Cerence Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the CERNS Q4 2020 Ernest Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, to Richard Yerganian, Vice President of Investor Relations. Thank you.

Please go ahead, sir. Thank you, Dylem. Welcome to CERNS' fourth quarter and fiscal year 2020 conference call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release preceding today's call. CERNS makes no representations to update those statements after the date hereof. In addition, the company may refer to certain non-GAAP measures in pro forma financial information during this call. Please refer to today's press release for further details of the definitions, limitations, and uses of those measures and reconciliations of non-GAAP measures to the closest GAAP equivalent. Joining me on today's call are Sanjay Dwan, President and CEO of Serence, and Mark Gellenberger, CFO of Serence. As a reminder, the only authorized spokespeople for the company are Sanjay, Mark, and me. Once again, on this conference call, we will be demonstrating Serence technology. The prepared remarks will be read using our voice cloning technology driven by our neural AI-based system called Genie. What you are about to hear are computer AI-generated voice clones of Sanjay and Mark. Following the voice-cloned prepared remarks, the real Sanjay Mark will join the call for Q&A. Pay close attention to see if you can hear the difference. Before handing the call over, I would like to announce several upcoming investor events. They are all virtual events, so the exact timing of our participation is subject to change. The conferences include the Wells Fargo TMT Summit 2020, Raymond James 2020 Technology Investors Conference, the Needham Growth Conference, and the 2021 Goldman Sachs Tech and Internet Conference. Please visit the events page in the Investors section of the CERN's website for the most up-to-date information on our participation. Now on to the call. Sanjay?

Welcome to everyone on the call, and thank you for joining us to discuss Serence's fourth quarter and our fiscal year results. The majority of my comments will be on the achievements of our exciting first fiscal year as a standalone public company, but I would be remiss by not first reviewing the great results of our fourth fiscal quarter. By all accounts, our fiscal fourth quarter was the best quarter in the company's history. We had record revenue, record gross margin, record EBITDA, and record cash collections. The financial performance of the company was amazing with 10% revenue growth year-over-year and 22% revenue growth sequentially. In particular, non-GOP earnings per share at $0.61 per share was 88% above the midpoint of our guidance of $0.33 per share. The outperformance was primarily driven by great adoption of our products and services by the auto OEMs the strong recovery in the auto market, coupled with the prudent financial controls we have implemented in recent quarters. As you can see in the guidance that we provided in the press release, we expect our first quarter revenue to be up approximately 10% to 16% compared to the same period in the prior year. For the full year, we expect revenue to grow between 9% to 15% over fiscal 20. We recently celebrated our one-year anniversary as an independent company and despite the challenges from the onset of COVID-19, we are extremely pleased with the progress the company made during its first year. We separated from nuance with minimal disruption, delivered a steady stream of new products and technologies, had record bookings, including two of the company's largest contracts in its history, and delivered fiscal year results on track or better than the guidance that we provided at the beginning of the fiscal year before the arrival of the pandemic. Most importantly, we established Serence as a leading company in the very important conversational space for transportation and mobility, playing a lead role in a consumer's experience inside the car and with other forms of mobility. Our participation as an independent company at the Consumer Electronics Show earlier in the year resulted in over 500 meetings with customers, investors, and the press. By all accounts, the show placed us among the leaders for auto technology and innovation in the car. We also opened the NASDAQ market and hosted an analyst day to help introduce the company to investors and other stakeholders. Among the key accomplishments during Serence's first year, we saw bookings increase by more than 70% compared to fiscal year 19, resulting in an ending backlog of over $1.8 billion. These bookings included several highly strategic competitive wins with both our traditional OEMs and also including a number of electric vehicle manufacturers, including NIO, a company many consider to be the Tesla of China. We maintained our strong position in the embedded voice assistant market and expanded our portfolio of connected car customers. As CEO, my strategy is to drive the business with three priorities. The priorities are to drive product innovation, speed of execution, and cost control. Product innovation is the most critical element of a leading technology company, and I drive the team very hard on this. The steady stream of amazing technology and products we have introduced during the first year is very exciting. We enhanced our core technologies and leveraged our embedded position inside the infotainment system to gain access to all the sensors, cameras, and microphones. This allows us to deliver new capabilities such as gaze detection, emergency vehicle detection, and