CRNC - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Cerence's Q4 2020 Earnings Conference Call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Richard Yerganian, Vice President of Investor Relations. you. Thank sir. ahead, go Please

Richard Yerganian

you, Dillon. year quarter fiscal Cerence's Welcome conference call. to XXXX fourth and Thank

Before I These date after call in makes may to we no that and hereof. the involve you begin, risks update today's certain would press like representations release forward-looking call. as to the statements. uncertainties statements preceding subject remind are described to Cerence this statements those

certain refer non-GAAP during addition, today's measures of pro measures closest In refer the the further information Please may and GAAP to forma definitions, uses for this release to call. the limitations to company press financial reconciliations of of measures equivalent. and details non-GAAP and those

of on Dhawan, are Sanjay today's of President me Cerence call Gallenberger, Cerence. CEO Joining CFO and and Mark

authorized will the Mark for our AI reminder, read As to Mark. Geely. will company on conference What only hear remarks a clones you're me. about voice and technology AI demonstrating by computer call the prepared be of called Sanjay, be The this generated Sanjay our system we again, are neural Once driven based using voice cloning and Technology. are Cerence spokespeople

Pay clone’s you the real will the prepared call voice see can attention Sanjay Mark for and the Following hear remarks, the Q&A. close if join difference.

in section the the to participation. over the exact Raymond include in of conferences Conference. timing on our visit Before Sachs date TMT announce Interconnect for couple Technology subject James like Please so investors the most the growth change. the of all page Fargo call would The handling XXXX events upcoming information the Investments are XXXX Goldman website Summit to participation I events, up our conference investor Conference, events. virtual They Wells to Needham Cerence the Tech XXXX, is the

call, want I the to Now Sanjay.

Sanjay Dhawan

reviewing share. financial record EBITDA I achievements collections. XX% year-over-year, and on quarter. was everyone my and accounts, midpoint the as by great Cerence's but the revenue and company, first The fiscal products first record fiscal results. will of had majority by particular, the margin, be primarily coupled our adoption OEMs, of auto at results quarter was share year per growth joining the on prudent discuss history. not best of The In the record quarter share XX% thank quarter all sequentially. and by a comments company's cash amazing fiscal great of public The fourth to the to our with our fiscal market, revenue, quarters. call, XX% the company performance recovery the fourth earnings exciting gross record in for our us you above guidance was and our our revenue stand-alone year was per would recent fourth be of outperformance $X.XX driven of the in We non-GAAP growth remiss By we have the per implemented with in controls of services $X.XX the financial auto Welcome strong

quarter first guidance in release, the our XX% XX% to As up to that you in compared the we period in we to prior revenue see press the provided expect the be year. can approximately same

the separated delivered of company anniversary the and XX% onset expect bookings, disruption, the pandemic. the track the guidance our technologies from For beginning better provided fiscal before COVID-XX, the arrival with the in made delivered challenges than to from year and on independent car important progress importantly, celebrated grow or fiscal company's of year. X% company to and the as very with of a year the 'XX. at consumer's and minimal of largest as despite year, new we inside buying a contracts mobility. We AI in other over we the fiscal lead And recently its leading revenue full two space conversational experience in the mobility, with between the company. pleased role its X-year We that of transportation had we including for nuance stream established forms we products history a of Cerence steady results during first the record Most extremely a are an

leaders as accounts, participation investors over By the innovation earlier the technology placed in the an Our with resulted the for press. show company at customers, Show independent Consumer and among all the in meetings us year and in Electronics the car. auto XXX

the Cerence's the and investors Among and an hosted year, Day to than year maintained voice-assistant resulting of bookings embedded accomplishments NEO, strategic 'XX, introduce company number of competitive both saw company billion. opened expanded highly our customers. included increase traditional in market by a electric an wins also manufacturers, of including NASDAQ a fiscal car portfolio we over and XX% with ending We our several more during These first key the stakeholders. compared other in position consider vehicle backlog Analyst strong $X.X market We to bookings help including OEMs our the connected of to be Tesla also China. to and the many

new during vehicle our embedded access to introduced to others. and Product hard strategy first to microphones. such three position is critical detection, detection enhanced infotainment element exciting. have the the as to gain leading steady innovation, core innovation all a is technology The I drive and system drive emergency this. my the leverage business many product is allows amazing sensors, on stream and drive We and priorities. speed we of very and with team products us our to technology technologies deliver year execution are capabilities gaze cost of of the cameras the inside the CEO, The As This priorities company, control. most and very

also can is inflection articles article and on at We depending it human how introduced just voices news, which like something that if Cerence read with sound Reader, or even near an sports it else.

