CRNC - Earnings call transcript Q4 2024

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Operator

Good day, and welcome to Cerence's Fourth Quarter 2024 Earnings Call. [Operator Instructions].

As a reminder, this call may be recorded. I would now like to turn the call over to Jason Gold, Investor Relations at Cerence. Please go ahead.

Jason Gold

Welcome to Cerence's Fourth Quarter of Fiscal Year 2024 Conference Call.

would certain remind forward-looking I call that begin, involve may statements. we like you to this Before Any statements beliefs, that considered including objectives, statements are and to not statements to targets expectations, of be our forward-looking estimates, should assumptions, plans outlook, statements. goals, related strategy, be historical fact, today. makes Cerence after representations update to no statements those Form press These statements to and our materially Form preceding such from risks filings, differ filed our described SEC may Form in the most XX-Q. which XXXX, on are uncertainties, subject X-K including call, today's November the recent statements release and to results cause with as XX-K actual our XX,

addition, forma The IR press further of details In closest measures, pro financial non-GAAP information and certain of the during GAAP the website. release equivalent. for definitions, Please is section refer in of of reconciliations company release today's and the limitations those this measures to to non-GAAP and key the performance uses to available indicators call. press our measures may refer

Joining Brian website. Rodriquez, me section slides in our of Investors further Please Cerence. context CEO are that with note the Krzanich, call CFO of Antonio are Interim of and available Cerence; today's on the

Now call. Brian? on to the

Brian Krzanich

and everyone, morning Cerence talk to to Thank as and good you Cerence's I'm excited you, Jason, morning, the XXXX this Call. QX welcome Earnings to new CEO.

has us start delivered prouder the has QX of of XXXX. year both accomplished 'XX the team end be $XX.X guidance. negative fiscal organization and earnings, our I million, $X.X adjusted of the QX. will Tony head for couldn't this and our line proud the the of you exceeded walk of EBITDA and gives what high very of While million The revenue what details through I'm top for

also company. few Before now which talk I to vision the why to to you minutes a like for spend for you about Cerence, you I I'd chose gives insight come my give to XXXX, to into forecast our

the large bring of and is already wins occurring a XX that automotive the at of assistance and fiscal in the as use forefront is automotive models footprint a has the and the vehicle, Cerence that in language in in 'XX. So products range Cerence broad AI AI voice space with industry to grow generative including year large revolution specifically importance. design

Our are this short rest time an small results. the so far, show Gen it's AI and usage but in increase product our specifically cloud has vision AI portfolio and encouraged programs also in with the not growth deals year unit This seen more built will first These that XX economics we've a importantly, begun AI have intelligence that large interaction. these BMW, earnest. but exceed with into this deployments customer adoption, these is forward moving products that them and language worth commanding that our Renault, in-car 'XX, fueling is the models that future, simplicity bring in every size any portfolio competitors and the evidenced generative a are solution solution And Motor Audi our sample to already Volkswagen, by PPU convenience of generative side. wins mentioning in including our on signed in across our transition Wall and far overall Great and based and and than out one fiscal like portfolio, frame, artificial Zeekr. is to SMA. is key shipped And we automakers happen and for SKODA, by program these And in rather solutions we've X for strong wins launches solutions momentum will meaningfully of our on

the our on of new our also models new launch language products deal we By first market. and of the leverages to the is for first entire the which to and bring AI second the platform, our large we of this quarter, based this generation generation language of will allows solution up fourth we quarter family simplify year, customer us speed proprietary platform, across models. how signed This which greatly

industry using moment a Siemens last introduced on for edge, implementation their voice cars In partner Calm to automotive for in other models as In pretrained vehicle, this Satya as with use We specific builds of Edge, their collaboration embedded models industry-specific not The interact create partnering cases fact, the as even in transition Microsoft, in announced which like and interaction connected. our Microsoft keynote most CEO, and systems just and first selected to when in vehicle, LLMs an top customers' on vehicle very important in solutions did to industry I order ahead they who adapted is Cerence LLM in have explaining want earlier simplified the the various in this the of and fine-tuned with the voice week's week, was Microsoft as preferred today, week commands. the AI leaders data their with conference. you highlighted Cerence automotive to we address allowing Nadella's strength with use why. in spend running IGNITE is this conference. Bayer to advanced IGNITE the

operate to within address to use vehicle navigation systems or conditioning enter to example, For Windows. or like an the air

assistant for and With commands ability multistep and for life. you to the vehicle of complex language need The understand your we removed saves the becomes the and becomes virtually interaction, limitless. natural simplifies assistant's human in time implementation script LLMs, an that now

