CRNC - Earnings call transcript Q1 2022

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Operator

Good day and welcome to the Cerence First Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I’d now like to turn the call over to Richard Yerganian, Senior Vice President, Investor Relations.

You may begin.

Richard Yerganian

Thank you, Michelle. quarter ‘XX first call. Cerence’s to fiscal conference year Welcome

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

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

today’s Joining of Stefan Mark call CEO Ortmanns, are me Gallenberger, on Cerence; Cerence. CFO of

only Mark spokespeople are authorized company the and the Stefan, for a As me. reminder,

the of information. IR call of exact The to so please the Stefan, investor Cowen X. in I March go subject Mobility change, Institutional to the timing on James upcoming Conference several Virtual Annual over X, Industrial to our on would to announce Berenberg Florida and Disruption Second Conference March website section Technologies XXrd Before for like Annual The the Virtual on latest the events. our is participation X, Investors Summit handing Events Raymond the Orlando, March conferences include XXXX

Now, on to the call. Stefan?

Stefan Ortmanns

for I thank busy Thank discuss quarter incredibly on earnings. few you, months. everyone Rich. been ‘XX joining to delighted am us to you be to energizing call and the first fiscal here. and an Welcome our It’s

long-term ideas on made important with since Cerence call. spent and the grounded lower led we gathering to a of company and realities launching factors leadership and the I our get strategic analysts, employees, advancing strategic this will products to and call. our later seen the to the a our fiscal feedback with and and both sustainable in this of drive you we future investors partners, have I our important see many and addition lot perspective last advance is In in current has The customers, fresh including time decisions It priorities to valuable new and on exchanging have Difficulty] partnerships, position changes growth. for year. convened opportunities. for reasons to to address Several guidance and We recognized us business [Technical

‘XX and our automotive As applies industry about This and the over else. think a XX X important of I the as commercial powered told Cars industry becoming more to is years, around by the pace and more at of everyone electricity the industry are believe I and employees, to end globe. rapid I our for year. and mainstream next scale are reach car evolving have at year will electrification last When needed specifically for Cerence speed be focus mobility the success. the an

and will to China, This powered By driving and the transform new to in fully XX% and create digital example, passengers autonomous challenges. electric of as digital and cockpit together: believe cabin. the key not digital automakers make speaking and we cabin be possible, Digitization and It developments. for car. These seamlessly fully services accelerate and content of just passengers, both but response, as by our also vehicles than In driving regulatory apps, a and will sold the has work more commercially an much mobility new will commands. of the demand It changing and this will A accelerate that simply possible enhanced in-car drivers our make we end cars are especially complete of the over certainly such car in at outside create for will will include use a also safe and our innovation bridge will will and continue It tipping and more. the deployment consumer new homes the They car. enjoyable redefined opportunities capabilities a platforms experience, as For new experience increasingly infrastructure, already digitization point solution, global in adapt with and today the drivers decade, cockpit vehicles. convenient, will in pedestrians driver for cars, experiences experiences. excels vehicle lives. phones, occur elements daily will where and the the inside our other factor billboards, on work. interactions Cerence the today two city vehicle,

car no Today, we products experience of better digital more enhances approximately all already and keep and Already our within together, the the is to than the cabin, road inside are driver user driver innovation buyers and Cerence the entertained future and for will to cars in cars their new plan platform becoming passengers the cars. important experience increasingly way informed, AI and on expand Taken the company lead in XX% Cerence. save. road to car corporate new

the are new we work to with value as focusing thrive this and deliver. uniquely can we incumbent vehicle To carmakers world, well As as on we market both in are our things that accelerates, makers. really well-positioned electric customers

To will to the already made leading that progress. end, for and conversational We AI, technology continue important our lead delivering of significant we field dynamic innovations customers. have

and the is rise and adaptability great the supporting customers our have continued creates we I a the our industry, helping our continue of that each and challenge. customers have commitment the how I dedication other position success. to am delivery their experiences. incredibly proud in sets and resilience, competitive remarkable team key market, to to to appreciate deeply the in-car technology benchmarks global incredible unique strong And employees. for We they

drive are we together, long-term well-positioned growth. Taken sustainable to

by customers. at issue for the intense views only report the on was the shortage business. that customers, long-term continues of its with I overall a back the This about guidance portfolio. the in cutbacks had metrics that will from on will for kind to be and a to will fiscal shortage a the quarter resolved want recent of indicator resulting itself. most COVID-XX. resulting be of the company. resolved, position of quarter. impact continue at of the still The have have setting our the and but the a months innovation of words to a gave quickly a large. The at calendar optimistic those strong booking a QX industry to Even history on get still a favorable strength clearly don’t say production value the our ensure underlying rise They our customers the drive of growth issue of hiring. semiconductor the year. recording half are year, of few Going were of to variant but to growth of our period semiconductor above markets the We headwind both reports the largest profitability spectrum due to foundation struggle in start growth a quarter it of expenses including we is we the the and the second in change due Most X Cerence. Omicron in been our forward, strength products to provide be focus serve execution better the great results until also and period we we our detail, Mark breadth is additional mix varying semiconductor Cerence, than stronger to but and Overall, expected past demonstrate not last and slower-than-anticipated the today’s mainly lower Profitability our creation. and sustainable how and shortage There

