Cerence Inc.

Ladies and gentlemen, thank you for standing by and welcome to CERNS' first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's call is being recorded. If you need additional assistance, you may press star then zero to reach an operator. I would now like to hand the call over to Rich Erganian, Vice President of Advanced Relations for CERNS. Please go ahead.

Thank you, Michelle. Welcome to CERNS' first quarter fiscal year 2021 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. Serence makes no representations to update those statements after the date thereof. In addition, the company may refer to certain non-GAAP measures, key performance indicators, and 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 Gallenberger, CFO of CERNS. As a reminder, the only authorized spokespeople for the company are Sanjay, Mark, and me. While many were amazed by our voice quote technology last quarter, Sanjay and Mark will be live for the prepared remarks and Q&A, and I challenge you to be able to tell the difference from last quarter's conference call to this one. Before handing the call over to Sanjay, 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 this Wednesday, the 2021 Goldman Sachs Tech and Internet Conference on February 10th. And in March, we plan to participate in the Berenberg Capital Industrial Technology Conference, the Raymond James 42nd Annual Institutional Investor Conference, Baird's 2021 Vehicle Technology and Mobility Conference, and the Common Mobility Disruption Summit. Please visit the events page in our investor section of the CERN's website for the most up-to-date information on our participation. Now on to the call. Sanjay?

