Slide 1: Cerence Q2 FY24 Earnings Presentation
X X Cerence Q2 FY24 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Dan Tempesta, Chief Financial Officer Rich Yerganian, SVP of Investor Relations May 9, 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; outlook; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on fin
Slide 3: Q2 Results & Outlook
X X Q2 Results & Outlook • Q2 operating results above high end of guidance due to Major SOPs 4 in Core Auto OEM-related adjustments • Based on a recent deep account review, we are lowering full Key Design Wins year revenue guidance to a range of $318M - $332M, 4 in Core Auto approximately 11% at the
Slide 4: Cerence AI Roadmap Key to Future Growth
X X Cerence AI Roadmap Key to Future Growth Generative AI products for existing solutions • 6 OEM design wins (year-to-date) • Strong pipeline of opportunities Car CA with Chat Knowledge NLU Plus Pro • Several expected OEM launches in H2 FY24 Next Gen – Full Stack AI Computing Platform • Single mult
Slide 5: 2H FY24 Objectives
X X 2H FY24 Objectives • Adjust cost structure of the business while executing on strong momentum of Cerence AI roadmap and customer commitments. • Achieve start of production with multiple customers for new AI products. • Convert deal opportunities currently in the pipeline. 5
Slide 6: Q2 FY24 Financial Details
Q2 FY24 Financial Details Dan Tempesta, CFO
Slide 7: Cerence Q2 Results
X X Cerence Q2 Results Q2FY24 Q2FY24 Guidance Total Revenue(a): $67.8M $60M - $64M GAAP Gross Margin 69.2% 60% - 63% Non-GAAP Gross Margin(b, c) 70.2% 62% - 64% GAAP Net Income (Loss) (d,e) ($278.0M) ($14M) – ($10M) Adjusted EBITDA(b,c,e) ($0.3M) ($8M) – ($4M) Non-GAAP Net Income(b,c,e) ($3.6M) ($12
Slide 8: Detailed Revenue Breakdown
X X Detailed Revenue Breakdown Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY23 Q1FY24 Q2FY24 In millions Total License: $45.4 $30.8 $25.9 $43.1 $145.2 $20.8 $35.5 Variable(a) $26.3 $26.2 $25.8 $30.3 $108.6 $20.8 $25.1 Total Fixed(b) $19.1 $4.6 $0 $12.8 $36.5 $0 $10.4(e) Connected Services: $18.4 $18.9 $18.6 $19.2
Slide 9: Variable License Revenue & Operational Metrics
X X Variable License Revenue & Operational Metrics In millions FY2023 FY2024 FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Variable License $83.1 $26.3 $26.2 $25.8 $30.3 $108.6 $20.8 $25.1 OEM-Related (a) Adjustments Included in $0 $0 $0 $0 ($3.2) ($3.2) $4.7 $0 Variable License Variable excluding OEM $83.1 $26.3 $26
Slide 10: Q2 KPI Performance
X X • Global Auto Penetration (TTM) remained at 54% (a) • Approximately 11.7M units shipped with Cerence technology Q2 KPI(d) • Down 6% YoY (IHS down 1% YoY) • Down 3% QoQ (IHS down 12% QoQ) Performance • Change in number of Cerence connected cars shipped (TTM over prior year TTM) units, up 23% • Ch
Slide 11: Fiscal Q3 Guidance and FY24 Revision
X X Fiscal Q3 Guidance and FY24 Revision Q3FY24 Revised FY24 Prior FY24(c) • Approximately $20M of Guidance Guidance Guidance fixed contracts during the In millions except per share Low High Low High Low High amounts remainder of the year, Revenue $66 $72 $318 $332 $355 $375 currently expected in Q3
Slide 12: FY24 Revenue Guidance Excluding Legacy
X X FY24 Revenue Guidance Excluding Legacy FY24 Guidance FY24 Guidance Less: Legacy (at midpoint) (at midpoint) Contribution Excluding Legacy Revenue $325M ($87M) $238M • Legacy contract is a connected services contract with Toyota acquired by Nuance through a 2013 acquisition. Toyota decommissioned
Slide 13: Fiscal Year 2025 Framework
X X Fiscal Year 2025 Framework(a) Mid-single digit growth off of $238 million(b) based on the following assumptions: • Flat OEM production and pricing mix similar to the expectations we have just built within our latest 2024 guidance. • Significantly less fixed license consumption than FY24. • Fixed
Slide 14: Q&A
Q&A ()cerence’
Slide 15: Appendix
X X Appendix 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: Q2 FY24 Reconciliations of GAAP to Non-GAAP Results
X X Q2 FY24 Reconciliations of GAAP to Non-GAAP Results Three Months Ended Six Months Ended (unaudited - in thousands) Three Months Ended Six Months Ended (unaudited - in thousands) March 31, March 31, March 31, March 31, 2024 2023 2024 2023 2024 2023 2024 0 2023 GAAP net loss $ (277,976) $ (26,089
Slide 23: Q3 FY24 and Full Year FY24 Reconciliations of GAAP to Non-GAAP Guidance
X X Q3 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q3 2024 FY2024 Low High Low High GAAP revenue $ 66,000 $ 72,000 $ 318,000 $ 332,000 GAAP gross profit $ 46,000 $ 52,000 $ 231,100 $ 245,100 Stock-based compensation 600 600 2,500 2,500 Amortization
Slide 24: Q3 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
X X Q3 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) Q3 2024 FY2024 Low High Low High GAAP net (loss) income $ (4,000) $ 2,000 $ (255,800) $ (241,800) Stock-based compensation 7,700 7,700 29,200 29,200 Amortization of intangibles 600 600 2,300 2,300 Restructur