Slide 1: Cerence Q1FY23 Earnings Presentation
X X Cerence Q1FY23 Earnings Presentation Stefan Ortmanns, CEO Tom Beaudoin, CFO Rich Yerganian, SVP of Investor Relations February 8, 2023 Destination Next
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 targets; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial results; b
Slide 3: Q1 FY23 Business Highlights
X X Strong Core Business drives revenue and profitability Introduced strategy “Destination Next” and Q1 FY23 long-term model at our investor day in November Strong market position delivers two win-backs Business Highlights and two new logos Macro environment incrementally better but risks pe
Slide 4: Q1 FY23 Product Highlights
X X Cerence Co-Pilot (CA 2.0) – 4 design wins in Auto: 3 in Europe, 1 in China Q1 FY23 Cerence Ride – 3 new design wins, including a Japanese motorcycle company Product Highlights Cerence Link – 2nd design win in India Strong Product Momentum Cerence Car Knowledge – Expanded Assistant at mar
Slide 5: Deeply Focused on Innovation and Execution
X X Deeply Focused on Innovation and Execution Accomplished Continued Focus New leadership team Strong bookings performance, including win-backs Established long-term growth strategy Innovate and expand leading-edge capabilities Efficiently managing costs Deliver on FY23 guidance and lon
Slide 6: Destination Next: Fueling Growth by Creating an Immersive Cabin Experience
X X Evolving from a voice-only, driver-centric solution to an immersive companion experience Moved from a component supplier to a trusted Destination Next innovation partner Participating in a significant and expanding Fueling Growth by Creating an served addressable market Immersive Cabin Exp
Slide 7: Q1FY23 Financial Details
Q1FY23 Financial Details Tom Beaudoin, CFO Destination Next
Slide 8: Cerence Delivers Strong Q1 Results
X X Cerence Delivers Strong Q1 Results Q1FY23 Q1FY23 Guidance Revenue $83.7M $75M - $79M GAAP Gross Margin 68.7% 67% - 68% Non-GAAP Gross Margin 70.4% 69% - 71% GAAP Net (Loss) Income ($2.2M) ($19M) – ($16M) AEBITDA $19.7M $11M - $14M Non-GAAP Net Income $14.2M $3M – $4M GAAP EPS – diluted ($0.05) (
Slide 9: Detailed GAAP Revenue Breakdown
X X Detailed GAAP Revenue Breakdown In millions Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Total License: $46.8 $46.3 $46.4 $19.0 $45.4 Variable(a) $21.5 $20.2 $22.3 $19.0 $26.3 Total Fixed(b) $20.1 $25.6 $23.3 $0 $19.1 Prepaid (cash upfront) - $5.7 $13.2 -- $18.0 Minimum Commitment (no cash upfront) $20.1
Slide 10: License Business Remains Strong
X X ($ millions) License Business Remains Strong In millions FY2021 FY2022 FY2023 Pro forma royalties remain solid Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Consumption rate of fixed Fixed Contracts $10.1 $17.3 $18.2 $25.4 $20.1 $25.6 $23.3 $0 $19.1 contracts peaks in FY23 Pro Forma $48.6 $47.4 $42.9 $34.0 $39
Slide 11: Strong KPI Performance
X X 52% Global Auto Penetration (TTM), up from 51% 11.5M units with Cerence technology, up 4% Strong KPI QoQ including 2.2M connected units, up 5% QoQ Performance High Level of Engagement (2%) Decline in Billings per Car (TTM YoY) with Customers and Partners 19% Increase in Monthly Active Us
Slide 12: Fiscal Q2 and Full Year 2023 Guidance
X X Fiscal Q2 and Full Year 2023 Guidance Q2 FY23 FY23 Tailwinds: Guidance Guidance Raised low end of full year In millions except per share amounts Low High Low High guidance by $5M Revenue $64 $68 $275 $290 Better than 97% revenue visibility for full fiscal year GAAP Gross Margin 60% 62% 63% 6
Slide 13: Partnering with our global customers to...
X X Best Positioned to Maintain and Expand our Category Leadership in Mobility AI Strengthen and differentiate their brands Secure their end-user data and data privacy Partnering with Monetize digital services and create new revenue streams our global Know and embrace their customers Colle
Slide 14: Q&A
Q&A Destination Next eke
Slide 15: Appendix
X X Appendix © 2023 Cerence Inc. 15
Slide 16: 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 17: 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 18: 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 19: 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 20: Non-GAAP Financial Measures – Definitions
X X Non-GAAP Financial Measures – Definitions Restructuring and other costs, net. Restructuring and other charges, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business such as
Slide 21: Non-GAAP Financial Measures – Definitions
X X Non-GAAP Financial Measures – Definitions Amortization of acquired intangible assets. We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size
Slide 22: Q1 FY23 Reconciliations of GAAP to Non-GAAP Results
X X Q1 FY23 Reconciliations of GAAP to Non-GAAP Results Three Months Ended December 31, 2022 2021 GAAP revenue $ 83,658 $ 94,426 GAAP gross profit $ 57,475 $ 70,199 Stock-based compensation 1,349 1,092 Amortization of intangible assets 103 1,879 Non-GAAP gross profit $ 58,927 $ 73,170 GAAP gross mar
Slide 23: Reconciliations of GAAP Financial Measures to Non-GAAP
X X Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures (unaudited - in thousands) Q1FY23 Q4FY22 Q3FY22 Q2FY22 GAAP revenues $ 83,658 $ 58,144 $ 89,041 $ 86,280 Less: Professional services revenue 19,847 21,048 22,599 20,646 Non-GAAP Repeatable revenues $ 63,811 $ 37,096 $ 66,4
Slide 24: Q2 FY23 and Full Year FY23 Reconciliations of GAAP to non-GAAP Guidance
X X Q2 FY23 and Full Year FY23 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q2 2023 FY2023 Low High Low High GAAP revenue $ 64,000 $ 68,000 $ 275,000 $ 290,000 GAAP gross profit $ 38,200 $ 42,200 $ 172,300 $ 187,300 Stock-based compensation 1,300 1,300 5,400 5,400 Amortiza
Slide 25: Q2 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance
X X Q2 FY23 and FY23 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) Q2 2023 FY2023 Low High Low High GAAP net loss $ (32,300) $ (28,800) $ (69,700) $ (62,700) Stock-based compensation 12,400 12,400 49,500 49,500 Amortization of intangibles 2,500 2,500 6,100 6,100 Restructuri