Slide 1: Cerence Q3 FY24 Earnings Presentation
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 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 and profitability; outlook; fiscal year 2025 framework; transformation plans and cost efficiency initiatives, including estimated net cost savings; str
Slide 3: Q3 Results and Full Year Outlook
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 Q2 earning
Slide 4: Leading Provider of Audio & Voice AI Experiences
Hybrid / Edge / Cloud Leading Provider of Audio & Voice AI Experiences OUR EXPERTISE & INNOVATION FOUNDATION CUSTOMER EMPOWERMENT Conversational & Generative AI Audio & Communication AI AI-Driven Safety Support OUR SOLUTIONS Continuous Technology Innovation Control of Data & Brand Customization & In
Slide 5: Transforming to Achieve Long-Term Profitability
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 savings to support Gen AI roadmap and next-gen platform Initial expectations are t
Slide 6: Cerence Generative AI Products for Pre- and Post-SOP
Cerence Generative AI Products for Pre- and Post-SOP 8 OEM design wins (year-to-date) 5 program launches in Q3FY24 with 4 OEMs 4 additional launches with global OEMs expected in CY24 Strong validated pipeline through pre-development programs Growth in price-per-unit Positive impact in customer exper
Slide 7: Powering Next-Level User Experiences
Powering Next-Level User Experiences Technology Vision. Large Multimodal Models will become the new computing engine enabling a single conversational interface to work across applications to complete tasks based on user preferences. Companion Applications Cerence Automotive LLM Conversational, Multi
Slide 8: Q3 FY24 Financial Details
Q3 FY24 Financial Details Tony Rodriquez, Interim CFO
Slide 9: Cerence Q3FY24 Results
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 ($0
Slide 10: Revenue by type: license, connected services, professional services
In millions Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY23 Q1FY24 Q2FY24 Q3FY24 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: $18.4 $18.9 $18.6 $19.2 $75.1 $96
Slide 11: Operational Metrics
In millions FY23 FY24 Operational Metrics: FY22 Q1 Q2 Q3 Q4 FY23 Q1 Q2 Q3 Pro Forma Royalties(a) $159.9 $41.7 $43.1 $44.5 $42.6 $171.9 $40.0 $39.6 $39.6 Consumption of Fixed Contracts(b) $76.8 $15.4 $16.9 $18.7 $15.5 $66.5 $14.5 $14.5 $16.5 IHS Production (units) 81.5 21.9 21.4 22.3 22.6 88.2 24.2 2
Slide 12: Q3 FY24 KPI Performance
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 connected cars
Slide 13: Fiscal Q4 Guidance and FY24 Revision
Fiscal Q4 Guidance and FY24 Revision No fixed contracts expected during the fourth quarter Adjustments to full year guidance for GAAP operating results include Goodwill impairment charge of $357 million in the third quarter Q4 and Full Year GAAP operating results include certain expenses associated
Slide 14: FY24 Revenue Guidance Excluding Legacy
FY24 Revenue Guidance Excluding Legacy Legacy contract is a connected services contract with Toyota acquired by Nuance through a 2013 acquisition. Toyota decommissioned the solution in Q1FY24 resulting in the acceleration of deferred revenue in Q1FY24 for Toyota and a directly related contract. From
Slide 15: FY25 Framework
FY25 Framework(a) Estimated net annualized cost savings of $35-$40 million predominantly realized in FY25. Flat to low-single digit percentage decline in revenue off of $237 million(b) Improved gross margin from a FY24 business without legacy revenue Positive Adj. EBITDA with single digit margins As
Slide 16: Strategic Priorities
Strategic Priorities Accomplish fiscal fourth quarter and full year financial objectives Execute on transformation plan while minimizing disruption to ongoing customer operations Deliver on AI Innovation roadmap
Slide 17: Q&A
Q&A
Slide 18: Appendix
Ocerence Appendix
Slide 19: License Business Revenue Recognition
License Business Revenue Recognition Type of Contract Description GAAP Revenue Recognition Cash Receipt Variable License applied at production Quarter car is produced. Based on volume Quarter following GAAP revenue recognition Fixed (Pre-Pay) Bulk inventory purchase ($ based) Full value of contract
Slide 20: 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 21: 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 22: 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 23: 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 24: 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 25: Q2 FY24 Reconciliations of GAAP to Non-GAAP Results
Q2 FY24 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. 1 (unaudited - in thousands) (unaudited - in
Slide 26: Q4 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance
Q4 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands)
Slide 27: Q4 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
Q4 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands)