Q1 2021 Nuance Communications Inc Earnings Call
Good morning, and welcome to the Nuance Communications first quarter earnings call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be and opportunity to ask questions to ask a question you May press star.
And one on your Touchtone phone to withdraw your question. Please press Star then two.
And at this event is being recorded I would like to turn the conference over to Mike Mcguire head of Investor Relations. Please go ahead.
Good afternoon, and welcome to our Q1, 'twenty and 'twenty one call.
And I hope everyone is remaining healthy and safe during these times.
Joining me today to discuss our Q1 results are CEO, Mark Benjamin and CFO, Dan and pass that.
Additionally, during the Q&A portion of the call.
We will be joined by Chief revenue Officer, Rob data.
Before we begin I would like to remind everyone that our discussion includes predictions estimates expectations and other forward looking statements.
These statements are subject to risks and uncertainty that could cause material differences and our actual results.
Please refer to our recent SEC filings for a discussion of these risks.
All references to income statement results are non-GAAP and all references to year over year financial comparisons are on a continuing operations basis, unless otherwise stated.
As noted in our press release, we issued prepared remarks and advance of this call which include a full reconciliation of continuing operations to total operations and are available on our IR website.
That material is intended to supplement our comments on this call today and.
With that I'll turn the call over to Mark.
Thanks, Mike and thank you all for joining us this afternoon.
I hope that everyone is staying safe and my thoughts remain but those whose lives have been affected by COVID-19.
I'd also like to speak on behalf of our entire nuance community and expressing my deepest gratitude to all those who are working on the on mines to keep our global community safe.
As I've stated before 'twenty 'twenty, one and many ways marks a new era for nuance with a clear path towards growth and execution against our strategic and financial initiatives.
And we got off to a great start in Q1 with strength on both the topline and bottom line is.
And as revenue and EPS exceeded the high end of our guidance ranges that 346 million and 20th century, respectively.
And I also like to congratulate our sales force and their strong execution and this ever important start to our fiscal year.
And health care and the dedication of our sales force to our cloud first approach resulted in a robust air performance starting the fiscal year on strong footing.
This execution led to a solid performance across all core cloud platforms, and selling health care cloud revenue and 28% year over year.
And in particular, we generated strong year over year growth and Dragon medical and Dax cloud revenue as we move our install base to the cloud and pursue underpenetrated markets for demo and execute on the early stages of our land and expand strategy for Dax.
Additionally, today, we announced the acquisition of say car and it.
Impressive start up that will help to further enhance our long term product roadmap for our <unk> solution and.
And finally, we launched our omni channel patient engagement and virtual assistant platform powering healthcare's digital front door, which leverages and established area of expertise and our enterprise business to address the critical health care trends.
And enterprise, we delivered a record revenue quarter as we continued to execute on our AI first approach.
Underlying the strength was particularly healthy performance and intelligent engagement with one of our strongest quarters ever for our security and biometric solutions.
And lastly, I'm honored to announce that last month and then once it was ranked the number one best place to work for in 'twenty and 'twenty, one by built and Boston.
As most of you know by now, creating a culture, where our employees are supported and able to do their best work is incredibly important to the executive team and me and I'd be remiss, if I didn't take this opportunity to congratulate our talented employees, who are the bedrock behind our own credit culture and nuance.
Their shared passion that keeps us on the cutting edge and delivering superior outcomes for those we serve as evidenced by our strong financial performance in Q1 results, which I'd like to highlight now and greater detail.
Looking at our health care business Q1 marked yet another strong quarter for our clinician platform with Dragon medical and <unk> cloud revenue growth of 22% compared to Q1 of last year.
We continue to expand our Dragon medical one footprint through a combination of transitioning our installed base to the cloud and increasing our market share and under penetrated markets such as the ambulatory and international.
On the international front this quarter, we completed a key clinical safety and compliance milestones for D. M O and the U K, marking an important step and the expansion of our presence and that market.
Overall, we saw strength in the quarter and the U K, Germany, and France with key wins, and Manchester University Foundation Trust and the joint management of benzene public hospitals.
Building on this momentum we also launch Dragon medical one and two new International countries, Ireland and Spain.
Importantly, we are leveraging this growing base of GMO users to seamlessly layer and additional solutions, including our computer assisted physician documentation or C. A P D to organizations, such as Mcleod health and South Carolina.
Adopted our surgical and see a P D solution to improve cost and ensure accurate reimbursements.
Beyond these financial outcomes organizations leverage C. A P needs great functionality for a range of additional benefits such as Kettering health and Ohio.
Selected and see a P D to improve both patient safety and overall outcomes and emergency room care.
Moving beyond our core Dragon medical one platform.
We continue to see positive traction with our state of the art Dragon ambient experience solution or Dax.
Private diagnostic clinic subdue cow, San Joaquin Hospital, Mercy health and blades eye clinic, among others are selecting backs to reduce physician administrative workloads increased patient throughput and improve the patient experience by allowing the doctor to completely focus on the patient.
