CRNC - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Stefan Ortmanns

[Starts Abruptly] data set and deep relationships with our customers will continue to be true differentiators for Cerence.As we progress through the second half of the fiscal year, we have prioritized several objectives in order to strengthen our position in our core automotive business.

First, balance our cost structure in accordance with our current levels of business while still ensuring we can successfully deliver on our Gen AI road map and customer commitments; second, release several Gen AI solutions into production with high end user satisfaction; and third, convert the deals currently in the pipeline, including some win-back opportunities.Before I turn the call over to Dan Tempesta, our new CFO, I would like to take a moment to introduce him. Dan joined us in mid-March and was previously CFO of Nuance.

As such, he is very familiar and experienced with the auto business and our solutions. With Dans's track record of leadership and experience in the space, we are happy to have Dan on board at this important moment in Cerence's journey. hand for I to to to full to QX contributions opportunity tenure QX and in CFO look and like Beaudoin thank to as also our more share year. call as detail and over his support for partnership the Board forward member.With and like about the that, results would would take to Dan review the our fiscal Tom Cerence's a I guidance Cerence continuing his during his Dan?

Daniel Tempesta

Thank let our you, challenging during and coming you in just shareholders meeting Stefan board, the me that come investor that several results. NDRs Also, a we to the have products about I discussed. to to I with clearly road I Stefan.Before many begin, new forward weeks.Turning the conferences say our map am optimistic of while to this quarter and on is look

of mainly an license of quarter's end related and was by revenue million. discussed This a above was QX an million large customer's call. of a last $X created royalties reported high license of settlement to conference fixed due to on the $XX.X approximately Our guidance, obligation directly the over-reporting of unplanned

an services line connected our $X.X addition, In million. under-reporting also unplanned benefited revenue true-up from OEM approximately of

in EBITDA revenue would the higher-than-expected quarter landed Excluding these of breakeven adjusted within benefited guidance items, from unplanned for range.Our our have was quarter. revenue the lower QX end and the approximately

the customers that a Our of nonautomotive with unbilled bankruptcy associated $X related during contract one profitability million to the QX negatively long-term quarter. write-off of impacted was approximately by our declared asset

came affected sheet approximately down ago, million, impairment to $X was million, cash quarter-over-quarter. Stefan fixed last $X a in $XX.X license same unplanned noncash impairment. breakdown. $XXX million mentioned. had negatively the results X% our XX% total by of at quarter Variable detailed due minutes revenue marketable $XX.X Our cash results.Turning and a originally license year $XXX revenue flow affects goodwill to from was for and our a license expected This the from GAAP also million that million few GAAP and is sequentially revenue mentioned than charge were million.As only up securities the our our previously operations balance higher Fixed quarter,

as for from Looking XX% discussed last revenue, forward, a legacy we was our in same of the discussed bring licenses above license million the of quarter. fiscal total as million resulting XX% excluding will quarter. from is which prior from earlier, the earlier, fixed expectations expect to $X 'XX true-up fixed $XX million, $XX the the and in our million approximately $XX.X the and year initial million.Connected services quarter by This contract, benefited unplanned million settlement, $XX growth including $X.X customer, under-reporting third up

Excluding the to X% compared the million, prior true-up, services connected revenue up was $XX quarter. approximately

and down in the of Excluding the was the professional flat compared first XX% true-up, ramp and half quarter-over-quarter. second half.Our services impacts year-over-year XXXX of expect a services connected modest in only to we the revenue legacy

adjusted and while into deeper flat.Going both reminder, variable a a remain to connected revenue, of our As is license professional revenue generally bit we enabler an we services revenue, professional schedule. license expect services have services this

occur highlight OEM with First, can we've periodic that to added a row adjustments reporting. the

is individual will can $X line, given million allow within and that that page, the in have the are occur operational we to that variable items our license of this OEM-related discussed ordinary highlight presented the greater updated have While trends.Second, to This at impacting are there the always intention bottom the in we format past. show, metrics in us to the quarter. adjustments than that are include, the any course, small adjustments

operational our As same quarter our consumption totaled in the of previously mentioned, to of at expectations. $XX.X compared million last with metrics, $XX.X million.Looking and reduction quarter, previous variable XX% this license this a license year quarter contracts fixed line was our

a of contracts, consumption will a past this the of time, value we royalties associated fixed As been result in have annual over contracts. managing reminder, down with fixed smaller because

As consumption expect levels license variable as should we periods future correspondingly result decline, in revenue accrue production as directly occurs. growth royalties will that in into

the trend. by our consumption consumption million the pro $XX.X which during fixed expect should to any continue align new level time year We of end to royalties XXXX, year.Our roughly forma the recent normalize run were and declining at a rate to contracts fiscal of show

production. our use XX-month a for X-year our quarter, delayed this a down penetration that review the quarter, X%. Total period production our in XX IHS increased metric compared XX.X technology billings shipped same X% the performance for million we as increased year programs quarter the that compared to cars months connected to at XX% XX%. into were Cerence the previously auto on of while trailing services same metric. year-over-year, We adjusted trailing to declined previous the global key production the second our in year.Turning produced Cars As indicators basis X% backlog with steady some remained went ago

