Slide 1: Cerence Q1 FY24 Earnings Presentation
X X Cerence Q1 FY24 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Tom Beaudoin, Chief Financial Officer Rich Yerganian, SVP of Investor Relations February 6, 2024
Slide 2: Forward-Looking Statements
X X Forward-Looking Statements Statements in this presentation regarding: Cerence’s future performance, results and financial condition; expected growth and profitability; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial re
Slide 3: Q1 FY24 – Business Highlights
X X Q1 FY24 – Business Highlights 54% • Our AI innovation roadmap was validated with various global penetration Maintained leadership position OEMs, generating new opportunities with existing customers and within Auto Core global auto production re-opening discussions for potential win-backs • AI pr
Slide 4: Cerence AI Strategy Delivers on the Potential of LLMs
X X Cerence AI Strategy Delivers on the Potential of LLMs • Large Multi-Modal Models expected to Solutions for Existing Systems Next Gen become the new computing engine (AI Agents), enabling a single conversational interface to work across applications to complete tasks based on user preferences Car
Slide 5: Cerence Full Stack – Next-Gen AI Computing Platform
X X Cerence Full Stack – Next-Gen AI Computing Platform Driving a More Immersive In-Cabin Experience Multi-modal, hybrid-based LLM architecture with intelligent reasoning Multi-seat support with barge-in capabilities and all-seat microphone capture with wake-word free invocation Proactive AI,
Slide 6: Video
Video Ocerence:
Slide 7: Building Momentum for Cerence AI Technology at CES
X X Building Momentum for Cerence AI Technology at CES • Strong recognition among automotive OEMs, tech partners, investors, and media, solidifying our reputation as an AI innovation leader • More than 200 customer meetings and demos leading to an enhanced pipeline of new business opportunities • Jo
Slide 8: Q2 FY24 Company Priorities
X X Q2 FY24 Company Priorities: Leverage the Strong Momentum of Our AI Roadmap • Build on strong receptivity from global OEMs to grow pipeline for new products • Partner with OEMs for quick deployment of cloud-based technologies for both new production and cars already on the road • Achieve SOP for
Slide 9: Q1 FY24 Financial Details
Q1 FY24 Financial Details Tom Beaudoin, CFO
Slide 10: Cerence Delivers Strong Q1 Results
X X Cerence Delivers Strong Q1 Results Q1FY24 Q1FY24 Guidance Revenue(a) $138.3M $128M - $132M GAAP Gross Margin 81.0% 80% - 81% Non-GAAP Gross Margin(b,c) 81.5% 81% - 82% GAAP Net Income $23.9M $19M – $23M Adjusted EBITDA(b,c) $70.4M $58M – $62M Non-GAAP Net Income(b,c) $54.3M $40M – $44M GAAP EPS
Slide 11: Detailed GAAP Revenue Breakdown
X X Detailed GAAP Revenue Breakdown In millions Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Total License: $46.3 $46.4 $19.0 $45.4 $30.8 $25.9 $43.1 $20.8 Variable(a) $20.2 $22.3 $19.0 $26.3 $26.2 $25.8 $30.3 $20.8 Total Fixed(b) $25.6 $23.3 $0 $19.1 $4.6 $0 $12.8 $0 Prepaid (cash upfron
Slide 12: Pro Forma Royalties
X X Pro Forma Royalties In millions FY2021 FY2022 FY2023 FY2024 Q1 Q2 Q3 Q4 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Fixed Contracts $10.1 $17.3 $18.2 $25.4 $71.0 $20.1 $25.6 $23.3 $0 $69.0 $19.1 $4.6 $0 $12.8 $36.5 $0 Pro Forma $48.6 $47.4 $42.9 $34.0 $172.9 $39.6 $39.7 $41.5 $39.1 $159.9 $41.7 $4
Slide 13: Strong KPI Performance
X X • Global Auto Penetration (TTM) remained at 54% • 12.4M units shipped with Cerence technology, up Strong KPI(3) 7% year-over-year and up 6% QoQ (IHS up 9% YoY and up 6% QoQ) Performance • Change in number of Cerence connected cars shipped (TTM over prior year TTM)(1) units, up 36% • Change in Ad
Slide 14: Toyota “Legacy” Contract
