Slide 1: Cerence Q3 FY24 Earnings Presentation
X X Cerence Q3 FY24 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Tony Rodriquez, Interim Chief Financial Officer Rich Yerganian, SVP of Investor Relations August 8, 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; fiscal year 2025 framework; transformation plans and cost efficiency initiatives, including estimated net cost savings;
Slide 3: Q3 Results and Full Year Outlook
X X Q3 Results and Full Year Outlook Q3 revenue at the midpoint of guidance GAAP profitability metrics effected by Goodwill impairment charge of approximately $357 million Non-GAAP Gross Margin was within the range, while all other profitability metrics were above the guidance provided in the
Slide 4: Leading Provider of Audio & Voice AI Experiences
X X Leading Provider of Audio & Voice AI Experiences OUR EXPERTISE & INNOVATION FOUNDATION CUSTOMER EMPOWERMENT 80+ 60B+ 500M+ Customization & Integration Global OEMs Tokens Cars shipped with and Tier1s (Dataset) Cerence Tech Control of Data & Brand ~700 70+ 53% Continuous Technology Innovation Pate
Slide 5: Transforming to Achieve Long-Term Profitability
X X Transforming to Achieve Long-Term Profitability Adjusting cost structure of the business with the objective of achieving consistent positive Adj. EBITDA and cash flow from operations Plan to reinvest a portion of cost $35M-$40M savings to support Gen AI roadmap Estimated Annualized and next-
Slide 6: Cerence Generative AI Products for Pre- and Post-SOP
X X Cerence Generative AI Products for Pre- and Post-SOP Cost-efficient LLM solutions 8 OEM design wins (year-to-date) 5 program launches in Q3FY24 with 4 OEMs Car CA with Chat Knowledge NLU Plus Pro 4 additional launches with global OEMs expected in CY24 Usage of top domains (limited sample s
Slide 7: Powering Next-Level User Experiences
X X Powering Next-Level User Experiences Cerence Conversational, Cerence AI Automotive Multimodal Computing Companion LLM (Voice + Touch) System Applications Technology Vision. Large Multimodal Models will become the new computing engine enabling a single conversational interface to work across appl
Slide 8: Q3 FY24 Financial Details
Q3 FY24 Financial Details Tony Rodriquez, Interim CFO
Slide 9: Cerence Q3FY24 Results
X X Cerence Q3FY24 Results Q3FY23 Q3FY24 Q3FY24 Guidance Total Revenue $61.7M $70.5M(a) $66M - $72M GAAP Gross Margin 66.0% 71.5% 70% - 72% GAAP Net Income (Loss) ($16.5M) ($313.5M) (b) ($4M) – $2M Non-GAAP Net Income(b,c) ($1.7M) $8.4M Adjusted EBITDA(b,c) $2.8M $12.5M $5M – $11M GAAP EPS – diluted
Slide 10: Detailed Revenue Breakdown
X X Detailed Revenue Breakdown Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY23 Q1FY24 Q2FY24 Q3FY24 In millions Total License: $45.4 $30.8 $25.9 $43.1 $145.2 $20.8 $35.5 $43.1 Variable(a) $26.3 $26.2 $25.8 $30.3 $108.6 $20.8 $25.1 $23.1 Total Fixed(b) $19.1 $4.6 $0 $12.8 $36.5 $0 $10.4 $20.0 Connected Services: $1
Slide 11: Operational Metrics and Variable License Revenue
X X Operational Metrics and Variable License Revenue In millions FY23 FY24 Operational Metrics: FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Pro Forma $159.9 $41.7 $43.1 $44.5 $42.6 $171.9 $40.0 $39.6 $39.6 Royalties(a) Consumption of $76.8 $15.4 $16.9 $18.7 $15.5 $66.5 $14.5 $14.5 $16.5 Fixed Contracts(b) IHS Pr
Slide 12: Q3 FY24 KPI Performance
X X Q3 FY24 KPI(d) Performance Percent of worldwide auto production with Cerence Technology declined slightly to 53% (TTM)(a) Approximately 11.7 million units shipped with Cerence technology in Q3 • Down 6.2% YoY (IHS down 0.5% YoY) • Up 3.0% QoQ (IHS up 3.3% QoQ) Change in number of Cerence c
Slide 13: Fiscal Q4 Guidance and FY24 Revision
X X Fiscal Q4 Guidance and FY24 Revision Q4FY24 Revised FY24 Prior FY24(c) No fixed contracts Guidance Guidance Guidance expected during the In millions except per share amounts Low High Low High Low High fourth quarter Revenue $44 $50 $321 $327 $318 $332 GAAP Gross Margin 55% 60% 73% 73% 73% 74%
Slide 14: 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 $324M ($87M) $237M Legacy contract is a connected services contract with Toyota acquired by Nuance through a 2013 acquisition. Toyota decommissioned
Slide 15: FY25 Framework
X X FY25 Framework(a) Assumptions include: • Estimated net annualized cost savings of $35-$40 million predominantly realized in • Flat OEM production and pricing mix similar to the expectations within our latest 2024 guidance FY25. • Significantly less fixed license consumption than • Flat to low-si
Slide 16: Strategic Priorities
X X Strategic Priorities Accomplish fiscal fourth quarter and full year financial objectives Execute on transformation plan while minimizing disruption to ongoing customer operations Deliver on AI Innovation roadmap © 2024 Cerence Inc. 16
Slide 17: Q&A
Q&A ()cerence’
Slide 18: Appendix
X X Appendix © 2024 Cerence Inc. 18
Slide 19: 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 20: Connected and Professional Services
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 21: 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 22: 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 23: 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 24: 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 25: Q3 FY24 Reconciliations of GAAP to Non-GAAP Results
X X Q2 FY24 Reconciliations of GAAP to Non-GAAP Results Three Months Ended Nine Months Ended (unaudited - in thousands) June 30, June 30, (unaudited - in thousands) Three Months Ended Nine Months Ended June 30, June 30, 2024 2023 2024 2023 2024 2023 2024 2023 GAAP revenue $ 70,539 $ 61,660 $ 276,699
Slide 26: Q4 FY24 and Full Year FY24 Reconciliations of GAAP to Non-GAAP Guidance
X X Q4 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q4 2024 FY2024 Low High Low High GAAP revenue $ 44,000 $ 50,000 $ 320,700 $ 326,700 GAAP gross profit $ 24,200 $ 30,200 $ 233,500 $ 239,500 Stock-based compensation 300 300 2,300 2,300 Amortization
Slide 27: Q4 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
X X Q4 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) Q4 2024 FY2024 Low High Low High GAAP net loss $ (32,200) $ (27,900) $ (599,900) $ (595,600) Stock-based compensation 4,000 4,000 23,300 23,300 Amortization of intangibles 600 600 2,300 2,300 Restructuring a