in now year the cloud-based for in introduced assistant our available faster time was other provides a during a leading solution products capability and market, to and in providing for ARK Cerence as car. key geographic regions customers. but other ARK, a pre-integrated Cerence China connected with comes the first lower solution edge cost services turnkey introduced market, developed of One voice the

only We a voice key helping Life, Pay. products the initiate provide of not appointments purchases the priority, up-to-date most technologies few cars, leads with allow service two about a new applications, new introduced me I've and only a Cerence have using number drivers is to transaction two that transaction that to and products software Pay market voice innovate, Car or their of suite will my even in-car of your biometrics but translate that into information critically Life mentioned offerings and quickly scheduling the source to car's as and capabilities needed. a get the market. learn which AI-powered or quality revenue them important execution. uses Car service when to innovation SaaS Cerence best It to generate brought them year, speed to and we on basis. to this about

products. 'XX been as will this One momentum the turning product of within ideas we the into ahead. effective year. and have management chartered to continue most look fiscal product important And company extremely group year our to race functions the with They beyond, first new is

which to cost priority is control. third The drive

three the the while from to reach Analyst and on Day approximately fiscal to showing products half throughout XX% our also the to How quickly mind. midterm We saving a cost auto impact is we will these hosted keeping the but becoming range do stay-at-home February, revenue achievements world. of review want We controls successful fiscal so have 'XX. in our of announced while are 'XX, cost while for made event our In target the results to the updated better were to business reflect what million financial shortly company. performance resulting on Shortly innovate, into quarter second model you shows innovation industry $XX at same. year. thereafter, ultimately Mark key some adjustments performance the efficiently we Then the our fiscal orders with we our as implemented And and a keeping year. year financial our CAGR year details key new profit priorities quite severe introduced with for the convert that guidance a pandemic in I metrics point leads fiscal out first first

third results With than our expected the fourth, quarter, excellent business we COVID. the results the pre provided than we in better in our and that deliver had up holding better able to guidance were

think we we refinancing Last the additional debt presented of Another year that spin debt the quarter, into as the business. series expensive KPIs, restructuring million of was to interest in first of out. accomplishment annual part use $XX insight received company cash over This is of our our which saving during expense. we successful the provide

XX% of in The our an in fiscal this KPIs car. are trend This we and 'XX. of quarter KPIs active car in on the providing users shipments car COVID of to and Well-connected compared this growth updated Certainly, expansion a are strong more on and of impact the number is the the declined of XX%. to per technology. continue when provide by more of number the The services declined added momentum. ones. results have new connected connected 'XX technology. car of fourth have our car connected also We KPIs new indicate both using into XX% Overall, are related cars use our to insight shows increasing and fiscal KPIs penetration additional to with and driven business monthly makes Overall as cars shipped the shipments production primarily chart consistent whole. trends connected our to had the drivers transactions. billings page of services by models. secular those with into our is The services reflect monthly car The

cars the we users in You expect of time, growth interrupted acceleration then more as chart more see recovery. number then active this that that the of by consistent and monthly and the will over Overall, COVID trend become can connected both transactions. show and would the impact

the using solutions, driving. As XX% going. we in a them for safer voice say respondents of that is car people In application enhanced by car elevators. has that Providing outside to expect reports part it look mobility the our study created while Cerence makes safer published technology This Adobe, the opportunities a XX% a The safety recent to to of technology a we fiscal age technology makes in COVID. core year keep of use momentum feel 'XX, as in car study additional of of them voice mission. such business feel the also same feel that that

Cerence remains Cerence our aggressively as adjacent mobility into bright vehicles, We exciting. further pursue continue also others. expand to and The applications all future launch core to for building of like markets and thank innovation in wheel products our cannot very the technology, will employees year. such for results new for the two and would their I Cerence's We results world. and to across like quarter employees support and would the Mark of the review deliver in these the journey. over the to call turn I support successful to and Mark? this of financial dedication without

