re momentum on the booking hey, our our side. So we are as we said we are very optimistic about the mid to long term here. It's just a question of how fast these sites come up at what we're going to be doing is picking on both sides.

Sites that are coming back faster and have more bandwidth to reengaged fully effectively on closing these deals whether it's tax or something else.

Yeah, Yeah fair enough very helpful. Thank you.

Yep.

Hmm.

<unk>.

<unk> Guggenheim Security should line is okay.

Yeah. Thank you for taking the question I. She wanted to start on the reverberation of the mid term outlooks, particularly as it relates to the health care. They are I'm curious is based on the current kind of uncertainty or seeing and the purchasing environment and the other revise outlet. They after this year I, you're thinking about dictating the broke up the next few years as we think about exceeding.

You have it for 2023 encarta there would be very helpful.

Yeah <unk> marks so you know <unk> I mean, <unk> you know we feel very good about the the mid in the long term.

Are with the exception, perhaps to prescribe one that has a long recycle, but they're not as larger meaningful impact to the to the mid term. You know you can you can ultimately make up for anything they lost timing and certainly.

You know, we we think will do just that so you know we don't we don't think that you know, they're weak guy, which by the way. We're still you know you know really happy with and really confident about I mean, the bottom of the airplane 13%.

Basically you know say best Rob sales worse than selling anything from today forward to the fiscal year.

I mean, there's a lot of competence and we think there'll be you know equally and emergency an acceleration I'm the from the the pipeline growth receipt.

Okay, great and and maybe just to follow up on the sales force you Robbie can make some suggestions here in the in the past few portraits around the sides of the team and aligning something in center I'm curious if the current environment has affected how you're managing that spatter. He overall and the overall sizes in them and some of the alignments there anyway.

Oh that'd be great.

Yeah, I mean, obviously were being thoughtful about all of our hires but we still have backing it for investment in the team where you'd we've re align how we market the actual marketing side, where we spend our money there where we spend our time I think you know the but there's no there's no letting off the gas.

Terms of being able to connect with the market across the whole all the businesses enterprise and healthcare, we we are having meaningful conversations everyday and so you know where we feel like again, we're we're well positioned this is not a situation where we have to send half the team home at all and if anything we continue to invest where where it's appropriate.

Even the time.

Yeah, <unk> Mark so.

Was it the intent here that are common intention of our comments is that yeah. We're still investing and then we think that the growth opportunity here.

Across the two businesses and with the solutions we have.

Releasing these last couple of quarters, just this quarter in the previous quarter and mixed with an enterprise meeting are intelligent engagements solution G.M.L.M. actually dax.

I mean, you know we we continue to believe that there is really bright future here. So you know taking or if it up at gas relative to the critical areas like tales like R. and D. investments you know would be in in our view you know a mistake and it would be very shortsighted.

So we're not making that.

Mistake at least under my watch and certainly you know all of US are feel the same way so.

You know, we're going to continue to dry we're gonna emerging that you know we set it in our comments.

A week, you think where to come out if you're accelerating and stronger.

Great. Thank you.

In X. question comes from me too me some Oppenheimer your line or something.

That people are taking my question and hope at one is safe and healthy as well and congratulate the shrunk quarter I just have one quick question and this every cost of the free medical license on 50, K. user can you chance comments on the feedback B.C., so far and and your opinion how much do you think.

You're you're able to convert these users after things returned back to normal seek based upon the times when you learn from Dot in conference demo.

That's all from me.

<unk> Yeah. This yeah.

Yeah. This is this is Rob the you know I've actually you know we've had you know an incredible gratitude actually for being very fast to market to help you know our customers with you know very limited.

Red tape to get these things deployed what services, obviously, along with it and so across the entire scope of business that we're able to do that we moved very quickly and you know we literally test scores a thank you notes for what we were able to do and you know frankly, we did it because it was the right thing to do not.

Because we went out there with any kind of pitch, we put them out there there are no strings attached they're designed to help our customers in a difficult time. So you know whether they convert yeah. We think there's opportunity because there will be volume after the fact, yes, but in certain situations. We know these your temporary licenses that we deployed just to help him in a difficult.

Period, but you know, we we feel very positive that the effort that we undertook a in a scenario where many of our competitors were largely absent will be remembered but regardless you know what's the right thing. So we it was important to our customers. It was important to our team frankly to be able to to participate and to contribute during that time.

But you know, we'll we'll know more in the in the coming months, but you know some percentage that will convert but that wasn't why we did it and you know we're just we're happy were able to help.

Thank you for the <unk> hope <unk> help keep saying [noise].

Yep.

I have time for that question came I tend to call back I was going to presenters for closing remarks.

Okay. So I just want to thank everyone for joining us and of course, we wish you know a safe passage to you and your family's in your loved ones and we'll talk to you. Soon so thank you for joining us.

Thank you everyone Miss spoken for today's conference call. Yeah Me now disk huh.

[laughter].

[laughter].