and customers We two to the the continue towards fundamentals: to focus great our future. on pivoting innovation company delivering

can and that, and creation the call will from to the shareholders. innovation financial And with quarter. our commitment You results I turn long-term and the to customers a value accountability to of to to to partners, expect over Cerence Mark both review success

year for guidance provide questions. I QX will I will comments, Mark’s and commentary guidance. fiscal then Following will the take we full update additional your some and Mark? provide

Mark Gallenberger

Thank Stefan. you,

financial slightly in guidance to the metrics reduction approximately fixed $XX.X in exceeded or which of XX.X% Let million and mix. X% driven operating of of fiscal earnings product revenue EBITDA for high by Non-GAAP our guidance. from was million. quarter Revenue million Non-GAAP guidance $X.XX, by the our which and gross midpoint our our $XX.X was share our a quarter. was of performance QX. remained primarily high-end was strong exceeding by review our $XX margin approximately Adjusted end favorable XX.X%. the growth million $X.XX. revenue license down last me above $XX mainly is quarter-over-quarter came driven $X for Year-over-year margin at the Profitability non-GAAP margin million, per X%, was XX.X%, was and first was

end is $X operating are employee million $X used of quarter, in the During which generated which year CFFO. the million QX quarter we our paid, approximately Also, cash. of approximately bonuses

remains debt of sheet total with and strong, and marketable approximately million. cash, equivalents million $XXX securities Our approximately cash $XXX balance of

let’s detailed Now, our revenue. breakdown review a of

Our from license last up approximately last down same X% was variable XX% quarter, the the but from year. revenue period

than quarter. to revenue out year headwind the license deals larger We are variable reason number be significant netted consumed because each the did growth. our the need to is planned by creating is The and licenses impacts to which of we fixed fixed of gross before, license customers the against last consumed starting that experience year now those licenses a and

creating headwind our dampening consume prepaid our minimum our is these our As FY and need total and backlog amount revenue Exacerbating ‘XX year and volume that to license growth. the further license The consumed a a next of contracts those contracts this creating did fixed in ‘XX the of customers licenses. fixed contracts a variable FY reminder, to by challenge year revenue our is is as fixed license in headwind this the of commitment license reduce deals for consumption increased from the revenue license this goal we growth future. combination and and is be to year customers

exciting industry. minimum as in we we customer had million commitment a new to During the well fitness And as NRE win the us recognized with they an since a paying $X.X a volume, made revenue. in quarter,

develop that leverage so We technology were we for we that to variable and expand non-automotive are vector pleased can markets. new growth able a into our

out this technology from big of of to business related an Since break tech we QX last a to wanted license with in million recognized them for is in deal giant. two example easier these comparison. automotive our our non-automotive-related, we are Another year, revenue contracts $X.X

approximately revenue Our services year-over-year. new connected XX% grew

QX approximately deal. for $XXX,XXX includes on-premise However, revenue an

was up quarter I revenue accounting in that slowdown had and winding that Excluding this growing we approximately our is of deal, connected the accounts, for programs want same in this QX. XX% portion connected last highlight period that older reason significant we the last to million growth for a about $X.X for correction offsetting from the adjusting X% fiscal down several year our expected which progress is are now newer which new this have in year, our revenue year. after the

the would the growth of I production in like release, shows XX-month tracks period number cars to connected on However, basis Cerence press the sands for same KPI highlight growth change of demonstrates the in our shipped versus our and connected cars over on the This the expansion a road. trailing auto X% year. prior XX% which of

from As QX million QX is in year. this previously $X to remain disclosed, the our million and in $X the QX quarter rest fiscal legacy per expected connected million level in to for revenue at decline will of $XX

remains down guidance. year. and future the but further ebbs call to I’d an and growth is last for and and was this the expected grow year like back year revenue services Stefan about fiscal QX of revenue project starts comments professional to the due to hand normal license last for enabler important and quarter flows to completions, from Our from