Mark Gallenberger

strong business, million, recovery over expectations. license higher the growth I'll all above of Revenue third and the along $XX.X our exceeded Thank then XX% all first fiscal The then the came our $XX results review for revenue results a our accounts, for you, guidance year. guidance. quarter review in sequential our fourth up professional a high By million, XX% performance the business. for the quarter quarter end year. with first fiscal full 'XX was provide fourth Sanjay. driven quarter strong of was and in in which I the our our almost will full by services for at

margin spending EBITDA lower fourth Our $X.XX. at in the with margin in non-GAPP in of plan the we profit adjusted of per particularly the performance $XX exceptionally was strong for fiscal elevated non-GAAP XX%, implemented or that year, the million of and the operating April earnings is XX% half coming share margins quarter. in factor key The second

return cost savings 'XX. will these fiscal ultimately year However, in

read to margins too quarter. I caution into achieved the and elevated investors much So not would analysts this

Regarding breakdown revenues. our of the

last strong had our which period we up the in a XX% up X% year. and recovery business, mentioned, same was from from third previously quarter As license the

exhibited variable auto sequentially quarter. from low license in recovered recovery XX% production the the strong revenue very and up quarter point the Our as during was a third

down year, XX% full due to while same X% our time IHS. revenue was auto COVID-XX, the declined of impact the For to according production the license over period

an fourth connected revenue connected by Our X% services from driven XX% our quarter grew services. year-over-year, increase by new of

versus XX% the 'XX. For was services growth new connected the fiscal year, for year

a gains. be of by secular to cars our trend of more driver as share the connected new combination more as and expect We driven well in key future, of services becoming connected our the growth a

Our our work the tends upfront indicator performed up prior strong as production. customize well and connected exceptionally business to growth leading professional solutions future has and at this license professional performance start be bookings XX% services year to in this to Not of revenues integrate consulting our and represents a business surprisingly, software grew to year this led potential services. our growth for

fiscal industry. For is the we exceed key of the a considering of year, the the metrics This auto the able we onset had achievement on provided all significant financial the were guidance impact to the virus of before COVID-XX.

to model our expectations. Our to ability revenue enabled performance reinforces AUTOSAR adapt and our decision by continuously expenses reducing business outperform quickly the outperform the to

billion year-over-year a was ago. growth year $X.XX and to in for is of pro up record is high is by XX% $X.X driven year backlog Our connected over million million This XX% professional from ago for services. prior $XXX the license, for for grew year. a billion X% represents XX% services. ending growth for compared comprised the XX% year slightly backlog bookings of license, and fiscal year, for $XXX $XXX The and versus approximately connected $XXX backlog which for The million of million

as strong COVID-XX expenses in the to the model from the Our year. expected global quarter first will business X%. 'XX those taken year-over-year of fiscal added reflects still XX%, down The be to be of XX% back for will to reductions auto guidance is during the production benefit expense course growth while flat

$X.XX. XX% a result, per XX%, earnings $XX of EBITDA quarter margins XX%, to enhanced in As to resulting $XX non-GAAP of see first the of and of adjusted to to share gross million operating margin will XX% $X.XX non-GAAP margin non-GAAP million

complete hiring to year freeze, to expected the elimination full in reflect For the the expenses another year top representing full and The expect XX%, X% fiscal fiscal we grow in business. growth. the between our year, the growth 'XX to of line that reduced were for the the both of strong support margins of restoration

adjusted to strong $X.XX earnings expected be our of $X.XX. another expect per year the and share and generation EBITDA non-GAAP to We of in is CFFO range

in expect So summary, extend fiscal developed 'XX to we in beyond. fiscal to momentum year the and 'XX

stream while of cost, keeping that strong steep execution is visibility open our And a we which not priorities but on of remarks. only well our new so into and of With Our it company and questions. up the a prepared backlog technology introductions future, employees Cerence now delivering trend, model, are innovation, results. three to focused a speed well-positioned growth a profitable concludes excellent business long-term steady for This is and the will strong product growth. financial on doing provides

Operator

from show I the Company. from our of Needham Raji question Instructions] [Operator first comes Gill line &

Raji Gill

I kind outgrow on auto terms the on be the that the in attach not And you necessarily there a revenue the backlog tide Congratulations you're elaborate production, results. of to also certain what production percentage the is sequential. of of market, but you tied could you overall a is seeing of even automotive what though rates. your there making is that. outgrowing to dollar and maybe seem Sanjay, further on seeing on terms both you're wondering was in in question licensing, excellent growth you're if

connected think attach what you. main being rates How color licensing. rate calendar on drive a any next services on application terms the we the think about a for Thank And in year-over-year services do of services kind will higher just connected then for the on do of basis. year? connected 'XX, you Just down attach

