Asset Manager Investing in Global Technology Sector

We're an asset manager allocating 100% of our capital into public companies and cryptocurrency assets driving disruptive innovation globally. We serve as a family office of an Asia-based HNW family whose key members have made their fortune in the technology industry and are believers in technology as the key enabler of disruptive innovation. We seek to continue the family's legacy in creating and preserving wealth through technology investing.

Our small investment team is made up of diverse professionals who researches, identifies, and executes relevant opportunities. While we are not accepting outside clients and investors at the moment, we occasionally share some of our internal investment memos, market commentaries, and analysis here.

Friday, June 5, 2020

Q2.2020 - Nuance: A Tech Compounder With Promising Turnaround

  • Nuance is an enterprise conversational AI company that consistently generates +$250 million of FCF and ~$1.8 billion of revenue every year.
  • While revenue has been flat for years, growth has reaccelerated to ~10% in recent times after the Cerence spin-off.
  • The continuing success of the turnaround will hinge upon the growth in recurring revenue, driven by the adoption of Dragon Medical, its cloud-based healthcare offering.
  • So far, Dragon Medical's traction has been strong. ARR grew by 70% in 2018 and 38% in 2019.
  • The company also has an attractive $500 million share repurchase program, 86% of which remains unexercised.

Nuance (NASDAQ:NUAN) is a cash-flow compounder with strong fundamentals and moat in the healthcare and enterprise segments. At present, Nuance is a ~$2 billion-a-year business with a consistent double-digit FCF (free cash flow) margin. While growth has slowed down to a single digit in recent years, the turnaround that involved a spin-off of its automotive business Cerence (NASDAQ:CRNC) has been successful. In recent times, growth has reaccelerated to a double-digit zone. Moreover, the company also has a $500 million share repurchase program with ~86% of it yet to be exercised.

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