Cerence Inc.

Good day and thank you for standing by. Welcome to the SARINS Q1 2023 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 will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rich Yerganian, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Welcome to CERNS' first quarter fiscal year 2023 conference call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Service makes no representations to update those statements after today. These statements are subject to risks and uncertainties as described in our SEC filings, including the Form 8K with the press release preceding today's call, our Form 10Q to be filed today, and then our Form 10K filed on November 29th, 2022. 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. The press release is available in the IR section of our website. Joining me on today's call are Stefan Orbins, CEO of Serence, and Tom Bowden, CFO of Serence. 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 that we will be presenting at the virtual Baird 2023 Vehicle Technology and Mobility Conference on February 15th in an early March at the Morgan Stanley Technology Conference. Now on to the call.

Stefan. Thank you, Rich. Welcome, everyone, and thank you for joining us to discuss our first quarter earnings. I'm pleased to report we had a strong start to the fiscal year driven by our core auto business. Each of the key financial metrics provided in our guidance came in above the high end of the range. Tom will share the details with you shortly. At our investor day in November, we laid out our strategy for long-term sustainable growth for CERN, what we are calling Destination Next. We described the evolution of our technology and the role it plays in the car of the future an immersive companion that goes beyond conversational ai extending to all aspects of the user experience inside the cabin for both driver and passengers and even outside the car we also provided our long-term target models which reflect not only the increasing level of adoption of current of our current technology with programs already awarded, but also the future adoption of a greater suite of technology that CERNS will bring to the market. This was an important event that allows us to share with all of you the excitement we have for the future of CERNS. In the near term, the first quarter showed continued success across customers and product innovation. Working with our customers, we delivered 47 SOPs, start of production, in the quarter. including 18 initial program launches. We signed two competitive win-back contracts in the outer space, one in Europe, one in China. These are significant because both represent takeaways from consumer tech and validate our continued competitive edge. Our experience in large language models combined with our deep mobility experience and generative AI expertise is vital to drive innovation and expand our position as a category leader. In addition to various competitive design wins, we added two new logo wins, one in Europe for auto and one in China for two wheelers. The two wheeler win now brings the total of two wheeler customers to seven, and we expect that number will be even higher by the end of the fiscal year. Two wheeled vehicles continue to be an important adjacency providing a growth area for CERNs and our destination next strategy. While we are seeing slow improvements, the macro environment remains a challenge. Semiconductor shortages are still impacting auto production, although there has been some improvements of the supply. We are hopeful that the slow but improving trend for access to semiconductors continues. These shortages have led to an up demand for autos, where in many areas inventories remain low. There is a concern about a potential global recession in 2023, but that does not appear to have had any impact on auto production at this point. The latest forecast from IHS aligned to our fiscal year is for 2.5% growth year over year. After our strong first quarter, we are slightly raising the lower end of our full year guidance. We remain confident that we can achieve the goals we set for the fiscal year and continue to deliver predictable and medium and long-term sustainable growth. In addition to the business highlights for the quarter, I would like to also share with you some key innovation highlights across our products. With our razor sharp focus on innovation, we have a distinguished competitive advantage. It is evident that our customers rely on us to jointly create unique mobility experiences for their customers. As the automotive industry transitions to electric vehicles, these experiences will become an increasingly important aspect of differentiation for our customers. Continued innovation is key to our customers' visions and to our future growth, and the strong momentum for our current products and technologies provides a solid foundation as we extend our AI expertise to other areas. At the core of our current product portfolio is CERN's Assistant 2.0, the foundation of our co-pilot offering. This product is a perfect example of what we refer to as scalable AI, where we can take a product developed for the auto industry and with minimal engineering apply it to an adjacent transportation market such as two wheelers. As you may recall, CERN's co-pilot runs directly on a vehicle's head unit with advanced AI deeply integrated with car sensors and data to understand complex situations both inside the vehicle and around it, while securely integrating edge technology with cloud services to make driving more intuitive, connected, and enjoyable. It's clear that mobility OEMs see the advantages CERN's co-pilot brings to their vehicles. ASQ1 saw four automotive design wins from customers in Europe and China. With CERNS Assistant 2.0 as its foundation, CERNS Ride, our offering specific to the two-wheeler market, was awarded three design wins in the quarter, including a key win for a major Japanese manufacturer, where we had to compete against both consumer tech and niche competitors. CERNS Ride offers unique features like providing the rider with distraction-free navigation, route planning, and riding records. enabling a safer, more enjoyable experience. By using their voice, riders can now navigate, listen to music and other media, adjust settings, and even control their smart home devices, all without taking the hands of the handlebars or their eyes off the road. Further expanding the reach of our technology, CERN's Link is a comprehensive solution that bridges the technology gap between connected and not connected cars by providing the ability to capture vehicle diagnostic sensors and telemetry data as well as car geolocation and other useful information that is delivered to the end user through a mobile app with a rich user interface. With CERN's connected vehicle digital twin as its foundation, CERN's link is able to apply cloud-based intelligence on this data to enhance driver safety, security, comfort, and convenience. When we first introduced this product last September, we had already secured an important customer win in India, which is already contributing to revenue for the company. In Q1, we won our second customer, also in India, demonstrating continued adoption for this new solution. These key wins for CERN Slink and CERN Strike indicate continued adoption in adjacent and expansion markets, proving that we are focused on the right areas that can support continuous long-term growth. And lastly, during the quarter, we had a customer launch, a significant expansion of capabilities leveraging our car knowledge product. The innovation is an upgrade to the OEM's existing solution and makes accessing digital owner's manual information and remote vehicle controls as easy as possible, delivering additional value for their drivers. Customers can chat with the assistant both in the car and via Facebook Messenger from anywhere, asking vehicle-specific questions or remotely starting, locking, or unlocking their vehicle. The system leverages generative AI to understand more voice commands and provide more engaging responses. I'm very excited about our current lineup of products and our growth in important adjacent markets. but even more so for the products yet to come under the leadership of Chief Technology Officer Fatih Kadpal and Chief Proc Officer Nils Schanz. This slide may look familiar to you from our investor days, but we feel it's important to revisit to continue to ground ourselves in all what we have accomplished in the past 12 months and where our focus is moving forward. We have the customers, the innovative product and technology, and the strong competitive position to deliver long-term sustainable growth. Now it is all about execution. As you heard from me in November, and as remains true today, our goal is to deliver on what we have promised to our customers and investors. We have had a strong start to the fiscal year, and we are focused on keeping the momentum going. Before I hand the call over to Tom to review our Q1 results and Q2 guidance in detail, I want to reinforce the key points of our Destination Next strategy. Destination Next applies to all aspects of our business. It shapes our product strategy as we innovate to deliver a truly immersive companion experience in the car. It positions us as a key partner to our customers as they seek to create unique branded experiences. It doubles our self-addressable market over the next seven years, providing excellent opportunities for growth once we get past the FY23 transition year. And it puts the company on a path to deliver strong growth, profitability, and cash generation over the long term. The entire company is behind our destination next strategy, and I'm excited to keep you informed as you continue to make progress towards our long-term goals. I will now turn it over to Tom.