Slide 1: Cerence Q3 FY23 Earnings Presentation
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 Exhibit 99.2
Slide 2: Forward-Looking Statements
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 Ceren
Slide 3: Q3 FY23 Business Highlights
Strong executive and company-wide focus drives operational performance Global production vehicle penetration (TTM) rises to 54% Full fiscal year guidance remains on track Successful Convertible Debt Offering reducing interest expense by approximately $8M per year Double-digit revenue growth and stro
Slide 4: Q3 FY23 Sales Highlights: Strategic Wins Drive Future Revenue
Competitive Design Wins Top Japanese OEM for Cerence Cloud Korean OEM for Emergency Vehicle Detection Large Japanese two-wheeler manufacturer for Cerence Ride Major Platform Releases 3 global programs SOPed with luxury OEMs 4 two-wheeler SOPs in NA, China, India Continued focus on several strategic
Slide 5: Company Priorities: Continued focus on operational excellence
© 2023 Cerence Inc. Continued focus on operational excellence Meet or exceed product performance and delivery commitments Maintain strong competitive position Capitalize on strong sales pipeline Deliver on FY23 guidance Execute on innovation roadmap Company Priorities Fueling Growth by Creating an I
Slide 6: Cerence AI Shaping the Future of Automotive User Experiences
Cerence AI Shaping the Future of Automotive User Experiences: The Immersive Companion 6 Leveraging two+ decades of unique experience to create generative-AI powered solutions tailored for transportation Next-gen Cerence Assistant: intuitive & multi-modal user experiences Generative AI-based applicat
Slide 7: Video
Video Ocerence
Slide 8: Cerence AI Shaping the Future of Automotive User Experiences
Cerence AI Shaping the Future of Automotive User Experiences: The Immersive Companion 8 Leveraging two+ decades of unique experience to create generative-AI powered solutions tailored for transportation Next-gen Cerence Assistant: intuitive & multi-modal user experiences Generative AI-based applicat
Slide 9: Q3 FY23 Financial Details
Q3 FY23 Financial Details Tom Beaudoin, CFO
Slide 10: Cerence Delivers Strong Q3 Results
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 – dilute
Slide 11: Revenue by type, Q2FY22 to Q3FY23
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 Commitment (no cash upfront) $19.9 $10.1 --
Slide 12: License Business Remains Strong
In millions FY2021 Fiscal Year 2021 FY2022 FY2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Fixed Contracts $10.1 $17.3 $18.2 $25.4 $20.1 $25.6 $23.3 $0 $19.1 $4.6 $0 Pro Forma Royalties(a) $48.6 $47.4 $42.9 $34.0 $39.6 $39.7 $41.5 $39.1 $41.7 $43.1 $44.5 Consumption of Fixed Contracts(b) ($12.3) ($10.3) ($1
Slide 13: Strong KPI Performance
54% Global Auto Penetration (TTM), up from 53% 12.2M units with Cerence technology, up 25% year-over-year and up 3% QoQ 12.2M includes 3.0M connected units, up 50% from the same quarter a year ago and up 7% QoQ 6% Decline in Billings per Car (TTM YoY) 28% Increase in Monthly Active Users (YoY) 6.4 Y
Slide 14: Fiscal Q4 and Full Year 2023 Guidance
Fiscal Q4 and Full Year 2023 Guidance Low End of Full Year Guidance Raised by $6 Million Q4FY23 Guidance FY23 Guidance In millions except per share amounts Low High Low High Revenue $72 $76 $286 $290 GAAP Gross Margin 70% 72% 67% 68% Non-GAAP Gross Margin (a) 72% 73% 69% 69% GAAP Operating Margin (8
Slide 15: Q4 FY23 Focus: Continue to Drive Operational Excellence
Deliver FY23 Guidance Generate full year positive CFFO Report 2H bookings and 5-year backlog Provide FY24 Guidance Long-term objective remains double-digit revenue growth and strong EBITDA margins Q4 FY23 Focus Continue to Drive Operational Excellence 15
Slide 16: Q&A
Q&A Destination Next
Slide 17: Appendix
Appendix @cerence
Slide 18: License Business Revenue Recognition
License Business Revenue Recognition Type of Contract Description GAAP Revenue Recognition Cash Receipt Variable License applied at production Quarter car is produced. Based on volume Quarter following GAAP revenue recognition Fixed (Pre-Pay) Bulk inventory purchase ($ based) Full value of contract
Slide 19: Connected and Professional Services Revenue Recognition
Connected and Professional Services Revenue Recognition Connected Services Typical Period GAAP Revenue Recognition Cash Receipt Subscription Term 1 – 5 years Amortized evenly over subscription period Billed/collected full amount at start of subscription period (value added to deferred revenue) Usage
Slide 20: KPI Measures – Definitions
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 informatio
Slide 21: Non-GAAP Financial Measures – Definitions
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 provi
Slide 22: Non-GAAP Financial Measures – Definitions: Adjusted EBITDA
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 acquisition-r
Slide 23: Non-GAAP Financial Measures – Definitions: Non-cash expenses
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 valuation m
Slide 24: Q3 FY23 Reconciliations of GAAP to Non-GAAP Results
Q3 FY23 Reconciliations of GAAP to Non-GAAP Results Free cash flow is net cash provided by operating activities determined in accordance with GAAP less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures. (unaudited - in thousands) (unaudited - in t
Slide 25: Reconciliations of GAAP to Non-GAAP Financial Measures
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 $63,811 $37,096
Slide 26: Q4 FY23 and Full Year FY23 Reconciliations of GAAP to non-GAAP Guidance
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 Amortization of inta
Slide 27: Q4 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance
Q4 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) Q4 2023 FY2023 Low High Low High GAAP net loss $(12,700) $(8,700) $(57,500) $(53,500) Stock-based compensation 11,800 11,800 43,600 43,600 Amortization of intangibles 600 600 6,200 6,200 Restructuring and other