Sanjay Dhawan

used more to becoming end the into are the of a but OEMs, about and as terms have more into over. license talked is think basically our conversational story and low AI So is revenue, than important. Basically, what well. what that to in penetration More for we also I and as more car see and voice it's function more we high that over strategic end automotive mid technology and they the more important, becoming be cars bringing more

main I this the continue. grow that the trend that's to of being AUTOSAR. That We're the increase seeing and are that continue leading customer basically make it cannot strategic discussions will technology why So than reason very to clear more auto and faster we absolutely an kind basically. to absolutely carmaker

On the thing. services, same connected

as we car. is you the car we SaaS there capabilities provide SaaS. trend thing certain to and As better so It's The And architecture interesting know, recognized product connectivity, sold runs our happening with of as the as our of better cloud gets hybrid is It's of And see revenue. a that services set a well. a SaaS. inside we have the similar even part basically can and. driver connected recognized as services

of a be will new to hoping So standpoint business there driver look I'm will is growth from But December, slower exciting growth next adoption products trend three slightly that which as see connected rates than I anything, the are more. our bigger on. obviously, services growth if And forward very even no services, we'll we be for increase kind else. a releasing rate from the you some expect years, And standpoint. difference and connected anything the so in

Raji Gill

licensing for just looking services. follow-up, and my connected when And at Mark, piece of the parts

obviously, circumstances, patterns year-over-year So think just into year? year, which because licensing, we COVID-XX, extenuating of there for was going How do in the on changed buying next prepay. about prepay they're prepay, XX% customers. growth This

legacy off revenue throughout kind we on and that do it And of does X% year-over-year. going year? quarter? services how roll then growth year some the legacy into the we next about next stream do how revenue about the side, connected So How think think

Mark Gallenberger

prepays. 'XX. it year Last fiscal million. did relates we $XX year in the first million The $XX to question So was around year, as it before,

you FY If around back $XX $XX million. or million go to was it 'XX,

XXs XXs. this So we be low in of low seem to to range

into within fiscal 'XX. year that I going So to expect be certainly range. us would

If prepays. said sort reducing you recall, towards have past, of in that we're biased the I

because our However, that's customers' have we ebbs well so not control flows. and and always our inside sometimes as that demand

So to which be that several it but view the fiscal XXs years, 'XX, 'XX down range over -- low the XXs. low it's going that high XXs from seen my think FY within or would going low have I into to certainly, is still we is be I year last think to

or So for that's question, to your see we're think but range long-winded to I answer the 'XX. that question, about going FY

Regarding the legacy connected revenue.

seeing revenue plateauing in are We 'XX. FY that

last revenue expect 'XX we year year that would to by winds in the program see for year, fiscal fiscal be flat So year-over-year. to as year full 'XX. which year to start in some probably revenue see $X did $XX 'XX, 'XX, revenue for should legacy just you that down. million decline year we'll fiscal a time the in legacy in that down the range then about million fiscal get And FY last in the starting 'XX, you'll I year. in connected be And

Operator

next comes the from Wedbush. question Our Ives line of Daniel from

Daniel Ives

Again, geographically, as years? the India talk opportunity can coming of what represents about markets maybe talk and of about and that in growth sort terms you China just over

Sanjay Dhawan

jump Mark, in. you I'll start, then can

shipping We share have China, have China for and So market leading for global we years share, very I focused into a cars China. have XX%, good almost market very absolutely OEMs. a XX been think China OEM in now, XX%

share in our that's clearly to that in we But neck competitors the of we’re neck leadership. some major compete a even where market local for with of space. terms So China,

or Neo almost quarter, as So customers of them customers, of in new others we being number well. one last announced four the and five

And very compared permission we are largest is you there we're making So clearly overall, in so top basically. quarter the participating market new smaller a also in in in our manufacturers, name making to that, one there China very, India as also Having progress two hands-free where other use like hands of about well. a market with the year India great remains we'll steering that's the We said progressing has as definitely think as from we're the assist basically their really they -- smaller services. given a both the are China. know, it car first shipments space. Cerence last ours any compared have was the market the do as because I the Hopefully, huge to that announced OEM customer sign wheel supposed technology China of win great kind participating a it's wheeler wheeler two to we're for we and very China nicely. in two technology can can We we're usage quarter. and get wheeler announce but talked China road, progress a a did to to the three auto that auto but And on when eyes for on us. soon. basically be conversational AI-based drivers local for and And

as looking well. in companies active at space number Mark? with we're discussions of well space in that So that [e-scooter] as