many others. We also introduced Serence Reader which can read articles with near human-like inflection and sound that even adjusts how it voices an article depending on if it is news, sports, or something else. One of the other key products introduced during the year was Serence Arc, developed and first introduced in the China market but now available in other geographic regions as a faster time to market lower cost solution for providing leading edge voice assistant capability in a car sedans are comes pre-integrated with cloud-based connected services and provides a turnkey solution for our customers we have introduced to new sauce applications car life and sedans pay car life a new suite of ai powered Software as a service or SaaS offerings that provides drivers with the best and most up-to-date information about their cars, helping them learn about the car's capabilities, or even scheduling service appointments when needed. Sedanspay uses voice biometrics to allow in-car purchases using your voice to initiate the transaction and will generate revenue on a transaction basis. I've only mentioned a few of the key products and technologies that we brought to market this year, which leads me to my number two priority, speed of execution. It is critically important to not only innovate, but to quickly translate that innovation into quality products and get them to market. One of the most important functions within the company is our product management group, charged with turning ideas into products. They have been extremely effective this first year, and as we look to fiscal year 21 and beyond, the new product momentum will continue to race ahead. The third priority to which I drive is cost control. We have to innovate, efficiently convert that innovation into new products, but also do so while keeping cost controls in mind. How successful we are at these three priorities is what ultimately leads to our financial performance as a company, And while Mark will review the details with you shortly, I want to point out some key financial achievements for the year. In February, we announced our first quarter results and updated our fiscal year guidance to reflect better profit performance on key metrics while keeping the revenue range the same. Shortly thereafter, we hosted our first Analyst Day event and introduced a midterm target model for fiscal year 24, showing a 15% CAGR from fiscal 19th. Then the pandemic reached our shores with the resulting impact on the auto industry becoming quite severe as stay-at-home orders were implemented throughout the world. We quickly made adjustments to our business, saving approximately $12 million of cost in the second half of our fiscal year. With the business holding up better than expected in our third quarter and the excellent results in our fourth, we were able to deliver better results than the guidance that we had provided pre-COVID. Another accomplishment during the year was our successful refinancing of the expensive debt that we received as part of the spin-out. This restructuring of debt is saving the company over $10 million in annual cash interest expense. Last quarter, we first presented to you a series of KPIs which we think provide additional insight into our business. We have updated those KPIs to reflect our fourth quarter results and have also added additional ones. The new KPIs are to provide insight into the trends of using connected services by drivers of cars with our technology. Overall, our KPIs continue to indicate strong business momentum. While connected cars shipped in fiscal 20 declined 16% when compared to fiscal 19, overall car production declined 19%. Certainly, COVID had an impact on both our connected car shipments and car shipments as a whole. The 14% growth in our billings per car is primarily driven by the expansion of connected services into more and more car makes and models. This is consistent with the secular trend of increasing penetration of this technology. The new KPIs we are providing are related to the use of connected services in the car. The chart on this page shows the number of active monthly users and the number of monthly transactions. You can see the consistent growth trend over time, then interrupted by the impact of COVID, and then the recovery. Overall, we would expect that as more and more cars become connected, that this chart will show acceleration in both the number of active users and monthly transactions. As we look to fiscal year 21, we expect to keep the business momentum going. In a recent study published by Adobe, 92% of people that use voice technology in a car say that it makes them feel safer while driving. Providing enhanced safety in a car is a core part of our mission. The same study also reports that 86% of respondents feel that using voice technology outside the car makes them feel safer in the age of COVID. This has created additional opportunities for the application of Serence technology to mobility solutions such as elevators. We will continue to aggressively pursue innovation in our core technology, launch new products and applications, and expand further into adjacent markets such as two-wheel vehicles, building mobility, and others. The future for Serence remains very bright and exciting. I would also like to thank all of our Sedence employees for their support in this successful journey. We cannot deliver these results without the dedication and support of Sedence's employees across the world. I would like to turn the call over to Mark to review the financial results of the quarter and for the year. Mark?