In addition to the strong value proposition our tax momentum and it's also due in part to a robust digital marketing efforts and the resilience of our sales force and embracing virtual selling and in fact quarter over quarter, we saw a 48% increase and virtual and Dax demonstration delivered to prospects.
Yes.
And while we remain laser focused on landing new clients for initial deployments. We are encouraged to see early progress with client expansion and.
40% of the deal signed in this quarter were for existing <unk> customers to expand to additional physician.
As an example last month, we announced that Rush University Medical center and expanded use of DAC to 14 clinical specialties and we are excited to see similar traction with organization, such as well span health, Connecticut children Hospital and Cooper, how all who are expanding their dax usage.
Finally, we continue to expand the reach of tax to even more position.
With the offering now available on 16 specialties, including the recent rollouts of oncology and rheumatology.
Overall, we are highly encouraged by the early traction of Docs and view. This positive momentum is a testament to the strong value proposition and ROI on the solution.
Solving the pain point of clinical documentation and reducing burn and restoring the joy and practicing medicine is what motivates us here at nuance every day with that and mind I'm excited to announce our acquisition of say car a Seattle based startup that shares our strong sense of purpose and combating the epic.
That makes the physician burnout through the development of mobile AI technology, and automates clinical documentation for physicians.
And with this acquisition and we are bringing together, the best and brightest minds and AI machine.
Machine learning and ambient technology for health care by adding say cars, leading scientists and developers to our world class R&D team.
This talent includes say cars founder and our gender Sandy it was very.
Very familiar with nuance, having previously served here as an executive and R&D and whom we are very excited to have rejoined on nuance family.
We are confident that say cars complementary technology will not only benefit our portfolio, but also enhance our multi year product roadmap for dogs and as we remain committed to solving some of healthcare's largest challenge.
Moving on to our radiology business, we continue to see strong demand for our cloud based solutions and add on offerings.
And we were able to showcase some of these exciting offerings at the annual meeting of the Radiological Society of North America, which took place and and all virtual format. This year.
Sales and marketing team maximize this virtual event with nuance sponsored presentations as well as an online demonstration of our AI powered cloud based radiology experience of the future, which showed how the capabilities of our diagnostics portfolio combined to transform radiology reporting for a change.
And the world.
We continue to bring disruptive innovations to the market, including our air marketplace offering for radiologists, which I recently discussed at the J P. Morgan Health care Conference.
With the AI and marketplace, our deep existing integration into the workflow of radiology and.
For just the unique ability to connect AI algorithm developers and end users within their existing workflow.
And I am marketplace gives radiologists and convenient one stop shop to select prove and use AI and their workflows.
And the most recent innovation that we first announced last month as our new patient engagement platform.
Leveraging our extensive experience and customer engagement with the globe's largest customer service companies like American Airlines and rockets and our patient engagement platform enables health care organizations to deliver world class engagement experiences to their patients.
With an estimated 84% of patients under 40 looking for a provider that uses advanced patient engagement technology. We are excited to help organizations address the urgent need to transform the access and delivery of care and the modern age of digital medicine, and we feel we are perfectly positioned to naturally extend.
Our customer engagement solutions into our strong base of hospital systems.
Dissatisfaction and positive experience of our health care customers is a crucial driver behind our success and that satisfaction was further validated in recent weeks.
First nuance scored its highest net promoter score to date coming and at 15, and now well above the software industry average of 30.
And second our Dragon Medical one platform was recognized by Klas research.
As the winner of the 'twenty 'twenty, one and best in Class Award a direct result of definition praise, we received and helping to deliver improved patient care.
Along with this recognition and we're also pleased to have won the best in class for our quality management solutions for the sixth time and classes annual software and services report.
These impressive milestones are a testament to our relentless focus on customer satisfaction and we continue to build upon the success across all of our business line.
Turning now to our enterprise business, we achieved a record level of enterprise revenue, beating our previous high from Q1 on one year ago.
With the world increasingly operating on digital channels and unfortunate consequence is the increased number of opportunities for fraudsters and bad actors to try to infiltrate customer accounts.
This has only been exacerbated by the pandemic during which current nuance and enterprise customers have seen the volume of fraud attacks increased by 200% to 400%.
And with the shift to digital only accelerating we have seen and increased demand for our security and biometric solutions, particularly in financial services telecommunications and the mid market as enterprises seek to protect customer safety and enhance customer loyalty.
For example, and Q1, the industrial Bank of Korea, where I V. K deployed our market, leading voice biometric technology to create the industry's first biometric solution for video calls.
Leveraging nuance out.
And I B K is protecting more than 100000 customers from fraud by authenticating their identities during both video and phone conversation.
And we continue to expand our capabilities beyond just authentication signing our first deal and the digital identity management space with Verizon.
As part of this joint venture with other leading telecommunication companies Horizon has developed and application names and key that work.
