NUAN , a software company best known for its speech-recognition products, reported its second-quarter earnings earlier this month, beating analyst estimates but providing mixed guidance. Beyond the numbers, management provided additional details during the company's conference call. Here are five things from the call with analysts that investors need to know about Nuance Communications. Paying down debt and buying back shares While Nuance has been unprofitable on a GAAP basis for the past two years, the company has managed to continually produce a few hundred million dollars of free cash flow each year.

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Some of this discrepancy is explained by the accounting surrounding Nuance's various acquisitions, which tends to hurt earnings in the short term, as well as the company's heavy use of stock-based compensation. All of these acquisitions have resulted in quite a bit of debt, and the company plans to reduce its debt load over time, as well as buy back shares. CEO Paul Ricci had this to say:. We intend to commit a meaningful portion of our future cash flows to stock repurchases and debt reduction.

Reducing the debt is probably a good idea. The share buyback program may seem like a shareholder-friendly move, but given the dilution caused by the company's stock-based compensation, the share count is unlikely to decline by much. In an effort to boost profitability, the company is implementing a new cost-cutting program.

This initiative includes reduction to services and products from third parties, real estate site consolidation, streamlining management layers, and global labor optimization, including workforce reductions. Ricci pointed to progress during the most recent quarter, with operating margins improving by basis points year over year. The company still reported a net loss, thanks to those interest payments, but cost cutting is so far more than making up for falling revenue.

Automotive is the biggest opportunity in mobile While the number of smartphones being used across the world has exploded, Nuance's mobile business is being driven by automobiles, not phones.

Well, I think we think about our Mobile business now as being led by the automotive opportunities.

As we've discussed previously, we have muted expectations for the smartphone segment, and because of the industry dynamics, of which you are aware, there [is] consolidation going on in that industry.

Nuance's technology is already pervasive in the automotive industry, with more than 90 million cars and 50 million portable navigation systems using Nuance's speech technologies. As cars become smarter and more connected, the total addressable market for Nuance has the potential to grow enormously.

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In the smartphone market, Nuance's technology powers Apple's Siri virtual assistant, but the biggest threat to the company may be homegrown solutions. Apple is rumored to be working on its own custom solution to replace Nuance, and even if Nuance isn't replaced, the deal with Apple doesn't seem to be helping the company's top or bottom lines.

Recurring revenue and the cloud Like many software companies, Nuance is shifting its business model toward subscriptions and cloud-delivered software-as-a-service. Ricci had this to say:. Additionally, we are further shifting our investments to cloud offerings and recurring revenue solutions, which we expect to comprise a growing proportion of our revenues as we look to FY '16 and FY ' During the past two quarters, recurring revenue accounted for As the shift toward recurring revenue continues, revenue growth may be further pressured going forward, as replacing one-time sales with recurring payments tends to depress revenue in the short term.

Specialized solutions in health care One way Nuance is trying to grow is by offering extremely specialized solutions.

One major area of focus is health care, where Nuance offers a variety of solutions and products. Ricci talked about one of them in the conference call:. But perhaps, more importantly, we're seeing a real expansion in our Clintegrity product line, which has been a business for which we've had significant hopes and we've made investments. And bookings growth this year appears to be on track for a very strong performance in particular.

Clintegrity is a Web-based platform for handling clinical documentation, providing a complete solution for health care professionals.

Health care is Nuance's largest and most profitable segment, accounting for nearly half of the company's revenue during the most recent quarter, and more than half of the total segment profit. The Healthcare segment is shrinking, thanks to a decline in the healthcare transcription business, but the company is betting on strong growth from products such as Clintegrity to turn things around.

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CEO Paul Ricci had this to say: Ricci had this to say: Ricci talked about one of them in the conference call: Learn about the top five holdings in George Soros' portfolio, including major mergers proposed for two of the holdings.

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