Stefan Ortmanns

Mark. Thank you,

note Cerence leadership to CFO. to offer a been thanks XX, in March advisory through family. his we Before the continuity will my years continuing, spend sorry remain Mark to of addition service which to ‘XX, be role an new transition with Cerence ‘XX to see to will retiring wish Cerence. today, Mark that would time that am him more him Mark sincere our I He orderly to he with Cerence like after has and I the I in announced from and great best colleague. very and mid-November remain with a want of business go earnings future. will an to the to in his until ensure for

interim executive to We CFO. Cohen serving year, a wide plans solidify and solid working approximately role, firm search fiscal Mitch total join range Cerence was entering have identify been international opportunities. pipeline backlog team the temporary leading a as have I providing a remains strong will years with to this retained and a week executive serve will fundamentally finance organization. the with With billion of companies significantly in leadership new the oversight business this CFO a a CEO, to ahead. of for Since the closely Cerence becoming $X in in of

out are over and customers, we delights goals automotive get the have we of I deliver areas more AI drive clear: available, Our for long-term. our and mobility, the more succeed all resources that innovation can where significant conversational know

We deliver field and are long-term That that this I would drove factors leading dynamic to into considered. decision at and creating that do reinforces to focused our everything mobility vision to the we our we remain year have for that guidance. like strong conviction products make we the fiscal I sure customers. for that in we lean markets, our AI some that our of emphasize that same leadership growth. update we sustainable key will opportunities value conviction hand, want ‘XX on customers

on as the but and as things. semiconductor and our the rapid ongoing This the factors shortage as arises production, still the a and remains is the new ramp impact of focus auto startup of COVID-XX. driven automotive growth to, of from in ongoing challenges by forecasting. up includes, also drives evolving First, long-term critical semiconductor production limited study sustained careful production, availability future A industry chain such models other well among that unknown supply not the factor business

of to auto semiconductor a crucial the know, chain in unpredictability has the supply shortage sector you current continues and As production. automotive factor complex the be

fiscal X of unclear November, Additionally, rest rise delivery variant affected in of the remains one interrupting and the production the of as has and labor factory such recently for shutdowns due Tier An further our shortages, our COVID-XX industry-wide Omicron customers, announced vehicles OEM the since of new recovery Japan. to year. and

industry, in forecast a and the developments analysis further result updated reviews we of As and our accordingly. recent

unit Second, bookings to the products. and since will not After I believe appointed new for previously being plan, particularly CEO, longer forecast these to me. each from did than report have business that I assessment, conversion assumption, reviewed my business revenue expected the take

license remain ‘XX. it products during expected be our our believe will a guidance contribute year originally as recognize assumed in number new our these growth, and revenue. longer will These we may And revenue one-time and opportunities attractive attractive to November to opportunities While markets take third, now realized fiscal previously Also expected. fiscal streams all than technology of remain. not

of with from now as X% revenue million So year-over-year to of This from $XXX million. range revenue of background, full $XXX we our the of of year’s revenue that are ‘XX year original expect midpoint last decline the reducing guidance million $XXX and by is guidance million. X% a X% FY the to $XXX.X in approximately

balance spending profit since we of our for profitability, are planned fiscal in exceeded had Regarding we the with most metrics the comfortable QX, of we that year. the

range $X.XX the to basis. is non-GAAP per in $X.XX between be and and share XX% With on margin the expected a adjusted EBITDA revenue of XX% guidance, earnings new now to

revenue For I from in million our expect to to would revenue $XX.XX million. $XX of range the QX, fiscal of you QX the to walk QX million we bridge like guidance. through $XX

we margin year. need $X million the need to don’t revenue the this legacy expect remove $X the deal for revenue, any we $XX gets sequential fiscal to from from to of contribution Then of you First, decline approximately balance additional the million. million the to connected we since for of which account fitness the due approximately

the affecting decline forecast, account which the also latest semiconductor a well current auto We the uncertainties slight production. sequentially shortages risk as taken of expects as into IHS and have

the XX% between margin meantime, Analyst and that QX, EBITDA model per In are to earnings Day. XX% strategy ahead. in as long-term adjusted for We of vision – model $X.XX non-GAAP sets profitability to the our provided generate refining between growth next share next and I we we strategy new on X a we anticipate the and a for in targets are business including previously profitability and withdrawing defining and Cerence, our $X.XX team to and vision basis. the leadership For fiscal years. are ‘XX our at over expect the sharing this target years The

ambitious since long-term and we must remain sustainable dedicated envision. customer Cerence’s we on satisfaction. generating XX have spin plus the innovation Leaning deliver fundamentals We the an ago, X been into that of have our the the will journey years and much of to success over practices growth years, so last

twin industry digital and copilot AI our leaders to attempt that newly as cutting-edge stay sales proactive announced the way are such capabilities. and in with We by and the developing offerings

us and two-wheelers, we expansion growth. closing, and accelerating that through allow will when where from Q&A, our we call our move In new we quickly expire addressable for This have like success for that and We the are use early a continue feed our I now. to will so as would from before to we also halfway as benefit stay segments agreement to into had the ready now are reminder, XX significantly fitness other planning that several intend to already restriction to turn such of markets reiterate buildings, market, And increase expect will over points. important quarters I ends.

recent as compelling, quarter. position strong and We have in our competitive fundamentals highlighted performance business the a by most

to We opportunity we automotive in for and realize long-term innovation opportunity. have that a on mobility, valuable focused intensely growth lead and and to remain AI growth conversational sustainable

We will your questions. take now

Operator

Jefferies. from question first comes with Our David Kelley Instructions] [Operator

line is Your open.

