Cerence Inc.

Good morning, and thank you for standing by. Welcome to the CERN's second quarter 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 11 on your telephone. You will then hear an automated message advising you that your hand is raised. To withdraw your question, simply press star 11 again. As a reminder, today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Rich Yerganian, Senior Vice President of Investor Relations. Rich, please go ahead.

Thank you, Eric. Welcome to CERNS' second quarter fiscal year 2023 conference call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Any statements that are not statements of historical fact, including statements related to our expectations, estimates, assumptions, goals, targets, and plans should be considered to be forward looking statements. Serence makes no representations to update those statements after today. These statements are subject to the risks and uncertainties, which may cause actual results to differ materially from such statements as described in our SEC filings, including the Form 8K with the press release preceding today's call, our Form 10Q filed on May 9, 2023, and our Form 10K filed on November 29, 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 Ortmans, CEO of Serence, and Tom Bowden, CFO of Serence. As a reminder, the only authorized spokespeople for the company are Stefan, Tom, and me. Before handing the call over to Stefan, I would like to mention that we have seven investor conferences in the next few weeks. Please refer to the upcoming events section of our IR website for specific dates and conference information. Now on to the call. Stefan?

Thank you, Rich. Welcome, everyone, and thank you for joining us to discuss our second quarter earnings. We delivered solid results with revenue just over 68 million, coming in above the high end of our guidance. In addition, our strong focus on operational excellence contributed to most profitability metrics performing better than expected. This includes generating free cash flow of over 5 million in the quarter. Our core auto business continues to perform well, with our global auto penetration rising to 53%. That means that 53% of total new global light vehicle production includes some level of technology from SIRENS. Tom will provide the details of our performance in a few minutes. We continue to maintain a strong competitive position against both niche players and consumer tech. Bookings for the first half of the year included multiple strategic wins. With a solid pipeline of identified opportunities, we expect a strong second half of bookings. Cross-currents remain in the macroeconomic environment. While semiconductor shortages for the auto industry are incrementally better, the uncertain effects of rising interest rates and a slowing global economy on auto demand remain in place. offsetting any likelihood for a near-term significant ramp of production. Aligned with our fiscal year, IHS is forecasting 4% growth. This is slightly better than our original assumption of 3%. Accordingly, we have raised the low end of the range for our full fiscal year revenue guidance from 275 million to 280 million. While it is a recent event and not part of our Q2 results, I'm excited to announce Iqbal Arshad as our new Chief Technology Officer. Iqbal will lead CERN's global technology and platform organization, responsible for providing leadership for our technology vision, building innovative user experiences, and accelerating our roadmap. Iqbal's impressive career in technology leadership includes senior technology engineering, and product development roles at Motorola, Google, and Lenovo. He brings a wealth of experience, having shaped some of the most exciting technological developments of the past decade, including industry-first innovations like the original Droid smartphone, Google's first Android tablet, the first mobile AI voice assistant, and the first Android smartwatch. Iqbal has deep expertise across AI, IoT, software and mobile technologies. That will be immensely valuable, not just for our automotive and transportation customers, but also as we look to potential expansion opportunities outside of transportation. I am very excited to have Iqbal as part of our executive leadership team to help us achieve our destination next innovation goals Working closely with Neel Shant, our Chief Product Officer, I'm very confident that Iqbal will be a critical leader as you continue to spearhead the industry in applying AI in innovative ways for the transportation market. Moving on to bookings, which for the first half were 263 million. This is up 11% from the second half of fiscal 22. Additionally, while the timing of when bookings occur is always difficult to predict, the pipeline of sales opportunities for the second half looks strong. In the first half, we had seven very important strategic wins, including three win-backs, two from customer tech companies, and one from a niche competitor. In Q2, a key win back was for connected services for a global luxury brand for the North America region. This win further validates the competitive strength of our solutions, building off the success with this customer in other regions. As an added benefit, because we are already delivering these cloud-based capabilities for this customer in other regions, the implementation of our solution for North America is shorter. They will be switching over to our solution