X our love living same deep Cerence supplier, highly speaking and we're suppliers world's work automotive leading with our breathing because customers, specialized language Tier unlike the competitors. and neutral uniquely our automakers and expertise, technical to and as to addition the In

their experience competitors between to as their on main and a the As like mobile in-car increasingly well choosing commoditization, in-cabin as And drive ago, touch threat they're was with from becoming face in their experiences point what the the their years drivers handset forward. auto much are the seen partner OEMs brand. of differentiator also industry they focused to as Cerence

fiscal terms And organization return our to in profitability the hard in year $XX 'XX free at anticipates million the flow and issuing already in million partnerships million. reductions, of EBITDA Now to $XX guidance revenue cover minutes. the a year position, this done market detail cost looking range adjusted a represents to of $XXX with $XX of with OEMs few $XX which work the range XXXX, strong initial million related in Tony $XXX and cash vehicle will to we're million fiscal million of have in both

bringing from been year transition cutting to burdened out For and the that of led simplifying been to the competitive observation and we and do, I XXXX a Cerence as and while be more doing hope Cerence, has partners can and model broad and large see of operational cost AI our customers to find company. that complexities business not Cerence. Fiscal of and new joining a from hands the improve will streamlining you will ways I It's same to industry-leading to structure year Cerence and get to that products organization our and eyes, company spin the in believe company's I taking cost streamlining CEO market a call by and from that into resulted potential provide rapid to the me of also that my earnings to my our spending XXXX, to language company pace. of finding accomplish opportunities task continue first just the perspective process in the of and these year now, products our set the fiscal vastly exceptional our Nuance. bringing This With the I is is execution, at capabilities more vision future. efficient vehicle productive speed XXXX a market. the and the

step our return to future the is and fuel a strong my with to quarterly the plan a business. Cerence And go is turn to great ahead. critical I'll XXXX restructuring through over it guidance job of path year now our numbers, to fiscal an company profitability, Cerence strong into Tony our exciting Tony? growth. it's With company the to a that, activities. to details turn Our

Antonio Rodriquez

major I'll be Thanks, X topics. Today, Brian. covering

results. year review our I'll I'll restructuring. QX full First, details go of some Then into XXXX and our

QX Lastly, fiscal some the fiscal year guidance I'll for full and of provide XXXX.

the Let's ahead by guidance our get into we achieved year X million OEM which At revenue the $X approximately this QX was of top, Revenue aided exceeded of our customers. quarter QX million, for $XX.X figures. royalty true-ups in $XX XXXX of and million. of guidance end full high range our license of

whenever out This and our is customers that royalty technology their to we the that approximate Our volumes we numbers. to meaningful true each believe shipments up auto uncommon, not actual. call include will it is quarter this and periodically self-report

exceeded were due of XX% our the our this also end high to drop-through benefit XX%. Approximately of margin of revenue gross true-ups. the Our in of of X noted QX points guidance

down Moving statement. income our

and well accelerated improved the the from guidance million. Our gross $XX higher-than-expected of profit loss adjusted of $X.X by expenses quarter our $X of operating This a the approximately driven loss during million. exceeded from decreased was EBITDA of the restructuring million revenue efforts

by The had of prior $X.X revenue of fixed signed license that QX year-over-year of million revenue with noise makes in the the As X that connected associated we QX and revenue of comparisons drivers XX%. somewhat million were during legacy decline our declined of biggest services to highlights million in difficult. quarter Toyota. $XX last contract with some year, the year-over-year or P&L compared year, the $XX.X This

decommissioned meaningful. in for expect QX full acquired that year-over-year more Toyota After remember the contract quarterly will by results our XXXX, and XXXX may was of solution this comparison of the that be Nuance You that XXXX. in we QX

million in-quarter of marketable $XX.X represents from We same efforts. quarter in securities, the for some of and million expenses ended of up versus the million QX. $XXX.X compared non-GAAP savings The fiscal with $X for to the Our the 'XX. quarter restructuring decrease million QX $XX.X operating cash were or $X.X QX million XX%

