Potential Opportunity Ahead of Prospectus, Enters MP Pre-Spin
Since its November 19, 2018 announcement, the stock price of Nuance Communications, Inc. (NUAN) has remained at the same $16 level. However, NUAN (the leader in conversational AI innovations) has been pushing forward with selling its non-core assets (like its Imaging business and its Subscription Revenue Services business) in order to help reduce its debt. Ahead of releasing its prospectus, small-cap investors should start evaluating this opportunity.What’s Happening?
Nuance Communications, Inc. (NUAN), the leader and pioneer in conversational AI innovations, announced a strategic reorganization and Spinoff of its Automotive business in order to reverse its negative returns of -8% compared to the Russell 3000 Index (RUA) return of +23% over the last two years. The Nuance Auto business is expected to be separated by October 1, 2019, and NUAN (Parent ex-Spin) plans to continue its string of non-core divestments. We believe this is the right step for NUAN (ex-Spin) towards creating shareholder value in the long-term and help to further improve its market position.
We are equally positive on the SpinCo considering its higher operating margin profile compared to the other businesses included in the current NUAN (FY18 adjusted of ~40% compared to NUAN’s ex-Spin ~32%) and higher revenue growth (FY18 growth of ~11% compared to NUAN’s ex-Spin ~7%) (please refer to page 3 in our analysis for further details). Additionally, the SpinCo will be a pure-play automobile virtual assistant company, which will allow it to capture the potential growth in this space.
Nuance Communications provides conversational artificial intelligence (AI). The company provides its customers automated speech recognition, natural language understanding capabilities, dialog and information management, biometric speaker authentication, text-to-speech, and domain knowledge, along with services and implementation support. The company's segments are: healthcare, which provides intelligent systems that support approach to clinical documentation; enterprise, which provides AI-powered intelligent customer engagement solutions and services; automotive, which provides assistants and connected services for cars; and other, which includes the company's Subscriber Revenue Services and Devices businesses.
The Edge Group - Global Fundamental Catalyst Investing. The Edge provides investors with access to hidden corporate value from Global Special Situations using a pioneering approach to investments. Founded in 2005 by fund management and investment banking professionals to provide high quality, private equity-level research on Global Corporate Divestitures for the benefit of fundamental event-driven, growth and value-oriented investors in this difficult to track, but proven investment space.
The Edge will look to screen and analyze include Spinoffs; Reverse Morris Trusts; Squeeze Outs; Privatizations; Demutualization; Deep Discounted; Rights Issues; Rights Offering; Restructuring; Insider Purchases / Buying Change of Management / CEO Change; Deteriorating fundamentals; Post-Bankruptcy; Reorganization; Tender Offer; M&A Deals; Secondary Offering; Share Swap; Thrift Conversions; Share Buybacks; Activist; Mergers. All analyzed from a fundamental point of view.
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