Mark Gallenberger

I thing the OEMs as indigenous so got is foreign drivers, sell add only two market for the us, you've China China. into that well OEMs other Chinese And as would

of think position very good I got both those areas. in we've market

I as some going really to our ARK two of think that's good growth of we're lower-cost where which the markets. mentioned, some our, towards Sanjay introduction product, of wheelers well technology see some lower-end, as geared the Cerence for the of some is as

such also as China to that markets think, opportunity as so inside India. as I for be, And grow good us of ground would well and fertile

Operator

comes Sachs. Our next from Merwin of from question Goldman Chris the line

Chris Merwin

year. that Congrats to backlog, touch on last I increased, million the year. by about $XXX like think, wanted a great I looks finish relative it on to the to

think I growth. almost XX% it's

thinking incremental being of we should sense the also, that the be in connected? about revenue backlog then you. that And a was years? generated, backlog was of just as how that So of coming can versus you license timing much that recognized give Thank us how

Mark Gallenberger

the million year end year. quite to grew a So went the about $XXX it million of at bit, $XXX over last backlog from this license

almost growth that portion XX%. was year-over-year on So

in there, shipped total of by But growth backlog, what million connected When pro about XX%. bookings. out growth out pretty terms $XXX our year, in we growth, then had XX%, was the backlog cannot lastly, substantial overall total it we of in services. and over our factor So this followed you

for very, So very bookings. year strong

next Regarding years lot us how to in I ship of good the terms would shift I say gives that's me, period. that over several a Clearly, of this don't to of going numbers or but three backlog likely in going visibility. year is of front the revenue I would say, XX% more have over the next

we've And past. so mentioned those in the numbers

what's I this in further are little into ship year But the to numbers several still think happening. the gives And valid it's terms to going much sets predictability the all, gives us you then of all business. in up of next XX% out, a much naturally of good it's it we'll be years. as get And over future, those higher as not that, to visibility course. bit. some course, year be going how decline good It those really us growth percentages us for in every

the term. I to will pick We expect beyond. And long of Over next do slowed year this had was year, COVID flows. ebb be things and down but up ebbs one obviously there things where kind and which

Chris Merwin

clarification. one just And

very driver of things? the the sounds Sanjay, going of connected in But growing In that driver backlog pieces How understand the was business a both fastest bigger are of terms just we growth source the well. business earlier you but like going mentioned bigger the square those think, Obviously, of the kind future. in here. do -- what's is the trying be of I going to Thanks. to forward two it to license be

Sanjay Dhawan

this we with the in products. completely what our introduced products last there's cloud are will very quarter basically new cloud combined and call in these interest performance, cloud which OEMs, to these And some with going also market And the plan if number cloud, of new compared our as release say services, then refresh was brand-new look our will revenue absolutely that expect drive discussions a of have and was services. even we So a that at early number Chris, something were with I we we I growth, connected And obviously of year-over-year, expect see innovations number stage I services that and offerings of more to to [X.x] along will discussions growth lot the OEMs. you a I interesting early around you new about our the XX%, bookings the mean grew look legacy. more. as I like forward, connected that having products

So the services out. effect is legacy strong take new you on the if the connected growth pretty

Operator

the Chris I Evercore. show our line next question comes of from from McNally

Chris McNally

Thanks so demo, then much to guys for the detail question. question and impress. model continue One tech and fantastic auto one

global particular. conservative LMCs model production and XX% to revenue plus assumptions look based in that's When we is XX%, be the know you So IHS -- on your and on itself, to how drive your I plus per you help XX% actual are guys the number? curious bottoms-up not on IHS se. going license may just But

that. detail any just that around So you can add

Mark Gallenberger

our start, all want backlog. bottoms-up third-party in. check can We sanity forecast those to to information. upon and a fill do we I based Yes, with Sure. if try estimates Sanjay, you

fiscal while I think in look at grew growth year same time 'XX, auto was you XX%. when we X% down our period production that year-over-year for

XX-point we 'XX. in fiscal So spread year had

did fiscal of probably kind and for that about you prepays look points of in accounted that be year-over-year growth. that you when the at year 'XX flat of X However, we to adjust some

plateauing you to kind points, add legacy you effectively year to each And the you of relative for 'XX, mentioned was growing prepays. X fiscal guidance then, that for in of comparison on connect before, another adjust which course, you if our just is what got get factor to historically to effects the to whereas could of So apples an that it year. I apples is

not grow fiscal see to year that in we're Now going 'XX.