$X.X $XXX.X million. during Last million. year the books, quarter, negative importance the for of Full more which minutes legacy million $XX Our QX landed at excluding noncash Adjusting would highlighting million. $XX.X we million. approximately impact we mentioned we year to been was the adjusted few EBITDA EBITDA of million the identified a discussing. million, $XXX.X of or spend full in of $XX was cash flow restructuring cost free million, net have QX now I that the the $XX.X With revenue quarter of will legacy revenue savings $X contract, efforts, adjusted the

are exceed range. of and track This across of to includes that facilities. including on our drivers, the major end cost all upper headcount cost reductions meet We or

back savings basis exceeded to growth for products. QX $XXX cost costs operating reinvest but calculations We identified into annual as are the help expense have you portion of the we our that discussing our models, driving plan removal with savings To these expenses our amount, base on because of a next-generation run million of a on net we this rate of entered for an your based non-GAAP net year. these this was of

cost sold we $X to goods services by implement but took Additionally, QX. not of We all reduction action the in certain approximately actions much reduced cost professional million. of

severance, these quarter. We $XX actions, We expect expenses to million but QX majority with to operating rate $XX.X to per we restructuring of bonuses benefits the We $XX.X million and run efforts incur retention some our in exit approximately expense Accordingly, of of benefits QX, in identified consulting of with non-GAAP between reduction fees. QX we QX. the in action million did of incurred associated another associated total in $X million vast expect QX. balance onetime and the P&L end in split the primarily the cost by realize approximately expect see the costs

these impact the the free will of the QX incur Our flow $X.X restructuring of million will of absorbed cash give fiscal costs we expect 'XX million $X.X another don't guidance in I these free onetime flow cash for to and that costs periods. absorb future

on efforts expect expect where in made reduce actions, staff engagement. we that decision refocus will professional services some particularly our business, have revenue the also these headwinds projects and from client we drive long-term We our to

on our that those We projects focus one-off significant have long-term potential don't upside. reduced we see or having

to million Our revenue to approximately million this. fiscal guidance 'XX the related $X for absorbs headwind of $X

million revenue we down last metrics, but $XX.X year, at was the $X look quarter for operating As QX. XX% from our million, up and revenue license same variable or breakdown

revenue year-over-year. Services revenue As $XX.X revenue X% there year. quarter professional fixed were without this Connected XX% planned, million $X.X services license down from million during no or $XX.X QX the million, was legacy same And was quarter. up our last

pro to quarter, shipped, fixed forma at contract As from was consumption. we previously in royalties reminder, total total a license value a a variable refer is as revenue We where representing shipped period was measure shipments licenses prior of in these including license the look operating where use licenses when we upon recognized shipment fixed licenses an signing. revenue recognized the

Our which up and $XX.X pro compared to previous were by Consumption of the forma for $XX.X than this QX. contracts from flat same year higher royalties quarter, million totaled QX $XX.X X%. last million, year were license of quarter fixed last our million

However, future annual value growth with will consumption there has and will contracts correspondingly, down, time, in because lower the past variable contracts license fixed trending fixed been result of associated that of in be royalties periods. over

of fixed level contracts normalize consumption of by the to roughly the year continue year. at end with new which during align 'XX, consumption We rate the time should expect fiscal run our to

number key this The down a to for penetration prepaid compared the exclude XX.X top while Cerence for also adjusted months X%. this approximately consumption period to we XX-month to billings trailing XX% XX-month X%. performance the were Total quarter, produced with programs our shipped customers. started connected slightly same for review the previous use IHS were services global We delayed ramping of trailing X a IHS compared year increased Quarter-over-quarter, the point that our adjusted $XXX.X to increased As metric production volumes previously XX%, declined in XX% cars XX of quarter, same technology was while cars basis production period production. year due primarily we indicators the percentage trailing XX% production declined our among billings down production some auto services, our as ago that year-over-year, on year. prepaid to and million down million the professional of weaker in

is backlog approximately currently Our X-year metric $XXX million.

