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https://drive.google.com/file/d/13N_h7AFwqWtXaEXTuV_oBeT1Eke...

Details sent out this morning. 1 for 8 Cerence to Nuance, shareholders as of 9/17, but "when issued" is only expected for a couple of days before October 1; October 2 regular trading.

Cerence describes itself:

"Cerence’s starting point as a standalone, public company will be as a market leader in automotive cognitive assistance solutions powering natural and intuitive interactions among automobiles, drivers, passengers, and the broader digital world. The market for automotive cognitive assistance is rapidly expanding and will grow further as vehicles become more autonomous and drivers and passengers pursue new forms of human-vehicle engagement. As an independent company, Cerence will be uniquely positioned to meet these needs with a dedicated team and capital investment strategy, building upon its track record of innovation and excellence as part of Nuance."

The linked file shows pro forma financials for the company (Cerence) after the split.

-Another Rob
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https://seekingalpha.com/pr/17620824-nuance-board-directors-...

Maybe I misread the pdf; the announcement last week suggests "WI" trading around Sept 16 (or 19th?)
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I need some help throwing together a guess for reasonable valuation of Cerence once it goes -WI...

They will be a pureplay software for automotive applications with speech recognition and some "AI" as their strongest features? Blackberry, Google (Android), Apple (Carplay), and Sirius (?) seem to play here but I don't like any of them as a comp.

https://www.sec.gov/Archives/edgar/data/1002517/000119312519...

• Seems like revenue is $295MM for 12 months?
• Seems like Operating Income would be $20MM
• EBITDA might be ~$32.5MM, not profitable at Net, though

• P/S might be a steal at 2x or ~$16/sh? More clearly over-valued at $24/sh (over 3x)
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Let me look into this one some more. Software and cars are a powerful combo, and this is exactly the kind of thing that will never look cheap but that could deliver great long-term returns. I need to read more about this, but on the surface it looks like it would be a relatively small portion of the total company.

The ENSG spinoff happens shortly as well, and I'll be curious to see how those break.

Jim
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I guess CARS jumped 10% on Friday, if anyone noticed. Apparently some kind of deal with GM for 4000 dealers, which gets them a really big picture of cars for sale.
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https://seekingalpha.com/news/3499584-nuances-cerence-starts...

CRNC "When Issued" trading began today, under the symbol CRNCV

https://www.schwab.com/public/schwab/investing/investment_he...

Schwab shows that 308 shares traded today, between $25.50 and $29.36
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Cerence is trading lower as people notice the shares in the accounts. Now pricing is about 2.7x Sales.
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I wonder whether NUAN doesn't do more to benefit by streamlining itself as a Software Subscription business as it rolls out these high-value voice to text medical solutions. I might be paying attention to the wrong part of this deal, even though like Jim said autos and AI should be pretty exciting stuff.
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Ok, at $22 per share, I get CRNC trading at ~$785 mn market cap. Debt is about $410 mn, though they do have $110 mn in cash and equivalents. So EV is about $1,085 mn. With EBITDA at about $100 mn, we're looking at EV/EBITDA of about 11x and EV/sales of about 3.5x. None of these figures looks excessive for the very high margin revenue here, and the potential for more. In fact, it's trading for about 1.2 book value, not that I like to use that measure for software companies since they trade at stratospheric valuation on that multiple. So the stock looks reasonable/cheap, relative to traditional software companies.

But the management does warn you about hiccups in the near term. And it's very typical for spinoffs to trade well out of the gate and then crater after the first earnings report as the very same issues that management has mentioned rear their ugly heads. This was much the situation last year with FTDR, where management explained that there would be larger than expected claims for a quarter, and then the stock plummeted when it actually happened (then proceeded to double over the next year).

In any case, CRNC looks interesting and very few people are looking at it, since it's a spinoff of a small midcap, and comes in under a $1 bn market cap itself.

However, note that while the company does generate ~$100 mn in EBITDA, it generates almost no net profit, giving away about $25 mn of that in stock-based comp, and plenty goes to restructuring expenses and intangibles amortization. Given NUAN's history of stock-based comp (IIRC), I wouldn't expect that to disappear here.

Still, it looks like an interesting opportunity longer term, and it seems like it could be acquired by a larger OEM supplier at some point and integrated into their broader product portfolio. But this is just a high-level look at the financials, and I'd want to be more familiar with the business and how it would be likely to perform in a recession.

Now I need to have a look at the ENSG spinoff. That could be substantially mispriced.

Jim
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I went for some cerence at today’s prices.
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It's really plunged since the WI trading, hasn't it?

Jim
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