And to identify the creation of fake accounts by fraudsters and box.
And then Qi will utilize nuances voice biometric solution to identify and authenticate customers and the secure and seamless way, marking an important new use case for this offering.
Beyond this success and security and biometrics during the quarter, we saw strong traction with our broad portfolio of Omni channel Enterprise solutions as we delivered our AI first capabilities to straight and the customer experience.
A great example of this is through our involvement and the nation's health insurance of open enrollment process.
<unk> placed each ball.
Once again in conjunction with one of our partners, we were a trusted vendor for the center and Medicare and Medicaid services, where CMS, who is responsible for ensuring that all eligible parties on role with the proper health insurance for the upcoming year.
Over the eight week period, leading up to and during open enrollment and our digital solutions left almost 18 million automated messages to over 5 million distinct customers transacting about 750000 calls each day.
Our digital customer engagement portfolio continues to help brands deliver the streamlined frictionless and fast conversational experiences that consumers expect and appreciate it.
Other important example of this is our recent international language Spice jet one of the largest airline providers and India, we select a nuance to launch pepper. The first bilingual AI powered virtual voice assistant and the Indian airline industry.
The hard work of our enterprise team has positioned us to become one of the strongest brands and the customer engagement space and this has not been overlooked by third party research organization.
And last week nuance with me and the top vendor by Opus research and their 'twenty 'twenty, one decision makers guide to enterprise intelligent assistant reported for the fourth consecutive year.
Recognized for our unmatched omnichannel deployment superior platform and rich Apis.
In addition, nuance as gatekeeper solution received and post security P. G 2020, Global Excellence Award for service of the year AI and security.
These prestigious global awards recognized cyber security and information technology vendors with advanced groundbreaking solution that helps set the industry bar higher and we look forward to raising the bar, even further and years to come.
Beyond our many successes across healthcare and enterprise. This quarter, we continued to make great strides and creating a work environment, where our employees are supported and rewarded for their important contributions.
It's why I am extremely proud and in addition to being ranked number one best place to work and Boston. We also ranked as the top company for best Perks and benefits and one of the best paying companies and Boston as well.
This is on the heels and other impressive accomplishments, including being named one of the Boston Globe's Best places to work last month.
Scoring and 100% on the corporate equality index and being named one of the best places to work for LGBTQ quality for the third year and a ROE by the human rights campaign Foundation.
We view these external recognition as a tremendous on both vital and strategic to our ongoing success as market leaders and conversational AI technology.
We are building nuance for the future and as part of that we are constantly looking to attract grow and retain the world's best and brightest minds.
So making investments and our culture and employees will remain a top priority for us.
We are extremely proud of what we've achieved to date, but make no mistake. We will continue to strive for further excellence as we move through 'twenty and 'twenty, one and beyond.
So in closing Q1 marked a great quarter of solid execution against our strategic initiatives and I want to both congratulate and thank our employees for their hard work and unwavering commitment to our mission.
And with that I'd like to pass it off to Dan to discuss our financial performance.
Thanks, Mark and thanks, everyone for joining us today I want to start by echoing Mark's comments.
Our thoughts continue to be with those who have been affected by this trying pandemic and we are extremely grateful for the hard work and resilience of the frontline workers through these unprecedented times.
I want to take a moment to recognize all our employees for their dedication to building a supportive culture and our work environment.
And then I'm incredibly proud to be part of.
Turning now to our results and we'll begin with the discussion of our Q1 'twenty one performance.
Followed by an update to our fiscal year 'twenty one guidance.
Overall, we are pleased with our strong start to fiscal year 'twenty one.
We generated $346 million and total revenue in Q1 coming in above our guided expectations and resulting in a 4% decline year over year.
This decline was primarily due to a non strategic health care coding contract with the government that did not renew which we discussed during our last earnings call and November creating a difficult compare versus Q1 of last year.
Our profit margins had an excellent start to the year with non-GAAP gross margins at 65, 2% and non-GAAP operating margins at 26, 4%.
And our non-GAAP earnings per share were 20 cents for Q1 also landing above our guidance expectations for the quarter.
Shifting to our segments, our health care revenue declined 7% compared to Q1, a year ago and.
Again, driven by the government coding contract that did not renew.
However, as a result of a recent request by the government for an extension we now expect to receive additional revenue from this contract and fiscal year, 'twenty, one, which I will touch upon when I highlight our updates to guidance.
Outside of this contract, we saw strength and our healthcare business and Q1, particularly from our cloud offerings.
As Mark mentioned health care cloud revenue grew 28% year over year and the quarter driven.
Driven by strong performance from our Dragon medical one and <unk> one offerings.
This growth was partially offset by declines and our on premise offerings as we transition our current installed base to a stronger cloud based recurring revenue model for the healthcare business.
This cloud transition is tracking well and we remain confident on the full year revenue and <unk> guidance, we have provided.
Which I will also touch upon shortly.