$XX for guidance. Street our QX consensus million Currently, to for the million. full $XXX turning and year Now is is revenue fiscal the XXXX

revenue As remember we be please level fixed any one license by any impacted in revenue. quarter. guidance, the QX, signed are quarter forecasting the can go that through the license in we fixed materially And not of

of revenue $XX approximately projects $XX adjusted be million. currently We related moment our free For million of to negative of expect range cash in absorbs to QX, we onetime currently in deemphasis ago. be expect in be professional million associated to the This to $X I service million million range of million the the negative This QX to negative $X flow EBITDA in to of $X million X. $X a of range with impact to the headwinds mentioned the restructuring. and absorbs $X approximately costs

'XX range with range $X be This our understanding year factors for $XX rate of For million. business to to currently the planning XXXX million licenses associated growth some of how we to $XX fixed We provide costs mentioned. in was million, $X additional like including year million of $XX At cash range in expect coming fiscal would have to $XXX I our free fixed million, to XXXX of the the flow XXXX. X% guidance midpoint new guidance, be midpoint the $XX in in together. in headwinds Had planned and I'd the a the to help million $XX we of as licenses is we expect model are $XX XXXX. of of fiscal to revenue be reflected for comparable currently of fiscal over revenue to restructuring. you related 'XX, expect million to and the EBITDA million million to adjusted to $XXX million currently projects, service approximately year professional emphasis

planning of also run very rate in connected line. We modest are services growth our for

units products our quarters, As a that we way are in period nature. in over book financial when statements all are is reminder, recognize statement. our amortize The Then shipped, deferred into onto our to XX connected them XX new contracts revenue. a we revenue new we typically of income these that

products gain how become as to business of services connected these our traction, progressing. an license so, begin billings will variable indicator is And increasingly and

make and sure your over I'll attention develops metrics. to point this our to leading time, out As direct

we connected high by billings variable license services to XXXX, and For expect increase digits. single

expected for XX%. are year Our be 'XX in fiscal gross to of the XX% to margins range

convertible to Now address like our I'd notes.

have convertible notes is we be when As for have current flow of best a of June believe interest in portion it that and in due. these that $XX.X positive you pay the and may aware, million down gone cash notes position given current expectations are our of our due to shareholders XXXX. We of cash XXXX,

us the us some direction in flexible the be also position a of long-term company forward. our put and to However, of strategic reserve we to that allowing debt cash could refinancing believe while as move better execute we retain

at report As notes earnings refinancing such, solid are call. looking portion of alternatives results in for pleased having are next anticipate and we these of QX. the a to with actively more Overall, we our

to begin believe fiscal on forward. return will we the are we moving now our improvement sheet right performance Brian close continue balance track remarks. show financial 'XX, our strengthen we to to our I back in it and to year to As

Brian Krzanich

questions. commitments fueling by for look remain understand happy AI In and are in and our road to quarter's we fiscal continuing investors in to and committed share cost progress. results. so We the to generative guidance 'XX that to believe Thanks, our 'XX for open We our beyond. reduction streamlining We the focused our on map. We'll We to in growth Tony. it and fiscal business forward trends on ability can deliver process business. advancing closing, up now our seriously, our motivated and we and improvement with execution, the are reporting take this Street our

Operator

Instructions]. [Operator

with Craig-Hallum Van Group. Our first Rhee comes question Capital from Jeffrey

Jeff Van Rhee

on to side. me. AI for start the few I A wanted

the You of touched more being compelling. on economics AI

Just you of deals. the us the give just well, a then sense the referenced because curious uplift. in, magnitude related the of AI-related be as how that also margin you're pricing margins being but was pricing on coming willing, of I on one -- to without questions And as compare precise mean, uplift AI.

Brian Krzanich

I equal then a And we in details. the we're models, in models. the AI Tony AI uplift. out of as can general, current of have pricing, operations development don't a absolute actually of give relatively our can and general, most seeing add price really models but cost In some generative the start and

are So, with applications. improving those the margins

seeing with products. those margin uplift are we a So,

Now natural it's want Hey, language window. can much just heat can you to and POCs build as product. that and of said, hey, kind XX% my but from to how build the the Well, assistance product, in it's that started the we are early, and the and turned able promising to the It value, just and that see naturally, window. speak the that on open people is deals thing crack value these your on. And better being seat realizes interpret the in and seat opens with first are increments perspective. it seeing goes People up you we've they cold. knows

in and as by for And customers. our So, demand we're anything a the margin. Tony, interest product or seeing importantly a seeing importantly, general, better we're else? more strong