with two is there certain may those in out at -- here different and And still a amount of there it conjunction forecasts uncertainty points, as put fair So there flare-ups risk. to COVID. relates

because just that COVID frankly. conservative want just sure to still we So going is unknown we an are year the quite make into

Chris McNally

is pretty not professional, sort that assume year's will next total take little can But year. growth for even it of to in have we a much that license next If connected be and still than much maybe like we going growth? business sounds lay strong stronger quite XX% the the but for to it bit there's not sounds equally, be license like you

Mark Gallenberger

pro I just think of to I services though would continue we've very coming and services, pro new pipeline design because year, expect grow a license think And growth. wins. our show also a off very as got good we're I well opportunities will strong year-over-year new even to

don't growth would I license. the in I So put all think

I pro service good been going to growth. to connected mention new that's Not growing. the think also services, show is

but So year-over-year of XX% good smaller connected on services. showing very just it's growth base, new growth, the still a course,

items grow all be So of line I expect would our just all to in license. It's three going to year-over-year. not

Chris McNally

Maybe and sounds Car when it's to talked Pay. the to the have down tech, hard Maybe streams, just like XXXX CMD, specific a the continuing the you think your Life good million all Cerence for growth you I number, it about first $XX Perfect. these. revenue you've opportunities about the talked but SaaS nail onto in is in be new new

just they've how you to for order specific again since been going just bookings how we we're get gauge think $XXX interest the opportunities, the you magnitude, of from the ballpark, Pay can in products? those early maybe million talk plus details Cerence third even Could maybe announced, Life soon. those OEM of one on I about to much are order book Car just

Sanjay Dhawan

cup using was first, And think, So recognizing and demo. world's I a by Chris, this was think me was, the and bit clone. sitting It's thank earnings bit AI experience. for The on call waiting our engineer about a an clone, very my firstly, done while interesting turn you financial our Mark I excited little we in I for terms. Mark coffee of more and Clearly, a to a were Q&A. train models need

was it our see non-GAAP clone So the words. of to I when a those getting some could came -- in jittery little

need train I we think to financial the more. terms,

but products, auto more going kind the pipeline the were some to different -- it be new When model. the your make bigger And are small. go question, the because car, 'XX. the want some tied a QX, first is team, big to The some terms. it quarter. QX, job. of of of comes fiscal the strong a how that of a is not where obviously, of I kind one through hope of these commitment and a contract are But back let's to come the Chris, type hopefully, contract the over last be financial we of which new signed into services share with was will a of my we to purchasing but is new for sign to for but So the QX. they signed more apps new number remember, it models been spilled to, these our that in some, on couple are There small before a purchase. COGs bit they deeper the in are can hoping major But very services, the models the coming on discussions I in know bigger OEM, a connected our kind for which very There discussions train OEMs was wins customers products what We they But work is happened. COGs did really of PoC transaction with business have great finding, they rev car. SaaS on, little well more

Operator

from of from Kelley comes the David question Jefferies. next Our line

David Kelley

starting to XXXX Maybe you're like longer-term It's your year. it guiding looks interesting target with margin the guidance. this effectively

you Mark, stand wondering, some What of And where tracking could of see then benefits cost target we'll upside those year? walk how COVID-related impact XXXX of the from maybe roll-off given timing to through this of we're the margin that thus far. we today, see XX%, cuts? assumed us EBITDA you Just if do any

Mark Gallenberger

put of and the answer FY 'XX savings that actions the our yes, the we we margin conservative even last in relates that short-term term to first. COVID your model long I And Sure, profile. took for our realized think when because question performance I'll that I adjust place given as we is it analyst out

believe to doing and FY give little we those close us a We're assume do that want to a XX% numbers, early 'XX. margin for go than points connected but I time. still think it's I XX to But little more that it like I bit update higher for already. services in

gross we For quarter, plus. XX% we did Last margin XX% pro assume 'XX. FY services, for

going in And so one with data But to to those I and going do is line point trend. doesn't be model that think make necessarily dictate we achievable. the what we be new assumptions believe that updating more are