Our healthcare segment profit in Q1 was very strong and came in at 37, 5%.
Up over six percentage points quarter over quarter, and three percentage points compared to Q1 of last year.
These higher profits on the direct result of the mix shifts away from our on premise coding business and towards high margin cloud revenues, particularly within Dragon medical one.
Moving to the enterprise business, we had another strong quarter with record revenue of $139 million, which was flat year over year due to a strong Q1 a year ago.
The performance this quarter was driven primarily by strength and security and biometrics as we continued to expand our use cases and adoption for these solutions.
This strength was offset by lower RBR license revenue versus a year ago due to a tough compare.
Enterprise segment profit in Q1 was 29, 8% up seven percentage points quarter over quarter, but down 40 basis points compared to Q1 of last year.
As a reminder, enterprise revenues and its corresponding segment margins or subject to quarterly fluctuations due to the timing of license activity.
And while we are pleased with our strong execution and pipeline during the quarter I would encourage investors to analyze our enterprise segment performance on an annual basis.
Turning now to our balance sheet, we ended the quarter with a cash and marketable securities balance of $374 million.
Above our minimum cash balance target range of $200 million to $300 million.
Our cash flow from continuing operations and the quarter was $55 million up on a year over year basis.
And finally last week, we closed a five year extension of our revolver extending the maturity to 'twenty and 'twenty six while also upsizing the credit facility from $242 million to $300 million.
Overall, our Q1 results position us well to achieve our financial objectives through the rest of fiscal year 'twenty, one and all.
And I remain encouraged by our momentum and executing against our strategic growth initiatives.
Let's now turn to guidance.
First I would like to point out consistent with last quarter, our Q2 and fiscal year 'twenty one guidance contemplates the current environment with respect to the impact of Covid on our end markets.
Second with regards to the planned and non renewal of the government coding contract. The corresponding government agency has recently requested an extension of that contract.
Through a portion of fiscal year 'twenty one.
And therefore, our updated guidance reflects approximately $15 million of incremental revenue from this extension.
The majority of which will be recognized during Q2.
Thereafter, our guidance assumes no further extension or renewal of this contract.
Taking this into consideration we are providing the following updated guidance for the year.
For fiscal year 'twenty, one we now expect total revenue and the range of $1.342 billion to $1.382 billion up $15 million compared to our previous guidance range, implying organic growth of five 8% year over year.
Our full year EPS guidance remains unchanged at 71 to 77 and despite.
Despite the higher revenue expectations.
Due to accelerated R&D and sales investments and an increased and our diluted share count to 318 million shares.
I would remind investors our diluted share count is impacted by our stock price.
And is currently trading above the conversion price of our outstanding convertible notes.
Additionally, we are reiterating our full year cash flow from operations and free cash flow guidance ranges of $270 million to $310 million and $215 million to $250 million respectively.
Turning to our segment guidance.
Taking into consideration and the government coding contract extension, we now expect health care revenue for fiscal year, 'twenty, one and the range of $782 million to $802 million, implying 9% to 11% growth year over year.
All other full year guidance ranges for healthcare and enterprise remain the same.
Additional color on our Q2 and updated full year guidance can be found in our prepared remarks document available on our investor website.
Before opening the call to questions.
I would like to let you know that we will be attending the SBB Leerink Global Healthcare conference on February 25th and 26.
And the Morgan Stanley Technology Media and Telecommunications conference on March 1st.
And those conferences will be held virtually and we hope to see you there with that I would like to turn the call back over to the operator to take your questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, a little pause momentarily to assemble our roster.
Our first question comes from Sanjay Singh with Morgan Stanley. Please go ahead.
Hi, Thank you for taking the questions and nice start to.
In fiscal year, and I have two questions I wanted to start first on from a macro perspective, you mentioned on Dax you got you saw 40% of the deals in the quarter were expansion deals, which was nice to see but broadly we think about the country going through vaccinations and sort of.
The workload that puts on hospitals has that sort of impacted on deal activity or people getting out of pilots on the corner and you sort of view on how and.
Baxter Nations and how thats going to play out over the next couple of months could impact on deals getting done.
Yeah, sure Hey, Andrew it's Mark.
Thanks for the question and I'll I'll start off and then maybe over to Rob to give additional color, but and.
And and we agree we're off to a great start so we're really thrilled.
We obviously.
Watch the hospital system is quite closely and.
Around Covid, we've had kind of these peaks and valleys based on case balance and.
And you know the vaccinations have certainly I think added to our core.
To quote distraction.
At the systems, but obviously and so one way, we all welcome over and over everything so.
I think we've seen you know just to kind of continuation of the Covid effect. If you will and we haven't seen anything I think turn against us or for us.
And any significant way rather than just a more consistent.
Covid impact and and all that.
Let rob comment on anything else yeah. So.
And I think Mark said, it well I think overall, there's definitely I mean.
