Slide 1: Cerence Q3 FY23 Earnings Presentation
X X Cerence Q3 FY23 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Tom Beaudoin, Chief Financial Officer Iqbal Arshad, Chief Technology Officer Rich Yerganian, SVP of Investor Relations August 8, 2023
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; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial results; backlog; demand for C
Slide 3: Q3 FY23 Business Highlights
X X Q3 FY23 Strong executive and company-wide focus drives operational performance Global production vehicle penetration (TTM) Business Highlights rises to 54% Full fiscal year guidance remains on track Successful Convertible Debt Offering reducing interest expense by approximately $8M per y
Slide 4: Q3 FY23 Sales Highlights
X X Q3 FY23 Competitive Design Wins - Top Japanese OEM for Cerence Cloud Sales Highlights - Korean OEM for Emergency Vehicle Detection Strategic Wins Drive Future - Large Japanese two-wheeler manufacturer Revenue for Cerence Ride Major Platform Releases - 3 global programs SOPed with luxury OEMs
Slide 5: Company Priorities
X X Company Continued focus on operational excellence Meet or exceed product performance and Priorities delivery commitments Maintain strong competitive position Fueling Growth by Capitalize on strong sales pipeline Creating an Immersive Cabin Experience Deliver on FY23 guidance Execute
Slide 6: Cerence AI: Shaping the Future of Automotive User Experiences
X X Cerence AI Leveraging two+ decades of unique experience to create generative-AI powered solutions tailored for transportation Shaping the Future of Next-gen Cerence Assistant: intuitive & multi- Automotive User modal user experiences Experiences: The Generative AI-based applications: Ceren
Slide 7: Q3 FY23 Financial Details
Q3 FY23 Financial Details Tom Beaudoin, CFO
Slide 8: Cerence Delivers Strong Q3 Results
X X Cerence Delivers Strong Q3 Results Q3FY23 Q3FY23 Guidance Revenue $61.7M $58M - $62M GAAP Gross Margin 66.0% 59% - 62% Non-GAAP Gross Margin 66.5% 61% - 63% GAAP Net (Loss) Income ($16.5M)* ($22M) – ($18M) AEBITDA $2.8M ($5M) – ($1M) Non-GAAP Net (Loss) Income ($1.7M) ($9M) – ($5M) GAAP EPS – di
Slide 9: Detailed GAAP Revenue Breakdown
X X Detailed GAAP Revenue Breakdown In millions Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Total License: $46.3 $46.4 $19.0 $45.4 $30.8 $25.9 Variable(a) $20.2 $22.3 $19.0 $26.3 $26.2 $25.8 Total Fixed(b) $25.6 $23.3 $0 $19.1 $4.6 $0 Prepaid (cash upfront) $5.7 $13.2 -- $18.0 $4.6 -- Minimum Commitme
Slide 10: License Business Remains Strong
X X License Business Remains Strong Fixed contracts will be In millions FY2021 FY2022 FY2023 approximately $37M for the fiscal year in line with the Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 commitment to a $40M ceiling for annual revenue Fixed Contracts $10.1 $17.3 $18.2 $25.4 $20.1 $25.6 $23.3 $0 $19.1 $
Slide 11: Strong KPI Performance
X X Strong KPI 54% Global Auto Penetration (TTM), up from 53% Performance 12.2M units with Cerence technology, up 25% year-over-year and up 3% QoQ High Level of 12.2M includes 3.0M connected units, up 50% Engagement from the same quarter a year ago and up 7% QoQ with Customers and 6% Decline
Slide 12: Fiscal Q4 and Full Year 2023 Guidance
X X Fiscal Q4 and Full Year 2023 Guidance Low End of Full Year Guidance Raised by $6 Million Q4FY23 FY23 Guidance Guidance In millions except per share amounts Low High Low High Revenue $72 $76 $286 $290 GAAP Gross Margin 70% 72% 67% 68% Non-GAAP Gross Margin (a) 72% 73% 69% 69% GAAP Operating Margi
Slide 13: Q4 FY23 Focus
X X Q4 FY23 Focus Deliver FY23 Guidance Generate full year positive CFFO Continue to Drive Operational Excellence Report 2H bookings and 5-year backlog Provide FY24 Guidance Long-term objective remains double-digit revenue growth and strong EBITDA margins © 2023 Cerence Inc. 13
Slide 14: Q&A
Q&A Destination Next eke
Slide 15: Appendix
X X Appendix © 2023 Cerence Inc. 15
Slide 16: 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 17: 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 18: 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 19: 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 20: 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 21: 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 22: Q3 FY23 Reconciliations of GAAP to Non-GAAP Results
X X Q3 FY23 Reconciliations of GAAP to Non-GAAP Results Three Months Ended Nine Months Ended (unaudited - in thousands) (unaudited - in thousands) June 30, June 30, Three Months Ended Nine Months Ended 2023 2022 2023 2022 June 30, June 30, GAAP net loss $ (16,455) $ (99,267) $ (44,702) $ (80,699) 20
Slide 23: Reconciliations of GAAP Financial Measures to non-GAAP
X X Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures (unaudited - in thousands) Q3FY23 Q2FY23 Q1FY23 Q4FY22 GAAP revenues $ 61,660 $ 68,393 $ 83,658 $ 58,144 Less: Professional services revenue 17,240 18,667 19,847 21,048 Non-GAAP Repeatable revenues $ 44,420 $ 49,726 $ 63,8
Slide 24: Q4 FY23 and Full Year FY23 Reconciliations of GAAP to non-GAAP Guidance
X X Q4 FY23 and Full Year FY23 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q4 2023 FY2023 Low High Low High GAAP revenue $ 72,000 $ 76,000 $ 285,700 $ 289,700 GAAP gross profit $ 50,500 $ 54,500 $ 192,100 $ 196,100 Stock-based compensation 1,000 1,000 3,700 3,700 Amortiza
Slide 25: Q4 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance
X X Q4 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) © 2023 Cerence Inc. 25