Antonio Rodriquez

of couple I a are Remember they're margins. Yes. improving. Yes, our connected services on products. these mean the that things

a XXXX out margins and services. until with service for higher primarily take bookings next and higher And seeing legacy product But that won't now come connected when that's margin year, mix play licenses 'XX the than at that half looking these our increase. year professional start 'XX for anticipating You'll latter connected less the into next more of that Service we're margin you and into we'll really the the overall, see is that we're really margin revenue.

the year So, benefit and we'll really in see that beyond. 'XX

Jeff Van Rhee

the rev Okay. Brian, it have for And been I your think landscape, several line deeper bookings guess on Connected as something lack it. competitive and is the Connected, rec you to, heard frame just I functionality, that you pointing of time, you it. it, been AI. a of just, loss, position on get lot over just get years, I about competitive forward, your years. that, position? pointed But has of to take of about, obviously, contracts to how understood. going just and growth would on then competitive stream lifted. share And suggests in backlog be to on maybe a the what touched these you connected to, been as going the look, talked Like opportunity little win. the your sense you last that's topic about I think business, And deeper same relates A But curious part but the inherited comments beyond has connected in right totally revenue the hasn't that

Antonio Rodriquez

comment last our at noncash noise revenue But bit year-over-year. quarter P&L legacy can you out in script, I'll year the that and we've before I if and take fourth look a quarter, our year we question. and business start -- on of connected that about at second you as compare Connected there's part ago XX% a the first other year, Brian with if from last grew of mean, it of on legacy talked Toyota But little growth the a it calls then actually within the mentioned we we've year-over-year. take look

the happened the quarter. as fiscal we So, 'XX quarter fourth beyond third that fourth as forward of the new we bookings fourth in with of we growing move quarter that see go and then this that into year year, and growing and in this

growing, that growth to business. So business be is of anticipate the it area we and a

Brian Krzanich

one, our kind quite understand It's we which Yes. and designed And of part automotive the part that what's And was right answer question, our Jeff, product around, space. second your your to it's strong. position or is business. let be really or of in another me

of seats we OEMs functions to able and and partnership that strong. work understand the with and example, to that the models those operate really to introduce have put manage for large to automotive-specific and very windows language charging you is and there's, and from through kinds So, instructions car, all right, very XX,XXX be ports different everything

to that of wants different big one and very willingness our all and create in answer, one tend the OEM really our structure, especially is It's product. is the time. to Second connected ability with come competitors, the They the that our customize experience guys. than one most

have We connected to local. ability the be to be

around set. feature their customize will We

want to they look not at want and example, kind for to Sometimes, own that LLM a to they comes go their they back. go business models any of public that they model say those it an have the whatever use they strategy have out want private that for to go to LLM call to instruction LLMs, and have, they set to to want the guide

the We the can goes they're architect it we search it to or goes OEM. whether go structure to, And have competition that or preferentially at search so our only to tends the public ability to the to whether request treated. goes private to that public a the where where

of typically their really really that of the customization, us that's can we much the perform of and So, why we we more And deal experience customized us where would with languages they it's for number gives want where all a strongest OEM. this experience. and for are

Jeff Van Rhee

royalty everything And product hands not been one, flattish. you around many of has headed. grow? your Is all last and number, got Understood. do to years the sales the as coming which is you it hasn't realize I have go-to-market if in fundamentally at adjusts takes working. handful somewhat this reins you're and some get market up to relatively not. over the you the pro But in think a Is have clearly, we're could, unfair the where of you what the and the getting here, think forma things function? what kind One it essentially, else, else? look you're Just X worked worked, Brian, last you why able prepaids of lesson brief relates what just company But brief fit? you look a and the and sizing can if your history for been Is on the you it a is because and this taking early -- something business as I years, last if business,