And it's a welcome distraction if it is one but each system is dealing with it a little differently and there's not a straight blueprint.
And we can just point to and say Hey, we're going to expect this.
Across the whole space, so thankfully and its actually hasn't been a distraction to us and.
And we've been working through and system by system and then again, if it is and if it doesn't distract and we're happy to have it.
Central outcome standard one other thing I that May also give you and near data point is that we watch you know volumes across certain parts of our health care business and the.
The volumes that we're able to measure have essentially stayed flat, they're not yet on pre COVID-19 levels, if you will but.
And if you remember over the last couple of quarters, we've talked about and returning to roughly 90% of the pre COVID-19 levels and.
We're seeing the same resolved through the past.
90 day, so that gives you any sense for how the systems are handling.
That's great color market, and really and really good to hear.
And then maybe we talk a little bit about the CCAR acquisition. They call. It definitely came up on our own work around back around AI in terms on the clinical documentation, where it's loved more generally.
Rightly and Mark to look and say, Cora and sort of and aqua hire worst and bringing some new capabilities.
And to Dax to nuance more broadly and I and if I could add just one more to that if he can address is what does this acquisition and say about a form factor that's likely to dominate over the next five to 10 years and this is gonna be more of the embedded hardware and software appliance or is it going to be more of the bulb.
<unk> form factor on this.
And this acquisition speak to those those trends and any meaningful there.
Yeah sure. So that's a great question and you, obviously, where we're really excited about St car.
To begin their founder and our gender.
<unk> is and X nuance.
You know leader within the R&D group. So yeah, I would say, we remain friends and the engineering teams and remain you know quite friendly over many years and you know when you get you know.
Smart teams and scientists working on really one of the hardest problems and and how tech. If you will you have a lot to discuss and in our view. It you know and obviously and there isn't it became somewhat and we have an opportunity here to I think combine the world's brightest and smartest.
Scientist on trying to solve this problem. So we obviously spent some time with them.
You know and we felt like we could gain and incredible group with 25 near 30.
Members to the Dax team, which is great for for the solution and the and the road map as well as we really did feel like some of their their not just IP, but you know their capabilities and some of the feature functionality that they were perhaps more focused on and then than us.
And these early days would be all additive to ultimately and the Dax solution going forward and I think those.
Attributes will manifest themselves over time.
So you know for US as we've said to you and others. We view this as very much a long term journey. So we're just really thrilled I think you know and have you know he and his team and his company.
And a come back to you.
And really complement ours.
Yes.
Hum on the modality.
Forgot the second part on the modality or factor.
I would say that you know.
We're approaching the market with docs and and I know, it's a car with.
And use of the mobile phone many of our Dax users are still using the app.
Versus you know the unit on the wall and so I think ultimately that's going to become you know more of our customer choice rather than a form factor that.
Having one of the leading with the others certainly telehealth creates another form factor.
There you know the integration into teams platform if you will.
Right there.
And within the desktop so and I think this is something that's going to.
Support all types and modalities and use cases from from the phone to hardware and the room to two other use cases.
Appreciate the thoughts tomorrow and thank you very much.
Alright, thank you.
Our next question comes from socket Calia with Barclays. Please go ahead.
Awesome, Hey, guys. Thanks for taking my questions here.
And.
And maybe maybe first for you on on Dax and.
That was a great data point just on 40% of this.
On the deals this quarter.
<unk> from from existing customers sort of expanding the number of doctors maybe the question. There is what specialties do you find are growing and adoption and and how is that sort of changing that average footprint for hospital right on.
And that average footprint footprint per hospital understanding that it's still very early but does that all make sense.
Yeah, Hey, socket it does and I you know at the fear of frustrating you with my answer because we're seeing like a variety of cases across our our early <unk> customers that are now expanding our for.
For example on the corner, you saw and talk about rush, where theyre expanding.
A different specialties on lower DUC counts and we have you know we and.
As for expansions and this quarter and there are others as well because none of the customers are buying backs with the intention of just starting and keeping at that call it low levels.
And we've talked about the 10 to 20.
Initial deployments so.
And what we're seeing is and expansion of customers staying within early specialties and expanding the DUC counts and we're also seeing I would say you know equally the same.
Specialty expansions within our early <unk> customers. So.
And we're watching it very closely because we love to.
Fine and that trend line and Rob we'd love to focus you know as precisely as he could to accelerate growth, but and we feel very good about it and I think the fact that we and.
Announced this quarter call it 40% of the tax bookings on expansion cases, and that's a super encouraging sign for us and this early.
And in taxes like so.
And I am not maybe giving you a precise answer because we're really seeing I think a variety of ways. Our customers are really focused on adding.
Adding to the population using it.
No that makes sense that makes sense and it's good to hear as well.
And then maybe maybe for the follow up for you.
It was helpful to hear some of the strength and intelligent engagement.
Within the enterprise business that is can you just remind us what you've said about how big intelligent engagement is.