X X Toyota “Legacy” Contract • Business purchased by Nuance in 2013, solution launched in 2011 Additionally, we received a termination notice from a separate customer, who in turn provided • Amortization schedule originally projected to go through services to our Legacy customer. The contract Q1FY26
Slide 15: Fiscal Q2 Guidance, No Change to Full Year Revenue and Gross Margin Guidance
X X Fiscal Q2 Guidance, No Change to Full Year Revenue and Gross Margin Guidance Q2FY24 FY24 Guidance Guidance • Full year fixed contract contribution In millions except per share amounts Low High Low High lowered to approximately $20M per year starting in FY24 Revenue $60 $64 $355 $375 GAAP Gross M
Slide 16: Q&A
Q&A ()cerence’
Slide 17: Appendix
X X Appendix 17
Slide 18: License Business Revenue Recognition
X X License Business Revenue Recognition GAAP Revenue Type of Contract Description Cash Receipt Recognition Quarter car is produced. Quarter following GAAP Variable License applied at production Based on volume revenue recognition Bulk inventory purchase Full value of contract at Standard payment te
Slide 19: Connected and Professional Services Revenue Recognition
X X Connected and Professional Services Revenue Recognition Connected Services Typical Period GAAP Revenue Recognition Cash Receipt Billed/collected full amount at start of Amortized evenly over subscription Subscription Term 1 – 5 years subscription period (value added to period deferred revenue) R
Slide 20: KPI Measures – Definitions
X X KPI Measures – Definitions Key performance indicators We believe that providing key performance indicators (“KPIs”), allows investors to gain insight into the way management views the performance of the business. We further believe that providing KPIs allows investors to better understand inform
Slide 21: Non-GAAP Financial Measures – Definitions
X X Non-GAAP Financial Measures – Definitions Discussion of Non-GAAP Financial Measures We believe that providing the non-GAAP information in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that p
Slide 22: Non-GAAP Financial Measures – Definitions
X X Non-GAAP Financial Measures – Definitions Adjusted EBITDA Adjusted EBITDA is defined as net income attributable to Cerence Inc. before net income (loss) attributable to income tax (benefit) expense, other income (expense) items, net, depreciation and amortization expense, and excluding acquisiti
Slide 23: Non-GAAP Financial Measures – Definitions
X X Non-GAAP Financial Measures – Definitions Non-cash expenses. We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; and (ii) non-cash interest. These items are further discussed as follow: • (i)Stock-based compensation. Because of varying valua
Slide 24: Q1 FY24 Reconciliations of GAAP to Non-GAAP Results
X X Q1 FY24 Reconciliations of GAAP to Non-GAAP Results Three Months Ended (unaudited - in thousands) (unaudited - in thousands) December 31, Three Months Ended 2023 2022 December 31, GAAP net income (loss) $ 23,857 $ (2,158) 2023 2022 Stock-based compensation 8,380 12,472 GAAP revenue $ 138,335 $ 8
Slide 25: Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures
X X Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures (unaudited - in thousands) Q1FY24 Q4FY23 Q3FY23 Q2FY23 GAAP revenues $ 138,335 $ 80,764 $ 61,660 $ 68,393 Less: Professional services revenue 20,692 18,491 17,240 18,667 Less: Legacy related revenue 86,613 8,853 8,867 8,88
Slide 26: Q2 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance
X X Q2 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q2 2024 FY2024 Low High Low High GAAP revenue $ 60,000 $ 64,000 $ 355,000 $ 375,000 GAAP gross profit $ 36,200 $ 40,200 $ 265,200 $ 285,200 Stock-based compensation 700 700 2,800 2,800 Amortization
Slide 27: Q2 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
X X Q2 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) 27