Slide 1: Cerence Q2 FY24 Earnings Presentation
Cerence Q2 FY24 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Dan Tempesta, Chief Financial Officer Rich Yerganian, SVP of Investor Relations May 9, 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; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financi
Slide 3: Q2 Results & Outlook
Q2 Results & Outlook Q2 operating results above high end of guidance due to OEM-related adjustments Based on a recent deep account review, we are lowering full year revenue guidance to a range of $318M - $332M, approximately 11% at the midpoint Goodwill impairment charge of approximately $252M Withd
Slide 4: Cerence AI Roadmap Key to Future Growth
Cerence AI Roadmap Key to Future Growth 6 OEM design wins (year-to-date) Strong pipeline of opportunities Several expected OEM launches in H2 FY24 Car Knowledge CA with NLU Plus Chat Pro Generative AI products for existing solutions Next Gen – Full Stack AI Computing Platform Single multi-modal, con
Slide 5: 2H FY24 Objectives
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.
Slide 6: Q2 FY24 Financial Details
Q2 FY24 Financial Details Dan Tempesta, CFO
Slide 7: Cerence Q2 Results
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) ($12M) –
Slide 8: Revenue by Type, Quarterly
In millions Q1FY23 Q2FY23 Q3FY23 Q4FY23 FY23 Q1FY24 Q2FY24 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 $75.1 $96.8 $13.6 Connected Ser
Slide 9: Variable License and 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 Variable License $0 $0 $0 $0 ($3.2) ($3.2) $4.7 $0 Variable excluding OEM Related Adjustments $83.1 $26.3 $26.2 $25.8 $27.1 $105.4 $25.5 $25
Slide 10: Global Auto Penetration and Backlog KPIs
Global Auto Penetration(a) (TTM) remained at 54% Approximately 11.7M units shipped with Cerence technology Down 6% YoY (IHS down 1% YoY) Down 3% QoQ (IHS down 12% QoQ) Change in number of Cerence connected cars shipped (TTM over prior year TTM) units, up 23% Change in Adjusted Total Billings(b) incr
Slide 11: Fiscal Q3 Guidance and FY24 Revision
Fiscal Q3 Guidance and FY24 Revision Approximately $20M of fixed contracts during the remainder of the year, currently expected in Q3 Full year fixed contract contribution expected to be approximately $30M in FY24(d) Adjustments to full year guidance for GAAP operating results include Goodwill impai
Slide 12: 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 13: Fiscal Year 2025 Framework
Fiscal Year 2025 Framework(a) Mid-single digit growth off of $238 million(b) based on the following assumptions: Flat OEM production and pricing mix similar to the expectations we have just built within our latest 2024 guidance. Significantly less fixed license consumption than FY24. Fixed Licenses
Slide 14: Q&A
Q&A
Slide 15: Appendix
Ocerence Appendix
Slide 16: License Business Revenue Recognition
License Business Revenue Recognition Type of Contract Description GAAP Revenue Recognition Cash Receipt Variable License applied at production Quarter car is produced. Based on volume Quarter following GAAP revenue recognition Fixed (Pre-Pay) Bulk inventory purchase ($ based) Full value of contract
Slide 17: 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 18: 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 19: 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 20: 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 21: 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 22: 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. (unaudited - in thousands) 1 (unaudited - in
Slide 23: Q3 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance
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 of intangib
Slide 24: Q3 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
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 Restructuring and