Cerence Inc.

Good day. Thank you for standing by and welcome to the CERN's Q3 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, press star 0. I would now like to hand the call over to your host, Rich Jernigan, please go ahead.

Thank you. Welcome to CERN's third quarter fiscal 21 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. CERN makes no representations to update those statements after the date hereof. 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 Dhawan, President and CEO of Serence, and Mark Gallenberger, CFO of Serence. As a reminder, the only authorized spokespeople for the company are Sanjay, Mark, and me. 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 the Raymond James 2021 Diversified Industrial Conference on August 24th, Collins Transportation and Mobility Conference on September 9th, the RBC Global Industrials Investment Conference on September 10th, and the Jefferies Software Conference on September 14th, and the Evercore Auto Tech Forum on September 21st. Please visit the events page in the investor section of the CERN's website for most up-to-date information on our participation. Now on to the call. Sanjay?

Thank you, Rich. Welcome to everyone on the call, and thank you for joining us to discuss our third quarter fiscal 2021 financial results. For our call, I'll first review our strong financial performance in Q3, followed by a review of some notable events that took place during the quarter. Next, I'll update our key performance indicators and then hand the call over to Mark to review the detailed financial results. Once again, we delivered a strong financial performance. This is especially the case when considering the headwinds to our licensed business due to semiconductor shortage. Our revenue came in at the high end of the range, was aided by strong year-over-year growth in our variable license product line, being up 74% year-over-year. The business model continued to deliver better than expected performance with non-gap gross margin at 79.1% and adjusted EBITDA at 38.7 million, or 40%. The result was non-GAAP EPS of 62 cents and cash flow from operations of 24.1 million. When combining our year-to-date results with our guidance for Q4, our full year forecast is expected to come in at the high end of the range. Mark will provide details in a few minutes. During Mark's comments, he will also be updating all of you on our midterm 2024 model. The model was first published in February of 2020 at our first analyst day. We had hoped to hold our second analyst day in early September as a live event in New York City, but unfortunately, the rise in Delta variant of COVID-19 has led us to delay that event until later in the calendar year. We did feel, however, it was important to update you on the 2024 model given the positive updates to the original model. Much has happened since we first introduced our midterm model, especially in regard to new product development and adoption, our decision to enter adjacent markets, and a better understanding of how subscription renewals may play out. We have also been able to make sustainable improvements in some of our assumed gross margins. The result is a midterm model with a significantly higher revenue target and improved margin expectations. You will hear the details shortly, but as a management team, we're very pleased to be able to communicate these updated model assumptions. One of the areas that will help us achieve our mid-term target is in the new applications and connected services. Some of these applications and connected services we have discussed before, such as Sales Pay, Car Life, Tool Guide, and others still to come. include in this category such products as Sales Connect, Browse, and Extend. What was especially encouraging was the momentum we saw during the third quarter related to bookings for these new products, in addition to the more than 30 million in bookings we referenced on our last conference call. This bookings momentum was partly the reason we were able to increase our revenue expectations for 2024 target models. We also had several notable events and achievements in this quarter. During the quarter, over 60 different car models from more than 15 different OEMs reached startup production or SOP. The 60 different car models was a record for the company. SOP usually follows two, three years after design wins. and represents a critical milestone because it is at that point when the licensed and connected services begin to generate revenue for the company. The range of cars hitting SOP in the quarter was also impressive and included high-end luxury cars from such companies as JLR, BMW, and Mercedes, to some of the hottest new cars on the market from OEMs that include Ford, Toyota, GM, Volkswagen, Renault, and Stellantis. All of the major geographic regions were represented, including about a dozen SOPs for cars in China. We announced an agreement with CirrusXM, the leading audio entertainment company in North America, that will provide their customers the ability to use their voice to change a channel. Safety and convenience are why using your voice in the car is important, and this is especially true when you have to look at the console when changing a channel. With this technology, it will not only make it safer environment for the driver, but also through our AI, the system will learn your favorite channels and suggest others you may like as well. Another important agreement was struck during the quarter with Harman. This competitive bid will combine Serence's leading conversational AI technology with Harman's Ignite platform. Harman, a leading tier one supplier to automakers, will integrate Serence's AI-powered voice recognition technology into their Ignite platform so they can offer hands-free, secure access to the platform's extensive capabilities, providing an intuitive and powerful experience to their drivers. We also entered into collaboration with Visteon, another leading tier one supplier to the auto industry. In this case, however, the collaboration will combine core Selen's conversational AI, including global language support with Visteon's Android-based smart core technology platform. The solution has been selected by a leading motorcycle manufacturer and will launch in 2024, powering a 12-inch display that offers connected apps and over-the-air software download capabilities. This is an important collaboration as we seek to expand our presence in the two-wheeler market and is an example of our successful ability to do so. There were two other events worth noting during the quarter. First, we were notified of our addition to the S&P 400 BITCAB index. We were pleased to hear of our inclusion in the index. as we took it as a recognition of the hard work of the entire CERN's team to consistently deliver strong growth and profitability. We are laser-focused on continuing this path of building a company to the most trusted co-pilot in a car. I'm also pleased to see that our Chief Information Officer, Bridget Collins, was recognized for all of our fantastic efforts on behalf of CERN's. Bridget was named 2021 Boston CIO of the Year in the corporate category, chosen by her CIO peers. As I said in the press release announcing her recognition, Bridget has been an integral part of my team from day one and is a perfect example of level of talent in the sales leadership team. Moving on to our KPIs. As expected, several of the KPIs returned to a more positive trend as the quarter most affected by the reduction in cars produced due to COVID fell out of the 12-month trailing period. Specifically, the percentage of cars shipped with Selen's technology increased to 53%, and the change in the number of cloud-connected cars shipped turned to a positive 12% from what had been a negative number. Our average billings per car increased a healthy 13% year over year. The main contributor to this growth is the increasing percentage of cloud connected cars. The largest increase in the number of monthly active users is indicative of the automakers bringing to market infotainment systems that are more capable and easier to use than Apple CarPlay or Android Auto. For sure, Some automakers are in a better position than others to compete for a driver's mind share, but the momentum is clearly building for growing adoption of a well-implemented and OEM-branded human-machine interface in the car. Our multifaceted growth strategy to deliver sustainable growth continues to play out. It starts with a strong core of leading conversational AI technology for the car, and extends to new applications in adjacent markets. We continue to push the innovation envelope for our customers so that they can offer their customers the safest, most enjoyable experience inside the car, which also represents a seamless transition of their digital life from outside the car to inside the car. You may have heard me say this before, but I think it is worth repeating. I drive the sales team to adhere to three priorities, As a tech company, we must continue to innovate. Since the spin-out into an independent company, I'm very proud of the number of new products and technology Serence has brought to market. Second, innovation is only an idea unless you execute and turn that idea into a product that you can deliver to your customer on time and with quality. And third, to focus on cost when designing new products because innovation Ultimately, we are in a business to make money for our shareholders. I think our financial performance is a good indication of the emphasis we put on cost efficiency. These are the guiding principles we will continue to rely on as the company continues to grow. The previous slide identified how we have expanded the business by developing new products and entering adjacent markets. Our long-term vision for the company is much larger than that. Our goal is to be the central AI brain of the car, essentially becoming a driver's trusted co-pilot. We see the next big opportunity is to combine vision with voice. We believe this has application not only in driver monitoring, but also in road and cabin monitoring as well. Certainly, this is an area you will hear more from us in the future. I'd like to now turn the call over to Mark so he can review with you the details of the quarter, our Q4 guidance, and also positive update to our midterm 2024 model. Mark?