Slide 1: Cerence Fiscal Q4 and Full Year Earnings
X X Cerence Fiscal Q4 and Full Year Earnings Stefan Ortmanns, Chief Executive Officer Tom Beaudoin, Chief Financial Officer Nils Schanz, Chief Product Officer Rich Yerganian, SVP of Investor Relations November 27, 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; multi-year plan and growth targets; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impa
Slide 3: Q4 FY23 – Business Highlights
X X Q4 FY23 – Business Highlights • Consistent execution leads to the fifth consecutive quarter of strong performance on revenue and profitability • Maintained leadership position within Auto Core at 54% penetration • Three key automotive design wins in the quarter driven by cloud innovation package
Slide 4: FY23 – Strategic Wins Drive Future
X X FY23 – Strategic Wins Drive Future Revenue • Design Wins – 14 strategic wins, incl. 9 Cerence Assistant programs – 9 new logos including 2 more 2-wheeler customers – 5 competitive displacements – 6 wins in non-transportation • Generative AI and LLM – More than 15 Proof of Concept Programs shown
Slide 5: Mission – Building an Immersive Companion Experience
X X Mission – Building an Immersive Companion Experience Flexible, Branded, Customizable. Redefining the way users interact with their vehicle, bringing a new level of safety, personalization, and delight to every journey. Immersive Customizable Human-Like Cabin UX Interaction Experience Deep Vertic
Slide 6: Leveraging Generative AI and LLMs in market-specific solutions
X X Leveraging Generative AI and LLMs in market-specific solutions Automotive Grade Conversational Automotive LLM UX/UI First Experiences Fine-tuned with Intuitive & personalized GenAI-powered automotive data set user interaction applications Technology developed for Automotive applicable to transpo
Slide 7: Cerence’s AI Roadmap Maximizes Performance, Minimizes Cost
X X Cerence’s AI Roadmap Maximizes Performance, Minimizes Cost Solutions for Existing Systems Next Gen Car CA with ChatPro Next Gen AI Knowledge NLU Plus LLM + INFO RETRIEVAL LLM + ONE.X LLM + ONE.X CERENCE AUTO LLM
Slide 8: Cerence Automotive LLM
X X Cerence Automotive LLM • Fine-tuned LLM with growing Cerence curated automotive data set for integrated in-car experiences • User personalization and predictive actions with Cerence’s unique context engine and embedding model • Built-in information retrieval including Car Knowledge • OEM customi
Slide 9: Cerence as an Essential AI Innovation Partner
X X Cerence as an Essential AI Innovation Partner • Trusted AI software solutions with Automotive DNA • Unparalleled vertical expertise in AI and LLMs • Unrivaled hybrid support • High accuracy and full control over UX • Intelligent arbitration 9
Slide 10: FY24 Company Priorities
FY24 Company Priorities Fueling Growth by Creating an Immersive Cabin Experience • Meet our customer commitments and deliverables with the highest quality • Deliver on our industry leading innovation roadmap by both enriching the current product portfolio and introducing a new LLM-based software pla
Slide 11: Q4 FY23 Financial Details
Q4 FY23 Financial Details Tom Beaudoin, CFO
Slide 12: Cerence Delivers Strong Q4 Results
X X Cerence Delivers Strong Q4 Results Q4FY23 Q4FY23 Guidance Revenue $80.8M $72M - $76M GAAP Gross Margin 71.5% 70% - 72% Non-GAAP Gross Margin(a,b) 72.9% 72% - 73% GAAP Net (Loss) Income ($11.6M) ($13M) – ($9M) AEBITDA(a,b) $16.6M $10M – $14M Non-GAAP Net Income(a,b) $3.8M $3M – $7M GAAP EPS – dil
Slide 13: Full Fiscal Year Results Exceed Initial Expectations
X X Full Fiscal Year Results Exceed Initial Expectations FY23 As of Q3FY23 Initial FY23 Actual Guidance (8/8/23) Guidance (11/29/22) In millions except per share amounts Low High Low High Revenue $294 $286 $290 $270 $290 GAAP Gross Margin 67.7% 67% 68% 64% 66% Non-GAAP Gross Margin (a,b) 69.1% 69% 6
Slide 14: Detailed GAAP Revenue Breakdown
X X Detailed GAAP Revenue Breakdown In millions Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Total License: $46.3 $46.4 $19.0 $45.4 $30.8 $25.9 $43.1 Variable(a) $20.2 $22.3 $19.0 $26.3 $26.2 $25.8 $30.3 Total Fixed(b) $25.6 $23.3 $0 $19.1 $4.6 $0 $12.8 Prepaid (cash upfront) $5.7 $13.2 -- $18.0
Slide 15: Pro Forma Royalties Up 10% Year Over Year
X X Pro Forma Royalties Up 10% Year Over Year In millions FY2021 FY2022 FY2023 Q1 Q2 Q3 Q4 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 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 Pro Forma $48.6 $47.4 $42.9 $34.0 $172.9 $39.6 $39.7 $41.5 $39.1 $159.9
Slide 16: Strong KPI Performance
X X Strong KPI • Global Auto Penetration (TTM) remained at 54% • 11.7M units with Cerence technology, up 4% year- Performance over-year and down 5% QoQ (IHS flat YoY and down 3% QoQ) • 11.7M includes 2.7M connected units, up 16% from the same quarter a year ago and down 14% QoQ High Level of Engagem