And the context of the broader enterprise business and maybe how the revenue components inside of intelligent engagement are different than the IPR part of the business.
Sure Hey socket.
Nice to hear from you and yes, the enterprise had a terrific quarter.
This quarter. So we were really pleased.
You know when you think about intelligent engagement.
It presents around 45% today of the broader enterprise business.
And that will grow overtime, and we talked about IV, our voice being flattish over time and and the gross.
Longer term growth at 4% to 7% over the midterm really coming from the intelligent engagement business.
When you think about the components historically the voice IV, our business has been primarily license M and S and professional services. So a traditional license type business.
The intelligent engagement is a real mix.
And it can really span across all the different revenue categories and delivery types of method, but.
The largest category is the hosting category and so we're very focused on the cloud and that space.
Very helpful. Thanks, guys.
Exactly.
Our next question comes from Stephanie Davis with SVP Leerink. Please go ahead.
Thank you and as that lease congrats on the corner and that the salad being raised.
Thanks, Stephanie.
So I wanted to continue on the coal car a question.
And the deal accelerates our head count for space, where it's traditionally been very tough to their crews.
Does that mean, you'll be able to leverage and $6 eight you're back and improvements around backs for quality would be automation or are you planning for guidance with the teams Valentine's day.
Well, let me start with the the last the last part of the question and I'll work into the very beginning.
The teams will definitely be integrated and and they've already begun that process. So.
So we're very excited about that and you know I think you know as far as roadmap acceleration and you know product sophistication. If you will acceleration, we we have a very aggressive roadmap to begin with so.
And my R&D leaders were here and they would say yes.
Please please don't answer the question with the acceleration.
Yeah, and and I think they are right I think where we're still trying to solve a very hard problem.
And you know relative to automation I think certainly having 25 to 30, new members is a team that I've spent many years trying to solve the same problem is obviously incredibly helpful and so I think time will ultimately tell.
If we can get there faster.
At the same time.
Say car it does bring not just these talented employees, but it also does carry with it some IP that we feel is you know additive.
Additive to that.
And the capabilities of <unk> over <unk>.
Kind of mid term if you will so.
For us it was really just quite natural and of course, you know when you're able to welcome you know you know someone back to the company. That's you know and.
You know knows everything about our culture and has really developed a lot of his own capabilities and culture is at a different company is kind of it.
Real nice.
Before I continue my next question and I have one job havent done and keep them and the company. This time, he keeps leasing in and getting balance being more stuff you guys and buying.
Well, you know, perhaps but I feel pretty good you know yeah, I've gotten to know her agenda, a little bit and I know that.
Thank for this and to have worked I think there had to be a very mutual respect of.
The two companies directions to company's capabilities, and and and I really said I think I said it earlier.
I think you know finding you know set of scientists and incredibly smart individuals that are trying to solve similar problems two and another equally smart and bright set of sciences I think that's where the magic can really be created and happened and I think you know.
I think that's the opportunity here so more.
More to come on I think it'll be a real positive path here.
And I understand and one last one out of me just given how we can monitor and CCAR and they've had a lot of wind on the net group side.
Could this expand your reach a bit more into the ambulatory practice side of the world or is that still TBD.
I I mean, I listen I think you know say cars strength is really building on the engineering and and and product capability side and I think one of the complementing factors here is really.
Putting our go to market along with their capabilities as well so.
And as you know Stephanie we'd been focused ourselves on that mid market and ambulatory space with good results.
And I think they complement each other.
I think you know largely the reason this made sense was less about.
Customer footprint, because that's certainly it's super early days for all of us.
But I think I think you know what I mentioned earlier is really the appeal.
I understand people have on and congrats again and to contain and execution.
Thanks, Stephanie.
Our next question comes from Daniel Ives with Wedbush Securities. Please go ahead.
Thanks.
So first for Ryder and your Mark obviously as well.
And you stay matter, a lousy as Dax appointments.
What's what sort of surprised you as you sort of now getting into some of these sales cycles and expansions I mean is it.
Does it feel like the expansions are happening quicker than expected the types of customers, where there are specialists or hospitals can you maybe just dive a little deeper into some of these interactions with customers on docs.
Yeah. So this is this is rob thanks for the questions and so you know if there are any surprises that really you know to the to the upside and I think the part.
And b, the not a surprise, but what's really been gratifying and reassuring is that pretty much universally.
When the physicians use it.
And the experience and me.
Media increase and their quality of life and you when it comes across and varying ways in terms of how they give us the feedback but.
And you know like right at the user level and its not like weeks and to using it looks like these days and to use and so I think that's been really a strong positive for us here early on.
And you know and it's a great it's great to have them, helping us as we go through the selling cycle. So I think that's that's been really positive I mean, certainly having launched something.
As game changing is this solution is right into the pandemic and that that part we learn every day, because we're really selling the entire selling cycle has occurred and a non standard environment.