Analyst we'll I think line probably with But to a conservative. those bit think assumptions so at the bottom we share update numbers to get once next time. our sure Day, and And be I were everybody appropriate those is that

we those terms fiscal around million for in back probably those will maybe in And look QX, of be $X the and $X adding in $X half year. the back million million your question, final in another that at second And add we $X year QX, expenses would 'XX. in would cut QX of The so in is first then QX. to fiscal million probably it another in those way whole of we $X expenses I back and stay million another about million to in then be $X we'll bringing

non This so in annualized of So about is if million OpEx our that's comp GAAP it kind that's feathered run depreciation expense about to amortization. and increase in out rate -- look year the and at stock-based fiscal you $XX in the of course 'XX how QX. take gets relative

of the hiring. kind at we're unfreezing as how the I how in So those of as look that's feathering expenses well

David Kelley

XXXX question fiscal XX% you disclosed number. in that a I billings -- And car. maybe growth guys I was on just the think a per believe then

early about of to talked the the also top cycle sales licensing, we on licensing. impact stages but benefits be in You've of connected that seem layering of recovery a

are Just about opportunity in you this curious expansion the year ASP thinking XXXX. how all

Mark Gallenberger

last revenue of ASP get your I more cars once you're adding connected, effect that saw more the that layering have the So do think year, on and you expansion top we per embedded. vehicle on

adding really We're that additional more that's functions, demonstrate value drive seeing license XX% to year-over-year can more whistles with, ASP features And not customers growth. only example, so we're and are you for that willing helps and and bells that because also But the value. expansion products, pay our thing. for that

of only also more features layering and So we we connected just but some not there well. services, functions are because expansion, we're effect and the because get seeing of continuing growth innovate as can add to

Operator

Capital Joseph Our RBC from from line of the next question comes Markets. Spak

Joseph Spak

of outperformance a is to the especially that going industry, the versus business production. Just your in to tied portion back

So variable portion. the

which down You've time. been about the vehicle definitely very was, But outgrowing that is X%. specifically down quarter, over XX%, in what production actually was maybe that which was below

of of was there are something or programs some sort on? timing you that just unexpected is some that there So guys the of

Mark Gallenberger

wrong and trend certain I couple alone of things. numbers to I is at also timing year, that think little or potentially line, lines tend to a of because a one the the in number revenue, that things versus there quarter. was year-over-year true-ups through in One higher but it's flowed accounting that arrive So little revenue could at think could want look some drove there of be that's QX you why of you just license the that a kind bit conclusion. quarter bit that there which last skew And

why 'XX or the while was were whole XX% industry XX%, versus at So license variable that's you XX%. if FY 'XX FY down we look variable license, down

that some perspective. of in last QX year, four last in year. that the true-ups So revenue of quarter helped we was still quarter that But outperformed increase there from

Joseph Spak

sort sort us portion that's to… from outperformance of a expect the expect, you variable So spread would that you would of the

Mark Gallenberger

to outperformance production. it assume more period. vehicles, outperforming those that should over a trend the more with over And we I penetrated periods, be would the inside should trend auto getting expect technology and be natural

Joseph Spak

we've more pay just bigger or really like the to the been Pay, or how et of and picture new shoulders et for lot the more things pay, some to touchless products going automakers to whether we follow automaker work or sense about is in whether hearing And cetera. think is talking take cetera. turning customers or that looking, yet consumer. fall this forward it's dealers on of a looking one of of for Any also rates, Cerence in or instance -- or convenience And and to it as are the to going the going for adoptions customers to about terms on pandemic maybe

in that have or to want are So going anything you've customers customers that even services? vehicles conversations, you was more keep these the or seen in there gives already you and out there confidence

Sanjay Dhawan

from the conversational AI that Firstly, is the an message week into that's say I and more can single world again again. and I'm hear important more again over one and categorically every becoming absolutely standpoint. that and discussions I OEM all space customer

release renewal first connected this services. mentioned our comments I get small did basically. we Second a renewal. in press It's of my

big fairly did alive service care cars these And car, are that but the a road. number on those a were old boast seven trend years that in and it's not So these to the services customers cars, keep about about six, renewal in they were ago. which us cars a kind shipped of to good with the

I connected you that is that kind would Third on on. model OEMs of going many of side, lot that of see make sales have a interest, the services a is bringing that lot discussions point is I The there are seen, out. emerging

you connected to will you using gets if vehicle see you to basically services whole cost number connected basically They For menu purchase services. a the bmwusa.com and consumer. connected package the example, and can a services these go back of

us. from net portion those revenue the kind when amount basically hearing basically go to as used buy buying you You these yearly our connected getting as are and And And to services. do, have consumers will a OEMs and is more of connected years, to BMW to through well I'm down customers that services a you after more what them of renew the flows four once pay see voice service a OEMs.