David Kelley

IHS the the bookings now versus taking shutdowns Hi, guidance the can timing Maybe with you’re macro out? cuts pushed and of good of of my seeing being of the sense morning cut, you a starting recent magnitude us give the questions. and for some headwinds thanks the

Stefan Ortmanns

your thank question. morning, you Good for David, and

rise also massive from especially variety Europe. customer the at see months. a the of late to OEMs OEMs of about a in other of shortage, so year, idea, further has we affected. a X EV recent really You and Asia, And their leading their beginning heard this chain Omicron customers Since a development, production of of you that and unexpected OEM the November with in schedules. you supply in we one worsened tolerance shutdowns. East actually looking been know we have know disruptions in semiconductor have production the Asia our November that some indicated the China, on And – right? to led big in European large delays in delay give and To projected this also maker, up cuts when

David Kelley

got Thank a of push solely for And the you’re the expectation you. out seeing. on here there, cut the or and issue it. a of Okay, little regarding color is this timing a just I is hoping bookings just there more bit bookings was any timing the revenue? conversion what And and

Stefan Ortmanns

Yes.

issue, conversion I has Bookings really Those David, mean quarter we mainly do can in this a nothing the our fundamentals had also to think, strong, right? second share what very history. and still with our booking already largest are I it’s are and what Mark great. right, we mentioned, outlook.

in I fine. in wins. think And a also really this couple design deals here, mentioned, basis Also by also China, still made important are Mark was we as And have of in three we and strong side fitness, two-wheeler right? a right? the underlined bookings

David Kelley

questions. you. you I thank my taking appreciate Okay,

Stefan Ortmanns

was regional million, business a of more. largest and also Probably booking of That specific our OEM QX, expansion, our that in shows right? about and also it the our one for was product. had, $XXX a strength We

David Kelley

you. Okay, Thank got it.

Operator

& from with Our Raj question comes Needham next Company. Gill

open. Your line is

Raj Gill

my taking $XX for new more moving of just – kind of believe from that of the those two on the little you Mark quarters. variable previous connected the least that you for new revenue the $X was variable could remainder revenue don’t pieces There change on new me wanted said million hearing clarity get that timing a of just questions. breakout correlation of to the in me between a revenue year. million. the that new one-time terms in you to lot kind are the I of the issues of at thanks say, Yes, moving fixed versus, were and just of components? those you impacting Maybe your if the expect. the impact And elaborate to

Mark Gallenberger

Yes.

minimum you licenses certain the customer deals fixed with a buy where actually licenses there start of or upfront. So volume the can in first, they licenses, a are so of which number prepaid commitment a know, are as commits deals combination to

will And going so consumed, the those as get those we to netted already get against be they inventory then clearly, but reports, what purchased. that’s of licenses have to need not be royalty –

that’s contracts volume interplay contracts these that – the so And between these and or correlation variable the licenses. fixed

on year, dampen our these each as in mid if – for high so past, or historical we does that go outside And we’ve million year, the go until license like which that has range get range been outside you you future consumed. range, typically go of did end the low if we licenses the to fixed in the even $XX $XX last mentioned those the growth million amounts in

On those the growth, your go then limits it help growth. ranges, but flipside, that does historical with ranges, if term longer you those short-term below actually

been in historical And so many really your is – under of contract ranges. where a have licenses relation and where purchased question to fixed that the it’s how

seeing this into years, historical year the above we’re because next we’ve going happening range. that’s end or high what X even our been of high year end and actually the so And the at last over

our the it’s license. for interplay and why the that’s So creating between headwind the two, that’s

we legacy services, that the about previously, connected Regarding down. is contract, as talked winding

now which schedule to alone. million million and amortization going quarter, last have $XX the that’s quarter. about the in drop see what to for you’re per year in to similar stayed We to down starting going step function QX, we million $X fiscal year. In reduction at it QX But to had QX, this was $XX of so that legacy

this at So balance year. it’s to stay $X basically and cut going in million of the per half, for quarter

legacy. the so drive And that’s the for

Raj Gill

been to minimum prepay. versus commitments about the time is commitments kind fixed relative I’ve What first This of shortages prepays. percentage hearing of fixed minimum your or the – sorry, minimum commitment contracts of

Mark Gallenberger

Yes. We’ve disclosed we’ve and been quarter. had each – in we’ve those those

And fixed we minimum that the was had $XX all commitments quarter, so past deals. commitment this million of

Raj Gill

Got it.

So – there – you were were commitments, all did amendments, $XX were the prepays. them no not of fixed fixed so million of

Mark Gallenberger

Not in this quarter.

Raj Gill

this quarter. Not in

thank Alright, you. Okay.