Brian Krzanich

been really you kind and Well, I'm hesitant just model and focusing about look much driving too past, to still because on from, it I've experience the a of do said, the as and a very past ourselves take where bookings kind and rather differentiate of they little the any a to was where really at if what the we grow cost than you and relative were different trying into it to came at, digging on really focused really are competition. products how think

how the haven't a language into those lot create go forward, models One, and look changing. I product. lot going language X are as we models whole So, right? we experience, large user talked the that end how and about actually into is are you're things So, large What there's we've AI really application how the seeing models the a talked that. about

speed our themselves development work now to into X customize customer. of down to how into put months part into there's months to their their on a And product like shrunk and product focus X so, XX our our of product to customer's a we hands, has can fast vehicle the from

but where shifting get things it really up to customize faster. us into product are quicker, standard the product, that are. So those the them are time it's develop those what the for to all models that software expensive needs the that that for the it better, large speed customer changing are to things and business, and using versus old customer. also now around differentiate less the it and experience own models, And we makes and much end paid for it the makes We to can which develop the make our It the them makes really driving the the right, language it by production those we much were how user that. produce more harder are models

as And this down so, for much for it's time we're we've seeing price products. the product. costs when simpler already and our period getting at paid I And kind over increasing to seen go and us this, these quicker develop look of

what's changing really that's my in mind. So

Operator

Langan comes with question Colin next Wells The Fargo. from

Colin Langan

the just if the year-over-year is that? actually Maybe I of up some kick services, actually market? of the shipments be of of maybe are professional some I contracts if at off, quarter-over-quarter. double were digits if KPIs, underlying driving What the fixed sort to your and X%-ish. it to driving think the shipments I look down growth growth scrub of exit seems out still underperforming sort what -- underlying And What's the and

Antonio Rodriquez

Yes.

this, more we as of PPU. yes, average about kind it's think So

-- business strip if in think out fixed So, our we year-over-year. down we license of if are year-over-year, we about license the out our

that of is decreases. is up. what's in interesting the with falls some So kind But Connected of line volume that

So, will the that questions that think have we 'XX. growth? are going couple because things. is of in we in again, One the one that the a license less license where fixed grow 'XX I business of consumption is, last of primarily in

shipping cars, more but we're will drop So, of that down.

service with that growth So, Connected area business, connected include there. cars volumes a there's And up are our the the business, growth there. Services then those

the and the if overall total volumes being you dollars connected with it's down. So, the average growth kind out connected as higher we really down, PPU volume in think that growth provides about in of in --

Colin Langan

When I now X-year we and revenue? what guess, from Got time that? like to your Brian, priorities? Is in that pressure? just should then last Is something And I right? it. that how updated Or that line I shrinking. your get did think are is perspective, about think on yes, was billion inflecting the analysis. frame then and focus I the cost the to mean, mean, we do time the think as it that last right you that backlog you And And trying about but backlog, it $X.X

Antonio Rodriquez

Yes.

backlog, $X So, it's yes, our as at in we looked backlog. to close billion

cease. to program cases a that our backlog. a in those that either term got contract of contracts we You car of a have expect where be remember a a things, volumes couple particular contract, long when certain program with are It could we particular place, the that that, prices in through and in have represents expected or current will it contracts we

up. program, relationships true where it's anticipate and the reflect that next an we a arbitrary the of time really will doesn't we close over of program kind it So, pick

So, accordingly, hit, terms time that's whether as because those dates. it end a denigrates program bit little contract over or dates

think most look our our XXXX still we I all billion. for 'XX represented is close in of $X And if to numbers, of healthy So, extremely revenue at it's at backlog.

So, it's going as of next be we next-generation the we growth bookings in that connected the backlog we will But long that as effectively the volume baked anticipate forward. hit have. expectations billings that

Brian Krzanich

to that kind and and car your into And trying I other Colin, what estimate a remember, gives X at of Yes. and to of And to model perfect to number. volume going that's you priorities of answer grain car just about and is bit so stop salt. just the It out look to will I'll any years, it's -- our us but revenues insight with models start. be, of a got not add that's Tony's question, billings a when are

been number, is what when and billion in prices we've and $X the we up the volumes do signed that return And some speech priorities, deals to 'XX are to what Most on your and to the his cut gives execution. costs And a there of signing are. really that need of execution the to around To finishing to back that not let to in line, insight at sits is work. in. me, to finishing for, organization. and we're things an It's it identified. and 'XX, really we that at continuing things that in out mentioned profitability. question as the those they me matter will already are it's those have really the to I AI are be look as the Tony I'm long items generative a means that then important still What's as talk, what more actual continue mentioned okay. just of creep look So hold And we plans out costs have

the end user. to Our first Gen gen brings AI model

the third way as model, targeted year of towards which brings like language And calendar year, all models end quarter focus AI of large the really then next I that kind have. And and get the starting of our earlier, that the work that execution first AI. that year, work. which finish through our mentioned really the is so the we priority the products, we organization, with reduces finish on that to critical workload product. the is the It's our right, is simplifies Our end our third second-gen I'm really generative fiscal of of Gen

some go Garmin, and other AI with can Watch. models just starting And go beyond. usages. that automotive. outside on getting of And launched Garmin where board. of Voice across we products go can usages with other the ourselves We've We're to TVs. LG is one these third ask X been into working and Second we're products, Gen products have and the is

impact, we going where it's really grow move company be to activation. go to beyond automotive not is 'XX and spaces out need well X want continue the a or voice figure into in as to really 'XX this to X we but Now to