Thank you, Rich. Fun to be live this time. So welcome to everyone on the call, and thank you for joining us to discuss our first quarter fiscal 2021 results. I'll first review our strong performance in Q1, followed by a summary of the key product introductions during the quarter. This will be followed by comments about the near-term business environment and update of our key performance indicators, and then I'll hand the call over to Mark to review the detailed financial results. After a record fiscal year in fiscal 2020, we're off to a fast start in fiscal 2021. as our initiatives for innovation and market expansions continue. In Q1, we again delivered record revenue of $95 million, representing 23% year-over-year growth. Our performance was driven by strong growth in our license, connected services, and in our professional services businesses. While revenue growth is an important metric for the company, I'm extremely proud on how we drive the business to achieve profitable revenue growth. Our intense focus on this led to a non-GAAP gross margins of 75%, adjusted EBITDA of approximately $40 million, or 42% margin, and non-GAAP EPS was a strong 59%. Overall, our Q1 results surpassed expectations in every key financial metrics, and Mark will share the details later in the call. You may have seen our recent announcement further strengthening our professional services organization by hiring Sujal Shah to lead this group. Sujal comes to us from Harman and has extensive experience in the automotive space, and in particular, creating new service offerings that will lead to even more future growth opportunities in this part of our business. I want to welcome Sujal and wish him the best. As strong as our financial results were for the quarter, there were many non-financial highlights as well. One of the key achievements in the quarter was that we were awarded a design win for a major European OEM's next generation infotainment system expected to start production in 2023. We just received the OK to share the name, and the name of the European OEM is Stellantis. It's, as you all know, one of the top three auto OEM that was recently formed by the combination of FCA and PSA. This win is important for two reasons. First, we won back a customer that had been lost to a competitor when our business was still part of Nuance. And second, the deal includes many of the latest connected services and apps product offerings we announced just a couple of weeks ago at our Sedans in Motion event, a true testament of the strength of our new offerings and innovative technology. Another headline event was our agreement with Zivo, a Lear company, to deliver Serence-based conversational AI-powered contactless payments into vehicles via the Zivo market platform. This deal is significant because it represents a major bookings for one of our new Serence apps. The bookings to revenue cycle for these offerings is much shorter than our standard products, so we expect to see revenue from this deal before the end of the calendar year. It is our speed of innovation and execution that allows us to retain or win new design opportunities, and that capability was clearly on display at our Silence in Motion event. During this event, we introduced amazing technology that either represents best-in-class or brand-new capabilities focused on extending a driver's full digital life from outside the car to inside the car. We introduced Sedans Drive 2.0, a major upgrade to our core technology. Sedans Drive 2.0 features a combination of edge technology enhancements and improved and expanded connected cloud services capabilities. Whether it be the number of languages we support, the level of accuracy, the speed of response, or the human-like text-to-speech capability, we're confident Selence Drive 2.0 represents the very best of conversational AI technology available in the mobility market. During the Selence in Motion event, we also introduced a series of other new products. Silence Extend provides the ability for a driver to use their voice to control apps on their Android or iOS-based smartphones. Silence Extend removes the limitation of using your voice for a defined subset of apps on your phone and allows you to use your voice to control apps ranging from Microsoft Teams to ordering a coffee through your Starbucks app. This product plays a significant role in extending the consumer's full digital life from outside the car to inside the car. No one else offers this technology. To truly extend one's digital life into the car also means providing a seamless way for a driver to interact with smart home and IoT systems. This is exactly what Sedans Connect allows you to do using your voice. Supporting multiple IoT and big tech ecosystems, Sedans Connect allows the user to provide simple instructions or create custom smart home routines or rules. Even if you use different ecosystems within your home, Sedans Connect allows you to control them through one AI interface. Sedans Tour Guide is a new application that serves as a high-quality professional tour guide in your car. Whether selecting a pre-planned trip or using the application on the go, Sedans Tour Guide can inform the user about key points of interest and also book experiences like restaurants, museums, and other attractions. Seren's Look is a new product that has the capability to leverage gaze technology and or the GPS location of the car to provide information on points of interest along the road. The technology was recently demonstrated by Mercedes-Benz as its travel knowledge product. which allows the driver to ask about the POI, point of interest, outside the car, and the voice assistant responds with the information describing the POI. Seren's look is currently in production now. Serence Browse provides the intelligence of internet search engines in the car using conversational AI. Serence Browse connects to multiple sources in the real time, indexes continuously updated information from internet sources, and uses machine reading comprehension to deliver the best possible response. As I said earlier, innovation is key to our growth and competitive advantages. But innovation alone isn't enough. It's the ability to bring those innovations to market quickly with the highest quality and meeting or surpassing the requirements of our customers. I'm happy to report we had several awards during the quarter recognizing the contributions the Serence team has made to conversational AI technology in the car. And one from a customer recognizing the value of Serence as a partner. While we value the recognition from customers, the one we received from Baidu is worth mentioning for two reasons. First, Serence was the only automotive supplier Baidu recognized for their 2020 awards. And second, it's another example of how it's a story of Serence and Big Tech, not Serence or Big Tech. As part of the Serence in Motion event, we also formally launched conversational AI-based platform for two adjacent markets that we have been targeting, the two-wheeler and building mobility markets. There are approximately 90 million two-wheel vehicles produced every year, and we see the opportunity to penetrate this market with a truly unique solution. As we have mentioned before, we received our first win in this space late in fiscal 2020, and we believe we are well positioned for additional wins this fiscal year. In the elevator market, we have made significant progress completing proof of concept demonstrations with two of the top five elevator manufacturers in the world. The key to this business is that our product is capable of being retrofitted into existing elevators as well as incorporating into new installations. We are optimistic that we will have multiple elevator customers this fiscal year. Just the innovation, expansion, and acceptance that I just discussed. With the innovation, expansion, and the acceptance that I just discussed, our KPI continued to show good progress, and I'll highlight two in particular. The first was related to our average billings per car, which increased 20% year over year on a trailing 12-month basis. We previously compared year-to-date results to the prior fiscal year, but now are reporting on a trailing 12-month basis to provide a more accurate picture of the trends in the billings per car. The other noteworthy KPI was that our adoption metrics continue to show a strong recovery following the impact of COVID in the middle part of the last year. We would expect this positive trend to continue. We continue to see excitement from our customers about our product innovations and our long-term growth opportunities remain bright. In summary, the momentum created during our first year as an independent company continue into our second year. We believe the innovation technology that we have brought to the market will keep the momentum going. Our focus has been on driver AI to enhance the experience in a safer, more productive way. We will continue to expand in-cabin AI using voice and increasingly other modalities. Longer term, we look for opportunities where we can apply our AI skills into other areas like road AI. We have a long-term vision for the future of transportation and mobility, and I'm very excited about the role CERNS will play. I would like to turn the call over to Mark to review the financial results of the quarter and our guidance for Q2 and for the year. Mark.