Operator

Our next Spak from question comes Joseph with RBC.

open. line Your is

Joseph Spak

looks trying some I recent maybe am information. I of and just us process still between could because the I that But and guess maybe Thank push to Mark, here help sort you you. understand pull variable it to But of component better sort just of variable say, was line you were in year-over-year. like down well, okay, down XX% fixed. XX% if with and variables was. was should been Production have production what down that

So that like would $XX million have been higher.

sort have next on you many audits, the do like years? like, effectively here that’s pulled of to how seems dollars based or weigh your like, ahead So X licenses going you have on

Mark Gallenberger

year-over-year. this that look Yes. year. I’d I we’re year at much consumption from And $X to be the increase occurred for last year-over-year estimating if mean, I it in the you is, think million to way variable, look at how approximately

of So if more – still incremental think you gets year-over-year. for that sort it it’s it’s down you IHS, of at XX% not around I consumption, adjust for the XX% $X million

If consumption approximately was the $X you the that in at increase quarter-over-quarter, look million.

to see more to we of by our those it that’s that, which about IHS for way get adjust consumption kind customers. and you’re as going consumed is, earlier outside were historical ranges, you back goes the going you’re slightly and licenses if comment, to once of ahead So, think so our those it

effects driving this year as the well. And some what’s of that’s so

Joseph Spak

over Right, to of year cumulative to banked pre amount produced? like relative the so been year, into you next you’ve the just and understand basically this dollar some the impact what’s that what’s potential balance think

Mark Gallenberger

going incremental year have... relative I to of about it’s $XX I low think to consumption last million XXs. an for probably don’t this be year, or

Joseph Spak

sort that Okay. expecting, That’s of the the helpful. one-time And guess assumed that? that guidance, in And is, sort time just the sounds of of the second just were guess license I were What as element. the well? much deals reevaluating deals first you the then goals broadly, I’ve of of like that’s was sort one-time you’re but midterm how I magnitude midterm question it heard

Mark Gallenberger

Yes.

down drop of We that in the the the that broken factors haven’t three guidance. contributed in terms to specifically upon

Stefan, more so answer any question sure And not. or to you details I’m not with want that if

Stefan Ortmanns

year, morning. QX, one-time good fiscal technology with What assumption technology but in about the in opportunities we we I made deal some our out will beginning and so-called based in next And say, fewer of that Joe, structured it seems tech opportunities big year. of on the can be now that planning see a So, I some giants. then pushed fact deals, fiscal or brought those maybe the to

Joseph Spak

later Okay. We can follow-up upon. you. Thank

Mark Gallenberger

also And is starting that idea I it the the big have point technology think but it And was that behind but as said, in like, seems this, mean, Joe, field example, some restricted as anticipated. to the take bit a others. longer tech swipe very we still I use, will are applied which we the of that QX, for for and I to originally FOU text-to-speech, attractive hand writing, actually the is giants than right,

Operator

Colin comes Fargo. next Langan Our Wells with question from

open. Your line is

Colin Langan

I the my provide the translate long-term? we all questions. the just Do taking sort of know targets. about Great. you into Can strokes broad think XXXX how what for factors? the last maybe should or better just gotten they near-term mean has withdrew Thanks quarter? you worse of I over

Stefan Ortmanns

quarter. by I our I we next it about speak of great, end it and fundamentals also said, will in actually see think You So more QX, with bookings strong the yes? are

semiconductor driver from here. the coming I by think, Omicron this and from is is the headwind the also currently, version all key shortage actually actually right, and

tell quarters. it to end views this that of be are next the couple the of will There that the sure over pretty pessimistic optimistic year the goes – I’m some fixed think quarters. calendar until three ‘XX. view some There over by two also I you cannot next when. are within last I exactly

We this. are into looking

have We OEM. also of our added some strong with relationships the

also are years. next the models in align for to OEMs from getting We and updates few trying here our

this just know You in that I’m also role started since December.

now a more our months and our two getting model. business before something excellent take sharing in it? it do vision, more I new also or to add my I’m you from leader, then Mark, think support long-term will want time but less our strategy bit the role. I’m So new to

Mark Gallenberger

No, accurate. I think that’s

correct. that’s think I

Colin Langan

And just to follow-up.

reasons a better actually confused updated. since cut has gotten last I’m On for the little IHS the because you because

I think flat. was it

X%. up it’s Now

on guided? that of and in So that kind shouldn’t why kind And original the a guidance negative originally known should this been of factor? then have have about the issue, that also been is variable you anticipated when fixed

Stefan Ortmanns

please. ahead, – Mark, So go

Mark Gallenberger

the that fixed. Yes, the mix, the have let the changes been there when given obviously little part Stefan in knew that a was it to we we And worse, bit answer November. some which question. the not but made I’ll I’ll other were factor. driving of Yes, then, take about Since guidance

Stefan Ortmanns

Yes.

you delivered. some from here, we’re it’s also October, then the as zero in semiconductor looking chip from in or also impact right? our So the at we’re right? But flat. well what yes, customers, IHS, and So as year more less hearing gain, level right, And that shortage are cases, to when company our – the it’s not know varies starting company fiscal of

mentioned that delivered. we an And here really volume. some solution, OEMs that I is search course, what projection, are I impact their And of the at that mentioned we really intensive they OEMs. an with our right? the already our on our acknowledge far beginning revenue key with see missing behind something example, car is large what here, this of some For but And is has, is also did

Colin Langan

my taking for thanks Alright, questions. Okay.