That's from the leveraging the great skill set of and experienced sales team.
With a new and new solution and the market and so we.
We still learn in that respect every day, but I would say.
And it's positive.
And in terms of like what we didn't expect the resilience of the solution and the.
The tenacity of these conversations that continued through all of these different challenges, but you will know so I think overall, it's been just been positive and the and the expansions only validate and you know what what the team thought of when they you know first Congress and the idea and brought it to market and so we feel fortunate we got worried.
To have folks not only by wants to buy again.
Great.
Would you share expand on Microsoft as a partner, especially when we think about everything that we're doing on the on the ACI front and how they play into spread and the gospel, especially on some of the next Gen technologies.
Yeah, So oh.
Feeling that if I could.
You know we've been we just continue to be Super pleased and <unk>.
Grateful and we have the opportunity to work closely with them as we do and I think when you think about the market and in similar ways and so it's really we go to market together and a complementary manner and it's not just you know on on the health care side, it's across our whole business, we have opportunities to work closely together and to really.
And much of what they're doing so we think it's a big draw because it's not just a chance to.
Go to market, so to speak with and and get more distribution for our stuff, but our stuff and we think helps create great interest and some of the stuff that they sell and so it truly is a complementary offering.
<unk> and health care.
It's still early.
But we have dedicated teams on both sides.
And we have great levels of access within their organization and I get to meet with the top levels of their teams.
Cros and.
Cross the whole enterprise of Microsoft and so when.
And when I see that level of interest at this stage of the game I know we're onto something really good and you know every week, we find a new and new nugget somewhere and.
We're working on ways to work efficiently to the benefit of our mutual customers really at the end and that's where you know once that starts to kind of.
Become a and I've got a.
A regular process I think we're going to really see great results.
Great and Mark any additional thoughts thanks.
Hey, Dan.
No I mean, I I think I think Rob hit and I mean, certainly on the tax side you know.
We're seeing very promising results.
We continue and obviously.
Measure the data.
And in some of the.
The data that we saw early continues to really hold quite strong I mean, there is the whole patient side of jacks and really the many benefits that.
No we don't speak a lot about.
But you know kind of data points, where patients and are feeling you know 90, 598% you know more time spent with their physician who's not focused on the computer or greater satisfaction and the appointment. So there's just there continues to be just in many ways I can.
<unk> data points that we learn.
You know that obviously will help shape, our product roadmaps, but help us learn of the value that our solution can create you know and it's different per physician and at times and for institution and Microsoft relationship.
And I'd say from day, one and we've continued to really I think appreciate and benefit from that partnership a mutually and I think that continues as Rob said.
Certainly on the go to market side, where.
And the quota can be shared and and targets can be worked together and and very complementary ways as well as.
The access to great capabilities on the tech side.
And the core Tech side I think are meaningful.
To us for the future so I'd say all very positive.
Awesome Thanks, everyone.
Thank you.
Our next question comes from Vikram Curse of our Butler with Guggenheim Securities. Please go ahead.
Yeah. Thank you for taking the question I wanted to start on Dax and in particular on I'm. Just curious if you have any updated thoughts on the pricing strategy. There if you've learned anything through these initial expansion discussions or maybe your latest feedback from customers and pilots and demonstrations.
Australia, and just any updated thoughts on the pricing model.
Hi. This is this is rob.
And thanks for the question Yeah, I think you know largely we still are enjoying kind of a similar trajectory in terms of the pricing right now I'm more focused on you know.
Just on customer feedback also on subscription models that really benefit them with understanding how they're going to pay and creating a more predictable pattern payment.
You know, we we learned though every day on how they want to consume it.
And so you know we continue to be responsive, but overall.
I think were and are really good position in terms of leveraging their feedback putting out something that.
It resonates with them and it's around the same price point that we've been discussing.
As you know since the launch and essentially.
Yeah and Vikram. This is mark so yeah, just a little more color on that so for starters and I think you've heard it from Rob just to make sure that you know the.
The price points, we've discussed are still the price points and.
Theres no change to that and I think you know Additionally, you know what we're learning and again, we were sensitive to our customers' needs and quite or quite honestly you know nuance has built its great health care franchise with.
With this level of sensitivity.
And just given the margin profile is on the expense and budget process.
And they take place within these systems and certain specialties may have different volumes of patient throughput and office hours exam hours surgical hours. So you know we try to work within and I'd say, a very controllable model on our side.
You know that's you know has low cost of administration and.
And execution, but also and I think gives the and customer you know what they need.
You know relative to tax and tax pricing.
Yes.
Okay, Great and then maybe just one follow up on on that point, and obviously kept the Dax and our guidance for this year and fiscal 'twenty. One just curious if any of the deals that you talked about so far are they contributing to that tax there are a number so far this year and and just how should we think about the cadence and execution on that front throughout 'twenty, one any color there would be helpful. Thanks.