in North America later this calendar year. One of the other strategic wins during the first half was with the largest car maker in China to support its global expansion. We will provide CERN's assistance capabilities in more than a dozen languages. This is consistent with other China OEMs turning to CERN solutions as they look to expand their business globally. demonstrating our unique leadership in voice AI and the broad portfolio of languages we support. The other strategic wins were in Europe, India and the US. These strategic wins reinforce the strong competitive position we hold and the continued superiority of our technology and solutions. With AI at the core of our product innovation, we remain sharply focused on leveraging new technology to bring innovative new products to the transportation and AIoT markets. One such example is recent enhancements we made to CERN's car knowledge, a valuable product for automakers and their drivers that enables real-time credible intelligence about all aspects of the car. Most recently, we have leveraged CERN's developed generative AI and large language models to enhance car knowledge, demonstrating our continued ability to leverage the latest in AI innovation to further improve the in-car experience. With this enhanced version, drivers can ask questions about the car's features, vehicle status, and more. Car knowledge leveraged data from the car sensor combined with user manual data to provide specific tailored answers. Because the responses are sourced purely from OEM-provided data and are tailored to the specific car, the driver can be confident the results are accurate. CERN's car knowledge is becoming very popular with OEMs with a strong pipeline for the enhanced version. During the quarter, we also released our newest version of CERN's Assistant, the foundational technology for the immersive companion experience. This latest version includes new features like Just Talk, Emotional TTS, Otter capabilities and Apple Music integration. Just Talk is just as it sounds. Instead of pressing a button on the steering wheel or saying hi Sirens, the driver speaks simply what they want to do and the car will understand if it is a request for the assistant to respond to or whether the person was talking to another person in the car. No more need for a wake-up call. Just talk to your car like you would to another individual. Truly groundbreaking technology. This technology is currently being integrated in the new Mercedes-Benz platform, shipping this summer in the E-Class. The first two two-wheeler customers started production in Q2 with our CERN Thrive product, and we expect two more in Q3. At its core, CERN Thrive uses our CERN Assistant technology, but enhanced to provide unique features for the two-wheeler market. These features include applying our audio AI technologies in new ways to account for the open cabin noise environment of a two-wheeler. As you would expect, the noisy environment creates some unique challenges for natural language understanding, but our team has done an amazing job achieving the accuracy levels needed for achieving an enjoyable user experience. During Q2, we continue to enhance several key AI technologies, including our neural network-based emotional text-to-speech product. Using our emotion detection technology, the assistant can address the emotional states of the driver. For example, if a driver is experiencing road rage, the system can respond in a calming voice using the appropriate pitch and inflection accordingly. This is similar for other situations, including fear surprise or fatigue. It is truly amazing to hear how our technology can deliver verbal responses based on the driver's emotional state. We also continue to refine and expand coverage for our emergency vehicle detection technology. There are upwards of 1,500 unique emergency vehicle sounds throughout the world, and we believe we offer the most extensive and accurate coverage. In fact, one of our customers compared our EVD solution to two others and our AI-based technology came out on top. The other significant advancement we made in the quarter was with our voice biometrics capability. We have developed an updated version of this technology. Much like fingerprinting is used for identification, Our voice biometric product can identify unique human characteristics in person's voice that can be used for digitally identifying a person to provide access to systems, devices, or data. In an era where voice is an increasingly popular enabler of many different types of transactions, being able to accurately recognize who is placing an order or making a request is vitally important. On the innovation front, I'm really excited about what our engineering teams have done to elevate our product offering. And I'm equally excited about the new innovations we will be bringing to market under the leadership of Iqbal and Niels. Before I hand the call over to Tom to review our Q2 results and Q3 guidance in detail, I would like to summarize the priorities I've set for the company for the full fiscal year. It is all about operational excellence, which covers all aspects of our business, from meeting and exceeding our customers' expectations, securing a strong second half of bookings, managing the business model, and meeting our full year guidance. The team at Syrens is well aligned and excited about delivering on these goals. I will now turn it over to Tom.