$XX Incorporating We making an million we are fixed and between be third figure the the our million, quarter impacts previously approximately that our are X-year to to $XX which $XXX which $X approximately backlog, to guiding just reduction million includes million license brings $XX revenue billion. discussed, mentioned.

year, and fiscal expect to million between full $XXX we $XXX the For million. revenue be

of to those reductions, on thoughts activities that year cost think run XXXX cash $X be the fiscal We occur impact to revenues important company. the Toyota may I any the the services. consider of excluding million.Before the impacts Excluding flow million now our the this behind contract is as $XX provide operations to us, from we fiscal XXXX view we of I it's discuss rate expect restructuring in range 'XX, for provides believe profile legacy the revenue since new

million. approximately of estimated I guidance year approximately revenue run cost $XX QX, the the our want page this of of exit We just company our rate as year forward. business in If $XXX view our run adjusted take look half revenue million fiscal recognized new for as 'XX of we 'XX discussed our consider legacy-related to model relevant you new revenue activities exclude for adjusted planning rate the current of this of well on previous midpoint 'XX for revenues, with a do the and take the both million first the going fiscal fiscal is $XXX to assessing minute forward.As I expected revenue

'XX consumption provide what fiscal guidance, 'XX flat in flat significantly 'XX OEM can year to fiscal 'XX guidance, down. our how to fiscal pricing am our to to commitments you we compared production our I incorporated similar is expect fixed I 'XX While past or continue a not begin revenue.If framework wind last mix, license assume would guidance and provide less as 'XX for think to this about year in time, prepared latest at midterm to

addition, 'XX single-digit new growth if our in million. the it very fiscal connected in run in growth $XXX modest licenses year estimated rate to services, In you assume new $XX off would rate and million mid anticipate of of run reasonable fixed be

slower is date or of guidance For be this growth introduction view, higher, shifts. Again, framework changes, revenue. developing of on Stefan, shifts this to this could customer-related platforms those industry by auto in to change is previously some how the rather production adjacent a pricing does color additional not depending but the than and think mentioned new lower represent in the of and our fiscal a Also, factors.With are sensitivity 'XX on global they number on about framework and mix for regards subject rates to as business based markets, anticipated.

Although critical that few LLM there my thoughts. ensure resources contribution offerings. you related meaningful markets fiscal our uplift in and product is we in revenue AI generative these are I'd in for in maps, to like comments, to leave a 'XX.Wrapping an road product are we we not We to midterm, and with expecting key plan our are these do future invest opportunity revenue up to that and technologies believe focused in believe growth a the technologies

financial cash flows.That in stronger take that cost industry, term to reinvigorate position the us Gen finally, call products near And in believe margins our we plan relationships remarks, initial our customers our recently in a we position AI solid future. profit for and to we will our current that Additionally, announced the prepared and long-standing actions given stronger our with concludes and up the success headwinds, us open our growth with foundation the questions. to the with now provide deliver will

Operator

Jeff [Operator from comes your Instructions] the Rhee Craig-Hallum. Van first And line question of with

Jeff Van Rhee

I live. missed monologue don't wasn't there, I know, the -- was first it

I picture, of magnitude if your parse I'm that mean, look at how loss, material repeating at the taken very little to midpoint here, affect you a the look being what's apologies competitive the if share you Stefan. thinking gains, about on revenue out, So But When the reduction that obviously, number. stuff would. start landscape? share you Just does at if deeper, a

Stefan Ortmanns

Yes.

I also let Dan for and also view, then Okay. here. will Maybe, Jeff, thoughts give me Yes. ask you his my

receiving reports, resulting observed a reviews, in downward forecast. we some dive royalty February factors in QX here. a starting trends we finished April. after and the account-by-account And couple in conducted in deep a So observed QX And reduction we in we then of

Yes, higher of And slower the right? is like part, our of the also to goes and this also data and penetration We by but know, course, a this answer.On and assumed into mentioned the some and see as flat, ramp also And start delays the production with also earlier high and XX%.Now yes? of and also means we But here, based latest the see into adjustment. split input yes? running also question bringing anticipated. another also the We I here, This forecast. trends also market customers, of input losing -- saw of actually this was slower fiscal revenue past, programs, first to is share But driven in IHS that a cost forecast -- forecast a a compared as in some data first in a our XX%. of yes, of of we together, obviously, historical year, right, line all, originally calls, hitting of in the impact some PPU. in projection here. market That's a would we So new One actually from So of you decline in on growth a original already royalties, quarter-over-quarter share deals also we have the X%. your my and still we business X-wheelers we the ramp the delay IHS. this aspect a we for real-time have, part X is parts. related from then of programs this baked lost the than second core the

We are also hyperscalers performing. completely success opportunities And convinced that our the as I not have mentioned back, for CES, a earlier, we believe we of also and lot also at large based on within so winning CES, since last programs of we that predevelopment of or new the OEM the AI months, X on about won we actually track XX, couple right? Gen we road we that with map. are are working And in right shows our currently, are programs, are that