Operator

Doyle with Our next Needham. Nicolas question comes from

Nicolas Doyle

services wondering But up professional it the despite mentioned was quarters. that in I to 'XX. -- million you of quarter-over-quarter. could that The X then $X driving X the million of to million fiscal cuts then couple first And mentioned 'XX down over $X were was kind just year-over-year. the Is you change if headwind comes one, know explain And quarter-over-quarter. the off mentioned that I you number? fiscal you last what's

Antonio Rodriquez

PS $X 'XX. million in in is So yes, anticipated 'XX fiscal reduction PS, a over to $X in million there

from down. focus those headcount a are we So, us. driving we've uptick teams there's really reductions, We look was that But cost done QX. we meaningful anticipate within year-over-year, of really cutting yes, as that at the have drive to with and did to results are that relationships deeper PS at the a looking it, most we the slight some that it

So, we for were anticipate those QX. that, that remember, number really will of some year-over-year. be down cuts But

in forward, going as about will really again, be it it didn't lot looking we million at that it a of effort. $X that. We But But see we year-over-year. think QX. saw headwind of So, focused a more

Nicolas Doyle

Okay.

clarifying. Just

guess be asking, just was to and is down. it I So it guess, quarter-over-quarter, we flat I expected up to again,

quarter? So, any there drove on the what strength explanation this

Brian Krzanich

lumpy services. do do we as actually on little It's Nicolas, it's more where to really, focusing add get Tony quarter-to-quarter. a said, bit from just we value and be going paid professional where for we're

when so, was. of ahead organization in thing professional to said should and we business and thought shrunk the size we went quality we we the let to this kind right looked some And it where business, go at down, people and the services go

get hey, we work, paid do business the Now good if there's them, it. for we've and that said, we'll can told

work cannot And you're And see going us wants it. to to pay and the do do the work it, we'll the in and way, either projects they to do a professional because so, come to they're kind want themselves lumpiness. do of or they services as somebody willing don't go

seeing more lumpiness you're hey, there's so, And of, just some bit a little work. that of

And professional bit work a to some year-over-year of quarters, than term, look long rightsized it year rightsized that trend. services. be we quarter-over-quarter But when little relative and the may we've full think we less organization the at amount or the the guidance,

I Does getting about paid for why? and margin is help the So, worry that answer wouldn't quarter. Like do X right. we what

Nicolas Doyle

Yes. Got it.

million I'm about change know and hairs, here. like little splitting I it's $X a lumpy, Just

drove 'XX. quarters highest just in or in Gen think on any those PPU quarter 'XX? X X thoughts the PPU drive Second Did question, really the change? fiscal and to since the rollouts average past Or much detail the year fiscal jumped the or X a that average I license this this level what strength AI of

Antonio Rodriquez

of Yes. shipments, is of Q do of a we And kind the effort we the simplify yes, as But it license try to Brian is get and go that it's hard, kind have both right? and I from business One down. to and P drops standpoint, as a forward again, an describe to we And how difficult. try model. times disclose some

have $XX that You do you that's for highlight And Connected But GAAP fixed. bill calculate drop average to because deferred little quarter billings, see get our a volumes, then billings is compared subscription because to those kind revenue at over million is a we of which as if we But in were take thing the then are our harder out look fixed you shipment. out one this revenue into a will period. something. recorded and to million. leading metric amortized then $XX.X PPU on of and revenue an is -- the then take and those down GAAP continue can

do see average in going new license of a understand much to PPU and really and periods. And deferred or those a standpoint, the that's you some revenue So, billed really from PPU to for of it's higher an because Connected hard from stuff license won't future until components products, really look at and license in volumes you have the next-generation the being then legacy try then how trying within that really are it's number. a there

the because But actually so an volumes? higher that have weighted for we the PPU we're of of What and/or shipments is built. is within will, components PPUs have for license components, those area those shipping? short that we components are being average our do components we have that there. selling that license higher higher answer you PPU, So, a effectively And the that in if are license effectively do more