Operator

Instructions] comes show line our next Jeffrey question Rhee from from Van [Operator I of the Craig-Hallum.

Jeff Van Rhee

over huge do coming time, into about ago? of car bookings year. connected share your holding your the you then sense deal in pipeline you're market the landscape? respect on a at I wins, see just of me, competitive color the feel what for of at scope can you gaining the this like? about look XX you're share typical couple you a what And there how a A And 'XX, you particular, months share secondly, to to point. And Who just size how now talk the obviously, seeing, like trending? pipeline if share you the mean, can wondering pipeline the does compared looks with

Sanjay Dhawan

bigger, of -- firstly first. enter I'll So order is bigger fiscal second absolutely magnitude question size we The pipeline 'XX. answer the as

a fiscal booking great for 'XX. Although, had we

a with a and products, have You to have that good the introduction which that new is engaged pipeline we almost, started force where start is and 'XX, of technologies fiscal 'XX. news sales plus, it. is of depleted Xx and new very the bit if when rebuild would go But to pipeline, we’re north to a able I compare we would we of think that’s fiscal a of from the and we maintain kind active were

great. your going So question? first was that's What

Jeff Van Rhee

competitive connected year. The car landscape in this

Sanjay Dhawan

win one back. owns So no a Volvo, major also adopting of kind change that was there. OEM, we saw who mentioned Geely We nice

win from other discussions competitors year. seen on other of now. during similar one two fiscal There are or right going the have couple back We

overall, kind feeling and So of our about quite competitive I'm good landscape how we're competing.

or China. are we competitors, Valley here, whether I based Silicon piece think competing how iFlytek, it's SoundHound our biggest against a based the niche in

companies to consumer that tech the the companies, think very whether big companies. tech the a or big -- big in other companies, then life digital we work or big there likes well coexist closely on sure I with Chinese of in extending of are tech we and tech those continue car the US making

with are from hearing we and completely aligned consumers. there strategy OEMs products our So what

Jeff Van Rhee

XX number will, don't opportunity units ship you opportunity bookings when bubble windows go there terms months, people shipping? kind if at anything start fair of any you wheeler, are you just prior live. as and could there. lot connected wave, in I just you bookings of respect questions, Is sneak two look the to the two of XX, the unit individual pricing, in wondering terms the to looking share or with services, six, If that to live ones. the a what get of go The then I of a of of about or can on bookings, scope is in what TAM know And and where quick over a they say particular expected and a next are but

Sanjay Dhawan

you me start let then maybe and can jump in. Mark, So

making three for this I be the the do We're is a positively just they would just couple to technology in more because too the not more belt we're than early little under answer based get ASP average about see deals to question? So OEMs and think would you Mark, one surprised two the value want that two kind that the us active statements deals. share more connected but give the space. lower bit to COG because our one much of wheeler so And the the COG services of than discussions on on lower with a right time trends us automotive positively much, auto or we're of we're little now. surprised. think But

Mark Gallenberger

a of our billings. continued well our as SOPs and on So I ramp-up expecting revenue the think are as services, we connected

billings schedule more because of would of Our indicator connected with obviously the the amortization be revenues. we a have leading

'XX even new start year seeing in will think I slope 'XX. more going 'XX going in versus billings see for in like start there. an to of But you're I connected accelerated kind to So you're fiscal growth you a think and steeper hitting our SOPs yes, to decent 'XX growth see

the the sort fiscal deferred see revenues would fiscal 'XX talked year and So source be 'XX the that's in of horizon. and that then and as we've I cash again And in year of think you'll in our past, flip a become about 'XX. declines

expected we way the it. out playing it's so And

to deferred and the think in seeing shape I think a But billings in in in in so going pressure in terms being growth little be are flip largely that's a the just But in revenues connected 'XX, increase to because 'XX. more how more of new was COVID bit driven we by fiscal and year nice But some of overall I change of it in is even going fiscal 'XX. down. 'XX. 'XX, production growth more year

Operator

I'm further turn to at I'd to no ahead. queue like time. concludes showing Please over remarks. Richard our Yerganian call This Q&A. Mr. back closing questions go in the the for this

Richard Yerganian

and Thanks look thank Have in you. all near support everyone and with being good you, Thank for call. you, day. for the you a company. engaging We Thank forward future. in interest your to on the the of

Operator

Thank gentlemen, for and conference participating. call. you you. today's Thank Ladies this concludes

You now disconnect. may

Cerence (CRNC) 16 Nov 202020 Q4 Earnings call transcript