Operator

question Van from next Craig-Hallum. Our Rhee with comes Jeff

is open. Your line

Jeff Van Rhee

questions, Thanks. guess. Great. Several I

come those any side, any have Just big then or closed up if for been very available have, to just in notable that close? contract, particularly fact, Just on Connected, rates obviously quarter? bookings on been of secondly, there have the those in a numbers have but talk could all wondering And of you you large that renewals renewal? overall with to win the

Stefan Ortmanns

And And right. with also let automotive earlier, not deployment expected. renewals, than that the I first, on me are take yes. bringing back mentioned innovation firsthands And as is X now, way renewals, see all then the more for add Because they we from also much years – here, on expected that right. mean I innovations, lower that, a So on right, by more are the And we renewals going right, expect the where has out to solutions. can we cycle, have solutions Mark this and our right. Their do so right. by new more new focus

Jeff Van Rhee

And then win rates? the

Stefan Ortmanns

I Win – total, side, the as with one two-wheelers are we think globe. now good, across four rates, I on said, we huge doing In win the right. have brands rates pretty

about and very globally, this So I am achievement. proud

in in position also, across business booking strong are the million. also seeing also We about by automotive globe. And especially biggest the ever core it’s the proven $XXX our of deal

Jeff Van Rhee

moving here Okay. second one a of still it. of and factor than expected to trying wrap for just guess products Last head around for lot the will I the But that key convert the parts then. new bookings to my to take me is revenues. longer

did already two? example or Can Just it, helpful? give that you touch Maybe me on you an would but be again.

Stefan Ortmanns

right. it’s know Please

And doing business. on years it are now, in bookings on will to X from street the right. years now core be we the So, a X deal then

right, to and leaders with opportunity expect I mobility new on contribution, – curves us a side or elevators, therefore, two-wheelers, in also two-wheelers revenue booking right, here for OEM growth see and also this of But right. learning also revenue are nice conversion field. some like had the example, for in actually for segment, terms We On also right. elevator. that’s there slower the right. And the a as business We elevator well, conversion

Jeff Van Rhee

it’s you what on conversion? the are can years to your on from auto if finer years And two-wheelers side, elevators, to X point put that X booking any

Stefan Ortmanns

bit. a depends It

new on very am hard inflation conservative business, what happen We automotive, our it’s a side. here. to think here. be still say actually I And didn’t because accelerating deployments. building is affect the rate But to also, for real elevator it’s here bit opportunity approach to in this billion automotive bookings This market to So, estate. sure see not book the we demand the also a might the segment. right. will elevator huge than in I actually the for did a X to safe slower also traditional I

supply automotive, the also the same maybe here, it’s faster two-wheeler chain. range, the than two-wheelers, bit For suffering think also a on I manufacturers but are in

Jeff Van Rhee

Okay, great. you. I will there. leave Thank it

Operator

Our next question ISI. comes Evercore from Chris McNally with

Your line is open.

Chris McNally

you. Thank

fixed has clarifications. fully like contract of been I couple the minimum not a addressed. feel Just

for meaning of that be referenced? clear not that $XX issues clear, currently, sure make listed. that have of down So, million to the one the that it’s Mark is conditions you one not the guide the wanted three I was just to

Stefan Ortmanns

say the of that, equation. would part I that’s think I

consumption on four have And less shortage, quarters. now six assumed the from let’s longer. will right. chip I also a had it say, we semiconductor take to mean based So, we it a the we faster, expect typically, is bit shortage, impact quarters And hand-in-hand. goes then the that

Chris McNally

Okay.

we been reasons maybe guess for the is the are fixed that’s point couple of upper revised confused, why That’s I X But really stable are because hasn’t all the IHS affecting minimum months. saying last So, contract. you mix of the anything. one for

Stefan Ortmanns

yes. Exactly,

Chris McNally

the new then products. the point, And Okay. second

new both or that’s in a that again edge, market connected Just to this longer be and you and is bookings expecting revenue? from clear, mobility this services applications conversion are new is effectively to only