Yeah, Hey, Vikram. So this is mark again, so you know we're still hold and the full year are our guide we gave the tax guide for the full year, a 10 to 20 million a year.
We're not changing those numbers, so but and of course everything we do every day every week every month and every quarter contributes to those are our numbers.
So there so it goes in no matter, what and and obviously, Rob success contributes entirely to that.
So you know, we we did get off to a very good start as we've mentioned and.
And it's it is a very good start and meaning it's Q1, and it's probably a little bit early I think we need a little more time a bit more execution.
And you know over the next call it 100 hundred and 20 days.
And you know too really to know if our full year opportunities have changed.
Okay, great. Thank you.
Again, if you have a question. Please press Star then one.
Our next question comes from Jeff Van <unk> with Craig Hallum. Please go ahead.
Great. Thanks for taking my question guys a couple for me.
And mark as it relates to tax I'm just curious.
And as you've watched the opportunity evolve your execution of all of your technical capabilities evolve.
And how has your thinking on the addressable Tam changed I'm sure you had a lot of question marks maybe about specialties about some capabilities, how many of those million docs.
Ultimately, we're gonna be addressable, but I wonder if there were a few milestones and you've been walking down this journey, where they were kind of light bulbs that went on and said, okay. It's different and when I originally thought.
Hey, Jeff.
Good to hear from you I would say is it's probably still early days.
Say that you know we continued to make very good progress on the <unk>. The AI automation of the clinical note and and I think that's obviously.
The bedrock of of the solution.
<unk> maturity, if you will and you know I'd say.
Say that we're seeing you know you know very good results and those early specialties that have the volume is moving through them and.
And as we've explained in the past.
And they add on on specialties actually require less data as you start to Cascade through call. It all the.
And kind of the ambulatory specialties, including primary care, which we also have in the market today. So I'm.
You know very good progress there and I think ultimately that keeps the Tam quite big for US and you know, we'll learn more I'd say and the next several quarters.
These expansion cases begin to really I think Boston, because we learned something when a customer goes from 10 to 20 docs within the same specialty and we also learned something when a 25.
Provider and Dax customer goes to 75 and spreads specialties to three additional so there's just a number of you know I think you use cases that we're you know learning educating and actually focused on.
And that will ultimately yield and probably a more prescriptive response to you Jeff.
But for the moment you know.
The Tam Sam conversation is probably a bit premature, but it will ultimately be something that debt rather than us do too much speculation on well ultimately.
I think yield.
Yeah Fair.
Fair enough any any change or kind of variance from expectations on your key cloud migrations, whether it's D. M O radiology a C. D. One when you look at the size of the piece of the migrations of the retention along the path of migration.
I mean, and I'll, let Dan comment because I know he's dying to say something.
[laughter], but yeah no.
No I I I would say that you know getting off to a great start was our number one and go for the year and as you know, Jeff and and these high recurring SaaS businesses, that's supercritical and.
And not just to feel good, but obviously for the full year.
We continue to I think you know do very well against the portfolio, that's still transitioning to cloud as well as I think the the new organic or strategic growth vectors of the cloud solution and so whether that's GMO internationally or in the mid markets here.
And we're transitioning the legacy Dragon base onto D. M. O I think all things there you know we check the box on and feel very good about our radiology transition, which is still very early moving to the cloud with power scribe, one and getting the benefits of the platform there.
There.
Continuing to do.
I think as we expected so I would say all and all C. D. One we'd include on that which again is a smaller base that we've transitioned.
Quite successfully.
You know early so I'd say, we feel good Dan Dan you want to add any color and I would I would love to add some more color to that but mark did a great job and I think we have a great start for the sort of cloud this quarter, everyone and everything hit.
And so we're feeling really good about the start Jeff Yeah.
Maybe if I could sleep sneak one last one and there Rob I didn't get to get to you. So so on and on the budgets you know the the buyer budgets, if you will and the sales cycles.
And what what have you witnessed and you know sort of last 90 days on either of those any lengthening or shortening of cycles and anything surprising in terms of kind of how people are approaching their budgets.
Yeah. So it's a it's just.
Certainly and the environment and hasn't been easy on any and any budgets on either side of the house and enterprise or health care, but I think one of the things that we benefited from as you know.
There is there is spending and our stack rank stays pretty high on that.
So I think because of what we bring to the organizations that we serve.
Where we're in the fight for.
And whatever dollars are available and you know and it's up to us to prove that out in terms of the ROI that we bring and so.
And it hasn't been great and it's not there's no easy money out there but.
But you know we have solutions that really make a difference for our customers. So we stay we stay on the on Homeaway gross so no change and call it but.
We're on their earn in it.
Good good sounds good I appreciate it thanks guys.
Hi, Jeff.
This concludes our question and answer session I would like to turn the conference back over to Mark Benjamin for any closing remarks.
Okay, well I just want to thank everyone for joining us and of course I wish everyone.
You know great safety and good health during these tough times and we'll speak to you very soon so thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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