Slide 1: Cerence Q1 FY24 Earnings Presentation
Cerence Q1 FY24 Earnings Presentation Stefan Ortmanns, Chief Executive Officer Tom Beaudoin, Chief Financial Officer Rich Yerganian, SVP of Investor Relations February 6, 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; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial result
Slide 3: Q1 FY24 – Business Highlights
Q1 FY24 – Business Highlights Our AI innovation roadmap was validated with various global OEMs, generating new opportunities with existing customers and re-opening discussions for potential win-backs AI product strategy based on data ownership, customizable and OEM-controlled solutions, ultra-fast i
Slide 4: Cerence AI Strategy Delivers on the Potential of LLMs
Cerence AI Strategy Delivers on the Potential of LLMs Large Multi-Modal Models expected to become the new computing engine (AI Agents), enabling a single conversational interface to work across applications to complete tasks based on user preferences LLM-based architecture with automotive-specific d
Slide 5: Cerence Full Stack – Next-Gen AI Computing Platform
Cerence Full Stack – Next-Gen AI Computing Platform Driving a More Immersive In-Cabin Experience Multi-modal, hybrid-based LLM architecture with intelligent reasoning Multi-seat support with barge-in capabilities and all-seat microphone capture with wake-word free invocation Proactive AI, Emotion De
Slide 6: Video
Video Qceence
Slide 7: Building Momentum for Cerence AI Technology at CES
Building Momentum for Cerence AI Technology at CES Strong recognition among automotive OEMs, tech partners, investors, and media, solidifying our reputation as an AI innovation leader More than 200 customer meetings and demos leading to an enhanced pipeline of new business opportunities Joint press
Slide 8: Q2 FY24 Company Priorities
Q2 FY24 Company Priorities: Leverage the Strong Momentum of Our AI Roadmap Build on strong receptivity from global OEMs to grow pipeline for new products Partner with OEMs for quick deployment of cloud-based technologies for both new production and cars already on the road Achieve SOP for Cerence Ch
Slide 9: Q1 FY24 Financial Details
Q1 FY24 Financial Details Tom Beaudoin, CFO
Slide 10: Cerence Delivers Strong Q1 Results
Cerence Delivers Strong Q1 Results Q1FY24 Q1FY24 Guidance Revenue(a) $138.3M $128M - $132M GAAP Gross Margin 81.0% 80% - 81% Non-GAAP Gross Margin(b,c) 81.5% 81% - 82% GAAP Net Income $23.9M $19M – $23M Adjusted EBITDA(b,c) $70.4M $58M – $62M Non-GAAP Net Income(b,c) $54.3M $40M – $44M GAAP EPS – di
Slide 11: In millions Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Total License: $46.3 $46.4
In millions Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Total License: $46.3 $46.4 $19.0 $45.4 $30.8 $25.9 $43.1 $20.8 Variable(a) $20.2 $22.3 $19.0 $26.3 $26.2 $25.8 $30.3 $20.8 Total Fixed(b) $25.6 $23.3 $0 $19.1 $4.6 $0 $12.8 $0 Prepaid (cash upfront) $5.7 $13.2 $0 $18.0 $4.6 $0 $12.8
Slide 12: In millions FY2021 Fiscal Year 2021 FY2022 FY2023 FY2024 Q1 Q2 Q3 Q4 FY21
In millions FY2021 Fiscal Year 2021 FY2022 FY2023 FY2024 Q1 Q2 Q3 Q4 FY21 Q1 Q2 Q3 Q4 FY22 Q1 Q2 Q3 Q4 FY23 Q1 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 $0 Pro Forma Royalties(a) $48.6 $47.4 $42.9 $34.0 $172.9 $39.6 $39.7 $41.5 $39.1 $159.9 $4
Slide 13: Global Auto Penetration (TTM) remained at 54%
Global Auto Penetration (TTM) remained at 54% 12.4M units shipped with Cerence technology, up 7% year-over-year and up 6% QoQ (IHS up 9% YoY and up 6% QoQ) Change in number of Cerence connected cars shipped (TTM over prior year TTM)(1) units, up 36% Change in Adjusted Total Billings increased 4% YoY
Slide 14: Toyota “Legacy” Contract
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 acceleration
Slide 15: Fiscal Q2 Guidance, No Change to Full Year Revenue and Gross Margin Guidance
Fiscal Q2 Guidance, No Change to Full Year Revenue and Gross Margin Guidance Full year fixed contract contribution lowered to approximately $20M per year starting in FY24 Approximately $5M of fixed contracts expected in Q2 Adjustments to full year guidance for GAAP operating results due to restructu
Slide 16: Q&A
Q&A
Slide 17: Appendix
Ocerence Appendix
Slide 18: License Business Revenue Recognition
License Business Revenue Recognition Type of Contract Description GAAP Revenue Recognition Cash Receipt Variable License applied at production Quarter car is produced. Based on volume Quarter following GAAP revenue recognition Fixed (Pre-Pay) Bulk inventory purchase ($ based) Full value of contract
Slide 19: 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 20: 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 21: 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 22: Non-GAAP Financial Measures – Definitions
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 23: Non-GAAP Financial Measures – Definitions
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 24: Q1 FY24 Reconciliations of GAAP to Non-GAAP Results
Q1 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 25: Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures
Reconciliations of GAAP Financial Measures to non-GAAP Financial Measures (unaudited - in thousands) Q1FY24 Q4FY23 Q3FY23 Q2FY23 GAAP revenues $138,335 $80,764 $61,660 $68,393 Less: Professional services revenue 20,692 18,491 17,240 18,667 Less: Legacy related revenue 86,613 8,853 8,867 8,885 Non-GA
Slide 26: Q2 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance
Q2 FY24 and Full Year FY24 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q2 2024 FY2024 Low High Low High GAAP revenue $60,000 $64,000 $355,000 $375,000 GAAP gross profit $36,200 $40,200 $265,200 $285,200 Stock-based compensation 700 700 2,800 2,800 Amortization of intangib
Slide 27: Q2 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance
Q2 FY24 and FY24 Reconciliations of GAAP to Non-GAAP Guidance (unaudited - in thousands) Q2 2024 FY2024 Low High Low High GAAP net (loss) income $(13,900) $(9,900) $11,400 $26,400 Stock-based compensation 9,400 9,400 36,200 36,200 Amortization of intangibles 600 600 2,300 2,300 Restructuring and oth