Stefan Ortmanns

actually it’s to here, new about am I So, applications. talking cloud connected both, and

market. And observe see that the then longer we on assumption greatest to put the think much team also on in analyze the actually seems on the a that’s platforms. of already bring review So, with conversion, what to This new actually I new a new want to in cars. latest and we the we attention have can solution faster and to the book the that platforms bit our SOP take they market, was OEMs now more adjacent road most technology here slower that our because

Chris McNally

for be just second, the could both – was I a the it’s the if edge being…? that so to little connected you if and And critical prior the a businesses ran that

Stefan Ortmanns

talking. No, are Yes. we not

it to sorry, apps, here, right. I edge. enough It’s right. connected about not didn’t clear related just spoke maybe was So

you Cerence we It about our Xevo. last that was for deal year with we right, business, Lear, this know booking and you the right. restructured example, for of So, out had And put backlog. to a example, example, Chris give Pay. That’s cloud-based, fully

Chris McNally

– platform been the it’s And so has moved. being the on that example, it’s you OEM for the that implication are

Stefan Ortmanns

– for and example, on new yes, apps. for Yes,

Chris McNally

Okay.

when And said basis – ‘XX wasn’t so ‘XX than booking meaning either lost. – the know or you has that the obviously implications more because you

going So, that’s to what are I this as. think take people

And so that I something am out not sure how going bookings revenue? be could you to taking previously was to not converted be affected if are

Stefan Ortmanns

Yes.

So, this and the bookings gone, was restructured with took and it business has Xevo, I we ourselves, case we hit de-booked And our completely therefore, right, business. mean we right. the pipeline. that This specific from

Chris McNally

Okay.

something pretty So, that’s obviously that’s specific, yes.

Mark Gallenberger

is Yes. bookings adjustment. over still even Xevo in $XXX Chris, there million after the

applications than system part he of still they What strong to together. we the infotainment dynamic rather is business. So, are is the wait a customers these on them to many doing that’s dealing of basis, until as-available an that technology what the it of the part referring putting bundling is their is And are introduce in next-generation that out choosing with. are

Chris McNally

Okay.

you the years. platform, or mid-cycle lot. okay, in than are to because could be of some is a multiple you saying a conversion the it’s like but moved it going six. What to where can of have going to products, rather middle to may are next not clear be we just been for be being that it which have booking, clear, that question the cycle So this product But moved get could five on a be XX-year lost

Stefan Ortmanns

Correct. That’s correct.

Chris McNally

to be ran. third to one-time going then be add be was edge a And was to trying just that was Okay. technology What this I finally, am one, I that you And – fiscal they division critical, going the ‘XX? that got license division within moved to that because for opportunities. again, obviously just want

Stefan Ortmanns

and outside edge And FOU you we right. have else. that our mobility. or into right, transportation, mobility the transportation, No, agreement and unique know some example, own we our or we cannot – still And They for Yes. in but go have we or have example, under for Nuance as mobility, we is actually TTS that, doing some TTS, and others such they handwriting of everything the clearly opportunities, cloud. that’s technologies focus is to restrictions, enter selling cannot actually that – it’s on both

Chris McNally

Thank you. Okay. will follow-up I offline.

Operator

next comes Our question Junk from with Luke Baird.

open. is Your line

Luke Junk

Thanks questions. of Good my questions. couple for philosophical morning. taking A

track terms mainly. yes, forward? First, Where on going relative could as range booking in the be Stefan, And if fixed around prepared what to I forward a that going license wondering comments the expand would philosophy would revenue to there your I that question remarks in of am revenue Mark’s normal you guess be? should

Stefan Ortmanns

over Okay. to let And – first, and will I start turn let me then me Mark. first

range think mean coming licenses, I of $XX So that’s that the right. in a all, of of trying in are $XX to I fixed to OEMs million And better automotive know normal first had and industry. we deal, right. million to negotiate traditionally, us terms or a you typical

gives always deal, fixed a also last us, to which as quarters takes Now to I actually now. tough. than years we a more bit running This six mean was last I it X then or of some originally consumption quarters. over expected. headwind with And compensate earlier, is the for royalties, said four need license year, this us it the higher always

Mark Gallenberger

get into objective to the be to range. add Just the historical to that, sort I would back think of

we to goal that, into even particular that. can And the time do so were at that think of above take and high we the But to necessarily the historical ranges. it’s time, before, were year, historical some I range, end clearly, we get get over these and last well be year sort that of would the to back think eliminate programs. don’t when last in going I But year

Luke Junk

line, I top terms of regarding second sort Okay. profitability. top but question of that’s And not had, necessarily consequence line then and in of

expense prepared with And the You year. the I to made for in the R&D. of areas base remarks, level aggressively the you approach you just as reset your company for How on the think Stefan, business should you expand rest here, like around the could now comments hoping spending comfortable right that expectation be specifically you your pushing? am from the were in revenue

Stefan Ortmanns

Yes.