Operator

Instructions]. [Operator

Sachs. comes question with Our Goldman from next Mark Delaney

Aman Gupta

for Gupta Aman You on have Mark Delaney.

provided revenue framework I of quarter, kind for decline First, single-digit fiscal legacy driving year-on-year, that a of the puts to guys to maybe drove last is for you excluding you what's of that year-on-year. of now and you're 'XX a business growth strength midpoint guess, Can of and seeing? speak showing takes some flat some low the that kind and

Antonio Rodriquez

certainly. Yes,

at that right took Yes, when $XXX a of we're now, is we we $XXX were million out point, million. guidance And million. close. mid-guidance think our framework think to looking legacy at the fairly of I $XXX business, I

looking of volumes look that and side, making we couple some our size a It's of quarter. expectation the the growth. what on license things. the So, we be backlog shipped as at will right is seeing within at we are and One sure

was be services professional will were framework. the actually about we what but in slightly But I kind to we be As Connected in framework said down, close we guided what than were providing overall, what last to quarter. think up framework, thinking of line in being very going down. mentioned, then And the actually we we that the with it's Services had it

Aman Gupta

products, the gen. appreciate one on higher the maybe it. then I first I And appreciate the of versus and for AI gen kind second a level context

product AI level to of of should have pipeline? a that launches you we going get the you simpler we AI of that waiting more Given kind a second-gen to be make, and higher pipeline Or kind how think of through product that's of pursue second-gen Are that of kind about little should wins? the year? supposed that kind to about you think before how

Antonio Rodriquez

nice next What's all X are for Pro products Chat next backward part, most Gen these X that through, Gen the is of No. compatible.

those upgrade So, people we to can products.

do So, we this I don't that. slow to all, want down at wouldn't and

they we X Chat where that features with with help customer look the if headed all they've want. guide X go right? a products kind want series and comes them. they we to to whether are go at experience or What Pro them of the whether various they and X, selection Chat we're do those a then process, that. manage with they through to to them the things in So, as skip Gen of want Pro want show And We -- there's look the Gen of to they through them what then going and they're want is or we next And Gen our able seen at them. and are through

want the Some a operational really customers good of experience. just

things a You can in do language. natural

just beyond assistant becomes called Reno assistant, like avatar they example the of way them they today Renault their out X. helps, We case, at an do that with further even the what we're their car. that. all Some we have just working In and is a really to others have can go a want Gen much to plans true auto. and looking and through it line assistant that move that where in good them with the launched to product from

through So, kind products. as they these continuum people a for like it's be go going of to

so, of be seamless. And kind to it's going

upgrade can hey, or going on. don't We breakoffs between upgrade not And the upgrades people, X. a they upgrade see if Gen everything stop move we seamlessly their X everything we later experience we Gen Gen selling want You're of, to make decision those. cars X want can stop with selling down have wire we or Chat because to to even Pro because everybody's want

that portfolio? So, we the of Does these ability have kind products. all understand that in product of help you

Operator

at to closing remarks. showing time. further Brian like any I'm call no I'd questions this turn the over to for back

Brian Krzanich

Okay.

the just we're I this I's our call is and interest for in the appreciate remarks I the hope business. morning. So, really really questions to attending excited business want and excellent, that about thought thank everybody I were you the see I from headed. Tony where

we think to For we'll XXXX, one, profitability. plans return we've to we we have our it's that to transition, the the for excited debt, products. place mentioned the about all through we're in we our think and quarter's and morning company said, have answers you in this as overall, priorities, execution this execution, Tony made through talked to about really the order work I numbers And the update. organization next-generation next achieve by

and our customers experience really and the see of those other So, that that's giving able execution to real the is feel for XXXX focus we're to generate.

the and this look showing that, so, just to we end And progress forward for everybody made I the seeing quarter we've thank far. morning, to with and want of attending next again so the at you you

thank much. very So, you

Operator

your Everyone, for the disconnect. have and you conclude This now may participation. great Thank a program, you day. does

Cerence (CRNC) 21 Nov 242024 Q4 Earnings call transcript