Jeff Van Rhee

to the you that of look years, think terms there, most coming? expand In of win-backs, a your Can the of second And who? kind competitive losses said back, taken terms win-backs on of at of the are lines you place the Along and last that bunch you a competitive path secondly, bit? percolating in where then you've you if against here. couple where do them on see of little have those win of got the part you

Stefan Ortmanns

spin So at that Nuance when days. back, to was the actually looking prior

GM feedback a road automotive new AI also that's all our are conversational or AI map of And the Google, here. for here I we There product few and world. a forward for So the more our also OEMs from across lot at and platform, with think But globe. And back think in against example, now have lost, I less the loss breakthrough winning computing new to huge with for another we others. we Volvo was yes? a opportunities deals the

Jeff Van Rhee

mean, software the struggled have of mightily. obviously, I particularly Yes. a OEM programs lot and around

falling of is car, now So have ago, Is they're taking months a ago, revenue expecting of any terms their there certainly, per reduction although put XX each been quantity the your that. the product ARPU into of year OEMs in there some delays, to your and seems it versus expectations the short car?

Stefan Ortmanns

a the there looking when EV is actually mean, we at automotive One slowdown I to trends. aware that trends, current EV related see are X all I the obviously in field. major and is

it's cars, where seeing new software-defined actually the programs delays we mentioned, And another also some provide PPU. can creating dimension we're right? I unfortunately, as Secondly, a higher of in complexity, also

third the right, And less China, this or emergence And For Europe of appreciated America. all more across one by the missing. even that's in is the and AI. us, North you're globe, Gen in is really carmakers

Operator

question comes the Needham. Doyle with next Nick Your from line of

Nicolas Doyle

on the expect one level through you 'XX? over fixed to be, level modeling-wise? we're the talking consumption? $XX less million, 'XX more that on that you're about the fiscal million little first we contract year I maybe The that. -- consumption. $XX the drivers good can seeing time lower detail a understand rate 'XX should fiscal a in And place and near-term, $XX of give than Is half million But around same consumption the

Daniel Tempesta

years. the question. trends of year indicators sort said the the of year. the our think, for of we part 'XX, Nick, to in licenses of we general, the of the remainder good I to are about That's first has $XX million. course, -- what question. we fixed do this are 'XX. those your of Dan. But do goal, And that the end get -- should of remainder I remember past of the starting been is in always to get close By the is to parity Thanks to be

that next intention that you and million intention, our time.So run at our a that year. come just approximately, expect So we're we if next if years. that's rate, but you we to $XX know, expectations the X over at that down we'll or And could to change this get level let as take

get should year how point. to that indicators of some to to down that and So come landing you give that's going year next the after

Nicolas Doyle

That's base $XX Yes. around that million on the And we're today? base the running contract is helpful. fixed

Daniel Tempesta

last a fluctuate year. a higher that's and number down, reasonable can up approximately. estimation. Yes, It little was but That

Nicolas Doyle

to the off seems on And detail ASPs quarter. in given we quarter pieces just little saw come trending with 'XX my be a fourth then a But flat, moving on the this question is what mean, I increase second possibly I I like up. we through year ASPs how kind good are it the seems think it mean, average guidance, down, billings model -- could out the on I nice be the mean of like ASP, the and per go-forward. car, bottom the more because way a your all may

Daniel Tempesta

be it's I'll growth of the comment and yet. quickly, to let I'll say Stefan I just -- should in then mean, given sort about significant reset, not fair ASPs I we thinking think

So that's the first item.

-- we to are be continue impacted. We

One from the production get ASPs old because program delay startup lower ASP. we that don't higher the to new program have better going ways delays is -- the of ASP startup oftentimes, we're when

year. being, -- don't that. fiscal flat impact we for it's the startup so And this for those productions time But relatively

Stefan Ortmanns

believe complete higher with AI we ASP new because the also or we flat this are relatively a the It's overall, right? solution see for experience going will in-cabin creating for products, conversational I we year, respect see beyond. to new with fiscal will and So a

weeks on forth. on based [indiscernible] then our large and an but X new we here, branding launch said, the generative as now. all fully to to platform, AI language So you also, era can AI ideas in Cerence in good, speed, assistant from we or also so see the easily new on also mean, there's first about generative and within and a weeks X yes? customization, AI, a integrate some will also we give so Secondly, the tested the X so it's That's I car, in models of automotive

beyond platform in And the in are new script are for goes we call AI computing nevertheless, cutting here. important going And thing his here. of AI transitioning So we the for far overall, automotive. here, that's path and us, most Dan large the is also also what language mentioned going for to innovation it drive as new cost a the approach model. But generative the platform, field we

Operator

for turn There Investor are remarks. over the Rich will no Vice of Relations, questions. I Yerganian, now to closing President back conference

Richard Yerganian

very to you. and much, you. Thank again, several speaking with conferences upcoming, be, Thank we you forward and look will at

Operator

joining. and Thank for you Ladies all today's gentlemen, call. that concludes

You disconnect. may now

Cerence (CRNC) 9 May 242024 Q2 Earnings call transcript