So, especially also professional lot services. attention I the updated to cost control, on R&D with and of mean also respect we to a guidance, put

to key of presented Cerence our Vegas, And That’s edge time and the digital I work where related okay, you product Assistant, have from was we features couple they success. and far which And right. seen of he was also, really right. to to first digital mean right, everything most that introduced, for OEMs, to say solutions to well our and awesome, cloud that application We AI a They We the one twin. new Karaoke have of our services. us, R&D competitive, a seems in and leading that also latest example, other We for are we expanding presented, I the a example, committed And big heard, think to It also been – have feedback for guy innovation also solution, vital then task. or as his I sold market. hand, deal is is by solutions, have for that we from twin. so everything to very went in the cloud around to executive or OEM And connected maybe other the new the And to wants proactive said, actually attractive received OEMs. right. the Cerence for very also, has great, customers, we saw outstanding is presented a was technology right. had to hybrid already right. QX On new

and encouraging to very promising us. that’s So,

Luke Junk

Thank I will leave it you. there.

Operator

next Filatov with Berenberg Michael from Our Capital. comes question

is open. Your line

Michael Filatov

Thanks taking my for Hi. questions.

have relative just sort I I see know expectations is said one, if OpEx step again kind profile of long-term, are I you the the tech your need of you you model, lower sort still end first the think do wondering XX to a bigger of the of achievable to guidance. Just you margins. some in competitors? you more on of am there products you for sort mean, reinvestment of or to I and down XX% on but think that R&D. high keep competitive for margin ‘XX do that is range pulling your reinvest

Stefan Ortmanns

Thanks question. for your

right. more have from the That’s now platform. really across globe, OEMs a competitive including or all we China, think feedback the less I

new our margin of target R&D the I I including new focus the also think essential on Nevertheless, – to is will we Day, within R&D. of also success on Analyst the bit the hiring adjust pending CFO. believe we next have outlook, the a model, new a long-term our company. the actually on the

Michael Filatov

it – you Okay, a the again, address year know, it, is will component seems there an for you I And quite that don’t to margin interesting. know, probably hardware would at ‘XX the I fiscal it’s Day understood. model, mentioned but because area this dilutive. Analyst That’s like It elevators. be

So, some – sort do for markets? direction of rethinking go or attractive you you those that in to still the Cerence see an potentially avenue for end as in, company are of to new go

Stefan Ortmanns

a I long-term about then That us. one. role and it’s months update our still nevertheless, to expectations But now. crisp opportunity But if am see bookings in be during unpacking we high We get this Day. it slowing am think I was down faster exploring some area which just here, need future, Analyst right. had time but two you and not could seems things responsible since to for I new to where right. next also for, this a bit conversion, we will currently, an And see the carefully an revenue be could

Michael Filatov

will I it understood. Okay, Thanks. leave there.

Stefan Ortmanns

you. Thank

Operator

Goldman comes question Sachs. with Mark from Delaney next Our

Your line open. is

Mark Delaney

if us about is. – you growth billings Yes. taking Thank rate could. car you first a what think of have two, if per for the I normalized help more in questions. I Maybe can

per now licenses your per billings understanding growth consuming OEMs are the been historical would prepaid Perhaps, car billings is think as licenses. of car. overstated these of because have the I use

number better basis normalized try about what’s So, sustainable think and on billing car a a number? to per

Stefan Ortmanns

per been has for adjusted billings deals. that the car prepaid these So,

– So, influenced that’s those numbers. that hasn’t

trend like versus are trailing the into where looks the contract a to looked of is we per If was zero that And to levels you particular trend program, had down. would there and older because an side, and that’s billings – we saw expect that It’s pretty now that’s downward, downward that be prior and in the ASP, that then on a billings per billings that to on starting car sort one see which this then connected for the high actually growth actually what’s alleviated. off, car once coming to quarter, basis happened XX-month year. it

Mark Delaney

question, can at think year? for second bookings, I my least typically not ‘XX, don’t you qualitatively? guide year-over-year And but can specifically, Okay. versus be I you fiscal about up last more bookings talk know Do it

Stefan Ortmanns

Yes.

also mainly was on Key on year bookings before. right. core. of bit then lower reason in automotive the by big the maybe But It in in ‘XX. value market our optimistic deal one than actually year And was ‘XX the of also position am side, we shows about the reasons, the a key our me, is, future health I that very moved and bookings, of and right. event, excited and right. also ‘XX the to other had still one the So, product And bookings than that, itself, ‘XX the driven

So, this. I am about very excited

Mark Delaney

Okay. Thank you.

Operator

questions. There to remarks. Richard would over the like closing back I for are to Yerganian call no further turn any

Richard Yerganian

discussions. to for joining on Thank to Have us everyone you. morning day. call the Thank future Alright. you this call a to great and

Mark Gallenberger

Thank you.

Operator

concludes the program. This

great Everyone, have disconnect. now a may day. You

Cerence (CRNC) 7 Feb 222022 Q1 Earnings call transcript