Cerence Inc.

Good day, and thank you for standing by. Welcome to this year's Q2 2022 earnings conference 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 will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require assistance during the conference, please press star then 0. I would now like to turn the conference over to your speaker today, Rich Erganian, Senior Vice President of Investor Relations. Please go ahead.

Rich Erganian, Senior Vice President of Investor Relations Thank you, Christy. Welcome to CERNS' second quarter fiscal year 2022 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 today. 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 Stefan Ortmans, CEO of Serence, and Tom Bowden, CFO of CERNS. As a reminder, the only authorized spokespeople for the company are Stefan, Tom, and myself. Before handing the call over to Stefan, I would like to announce several upcoming investor events. The exact timing of our participation is subject to change, so please go to the events section of our IR website for the latest information. The conferences include the virtual 19th Annual Craig Hallam Institutional Investor Conference on June 1st, the Baird 2022 Global Consumer Technology and Services Conference on June 6th in New York, and the 6th Annual Needham Virtual Automotive Tech Conference on June 7th. Now on to the call. Stefan?

Thank you, Rich. Welcome, everyone, and thank you for joining us to discuss our second quarter earnings. As you saw in our release this morning, we delivered solid results for the quarter against a backdrop of continuing disruptions in auto production. We either met or were at the high end of the range for most key financial metrics in the quarter. In addition to the quarterly metrics, we delivered very strong bookings in the first half of the year, up 53% from the same period in the prior year. We see a strong pipeline of potential bookings for the second half of the year, including several competitive takeaway opportunities. I'm especially pleased with our performance, since every day we see news about the market conditions playing a major role in our industry. Semiconductor shortages, factory and city shutdowns due to COVID-19 and the impact from the war in the Ukraine all continue to contribute to challenges in auto production. We are carefully managing the business through these headwinds and despite the challenges, we remain confident in our full year guidance. Before we dig into our performance and outlook, I want to welcome our new executive officers. First, I'm pleased to welcome Jennifer Salinas to CERNS as our new general counsel. We are fortunate to have Jennifer on the CERNS team. She is an experienced and progressive public company legal leader who most recently served as general counsel of the infrastructure solutions group and global head of litigation at Lenovo. In just six weeks, Jennifer has proven to be a tremendous addition to the team. Second, I'm excited to welcome Tom Bowden as our new CFO with the departure of Marc Montagnier. I've known Tom for years, and I'm confident that he will be instrumental to our operation and in helping us execute. Tom has a proven track record of driving change and significant experience leading finance in the software and automotive industries. Many of you recall Tom from his time at Nuance, where he was CFO and then led its business transformation office. He knows our business extremely well, first in his role leading the successful CERN spin from Nuance, and then for the last two and a half years as a very active director on our board. It's my pleasure to welcome Tom in operational role and have him join us today. You will hear from him in a moment, but before I turn it over, I will share a few highlights and observations. At the beginning of the call, I mentioned our strong first half bookings performance. At $448 million, our first half bookings were up 53 percent compared to the same period last year. For additional perspective on the achievement, bookings for our entire fiscal year 2021 were $590 million. Our continued success in accounts and markets is due to our strong competitive position in the automotive industry and our ability to reach beyond traditional automotive markets. Regarding our competitive position, 80% of our first half bookings were with existing customers, including a significant expansion with a marquee North American OEM for its current and next-gen platforms. It also includes, as we previously announced, a significant contract. the largest in our history with a large European OEM that called upon us to help with their expansions program underway in Greater China. Aside from traditional automotive, we have also seen acceleration in newer areas. Of note, we secured several important wins with EV car companies, signing five new contracts, including four in China, the world's hottest EV market. These Chinese EV makers turn to CERN to create a unique AI experience as they expand out of China into other regions. We are the only supplier with the portfolio and language coverage to support their aggressive plans and deliver the experience they want in their vehicles. Another prime example of our expansion is our growing success in trucking. a major European heavy truck supplier recently signed on for our CERN's assistant offering. This new contract represents the fourth customer in this space. Our CERN's ride product continues to attract new two-wheeler customers. This offering combines our core AI innovation with new capabilities such as a group ride function, transforming the two-wheeler experience as ridership grows worldwide. We added four new customers, including some of the top two wheeler manufacturers. And finally, as we mentioned on our last conference call, we want a new fitness customer which falls under our new mobility market opportunities. Collectively, these wins and bookings are a strong sign for the business, with new connected services now comprising more than 40% of our backlog. As a reminder, At the end of fiscal 21, we reported backlog of approximately $2.1 billion. And after such a solid first half of the fiscal year, I'm pleased that the pipeline for the second half remains robust. With our strength in the second quarter and attractive pipeline, we are now focused on the second half and several key priorities. We are deeply focused on accelerating design wins and new bookings momentum across the market we serve by leveraging our strong pipeline. These are the single biggest contributor to our future, and we plan to capitalize on every opportunity. Second, we remain intensely committed to delighting our customers by continuing to deliver high-quality products and implementations on schedule and on budget. We are intently focused on bringing several key customer programs to successful launches, which will position us for future success. And part of this, we expect a significant increase in professional services revenue for the second half of the year, which is another leading indicator for future business potential. Third, we are prioritizing and allocating funds to innovation and areas of our business that generate the highest rates of return. And finally, we will continue advancing our strategy and operational plans in a manner that best positions the company to achieve long-term sustainable growth. And with that, I will now turn the call over to Tom to review the financial results of the quarter.