Slide 17: Toyota “Legacy” Contract
X X Toyota “Legacy” Contract • Business purchased by Nuance in 2013, solution launched in 2011 • Amortization schedule originally projected to go through Q1FY26 at approximately $8.4M per quarter • Non-cash revenue • Toyota decided to decommission the solution in our fiscal Q1FY24 resulting in the a
Slide 18: Fiscal Q1 and Full Year 2024 Guidance
X X Fiscal Q1 and Full Year 2024 Guidance Q1FY24 FY24 Guidance Guidance • Q1 includes acceleration of Toyota “Legacy” contract revenue of In millions except per share amounts Low High Low High $76.3M Revenue $128 $132 $355 $375 GAAP Gross Margin 80% 81% 75% 76% • Full year fixed contract contributio
Slide 19: Update to Multi-Year Targets
Update to Multi-Year Targets
Slide 20: Key Assumptions Underlying Multi-Year Targets
X X Key Assumptions Underlying Multi-Year Targets(a) Mid-term (FY26 & FY27) Target of double-digit growth and 28-32% AEBITDA • Growth in connected services expected to lead to strong growth in billings, deferred revenue and cash generation • Purposely lower contribution from fixed contracts ($40M to
Slide 21: Bookings to Revenue Cycle Provides Visibility to Future Growth
X X Bookings to Revenue Cycle Provides Visibility to Future Growth OTA Award Booking Backlog Delivery Production Revenue Upgrades ~ 18 months from booking to product revenue recognition for new programs Program extensions typically one to three months in advance of revenue contribution FY21 Ending 5
Slide 22: Robust and Balanced Backlog Provides High Visibility
X X Robust and Balanced Backlog Provides High Visibility Auto License Revenue Visibility(a,b) Auto New Connected Revenue Visibility(a,b) FY24E FY25T FY26T FY27T FY24E FY25T FY26T FY27T In production ~92% ~82% ~70% ~47% In production ~94% ~86% ~81% ~61% Pending SOP ~5% ~15% ~24% ~26% Pending SOP ~1%
Slide 23: Significant Repeatable Software Contribution to Revenue
X X Significant Repeatable Software Contribution to Revenue 100% 90% 19% 22% 20% 18% 80% 5% 5% 5% 6% 70% 60% 50% 40% 77% 76% 72% 75% 30% 20% 10% 0% FY2024E FY2025T(a) FY2026T(a) FY2027T(a) Repeatable Revenue Fixed Contracts Professional Services Repeatable software contribution: The percentage of re
Slide 24: Connected Services Ramp Expected to Yield Significant Growth
X X Connected Services Ramp Expected to Yield Significant Growth in Adjusted Deferred Revenue (a) $M 400 350 300 250 200 150 100 50 0 FY2020 FY2021 FY2022 FY2023 FY2024E FY2025T(b) FY2026T(b) FY2027T(b) Connected Billings Connected Revenue Adjusted Deferred Revenue a) Adjusted Deferred Revenue: Adju
Slide 25: Multi-Year Targets Expected to Yield Long-Term Growth and Profitability
X X Multi-Year Targets Expected to Yield Long-Term Growth and Profitability FY2023 FY2024(b,c) FY2025(d,e) FY2026(d,e) FY2027(d,e) Actual Guidance Target Target Target Total Revenue $294M $355M - $375M $310M - $330M $360M - $390M $400M - $430M Year Over Year Growth (10%) 21% - 27% (15%) – (10%) 13%
Slide 26: FY24 Focus
X X FY24 Focus • Deliver advanced Gen AI/LLM software platform to customers • Maintain path to double-digit revenue growth and strong Adjusted A Continued Focus on EBITDA margins Product Innovation and Operational Excellence • Meet or exceed FY24 guidance • Report 5-year backlog semi-annually • Cont
Slide 27: Q&A
Q&A ()cerence’
Slide 28: Appendix
X X Appendix © 2023 Cerence Inc. 28
Slide 29: 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 30: 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 31: 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 32: 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 33: 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 34: 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 35: Q4 FY23 Reconciliations of GAAP to Non-GAAP Results
X X Q4 FY23 Reconciliations of GAAP to Non-GAAP Results Three Months Ended Twelve Months Ended Three Months Ended Twelve Months Ended September 30, September 30, (unaudited - in thousands) September 30, September 30, (unaudited - in thousands) 2023 2022 2023 2022 2023 2022 2023 2022 GAAP net loss $
Slide 36: 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) Q4FY23 Q3FY23 Q2FY23 Q1FY23 GAAP revenues $ 80,764 $ 61,660 $ 68,393 $ 83,658 Less: Professional services revenue 18,491 17,240 18,667 19,847 Non-GAAP Repeatable revenues $ 62,273 $ 44,420 $ 49,7
Slide 37: 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 JW0 (unaudited - in thousands) © 2023 Cerence Inc. 37
Slide 38: Slide 37 JW0 I have dropped in latest guidance screen shot in both pages
Slide 37 JW0 I have dropped in latest guidance screen shot in both pages Jingyi Wu, 2023-11-21T21:17:49.380
Slide 39: 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. 38