Cerence Inc.

Good day, and welcome to the CERN's Q4 2023 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Rich Gerganian, Senior Vice President of Investor Relations. You may begin.

Thank you. Welcome to CERN's fourth quarter and full 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, strategy, goals, targets, and plans should be considered to be forward-looking statements. CERNS makes no representations to update those statements after today. These statements are subject to 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 and our Form 10Q filed on August 8, 2023, and our most recent Form 10K. 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 the website. Joining me on today's call are Stefan Ortmans, CEO of CERNS, Tom Bowden, CFO of CERNS, and Neal Sharns, our Chief Product Officer. 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 will be present at the Wells Fargo 7th Annual TMT Conference tomorrow, November 28th, the UBS Industrial Summit on November 29th, and the Raymond James TMT and Consumer Conference on December 5th. Now on to the call. Stefan?

Thank you, Rich. Welcome, everyone, and thank you for joining us to discuss CERN's fourth quarter full fiscal year results, guidance for fiscal 24, and the update to our multi-year targets. Before I review the highlights of the fourth quarter and fiscal year, let me start by saying how excited I am about the future of CIRIN. We remain well positioned to benefit from the execution of our strategy to build an immersive cabin experience. And these efforts are only enhanced by the rapid advancement and application of AI within our leading edge solutions. We continue to build out innovative new capabilities based on advanced automotive, great large language models and generative AI. We are already seeing a high level of interest and traction across our OEMs regarding these initiatives. We have had some incredibly strong additions to the leadership team over the last year. You met Iqbal Arshad on our last earnings call, who joined us in May as our Chief Technology Officer. and most recently, Christian Menz, joining our team from Amazon as our Chief Revenue Officer. Iqbal and Christian work in close collaboration with Neel Shans, our Chief Product Officer. You will hear from him in a few minutes. We now have an extremely strong management team to guide the company forward, especially as generative AI and large language models accelerate transformation across transportation and beyond. No company is better positioned to prepare but trusted concerns to guide and support automakers and mobility OEMs as they navigate the best path to providing their customers with an immersive, intuitive in-cabin experience. Building off of our destination next strategy that we shared last year's investors day, we are deeply focused on leveraging our state of the art AI technology in two ways. First, Enhancing our current software platform with products that enable OEMs to quickly, easily, and cost-efficiently deploy new AI-driven applications to their drivers via over-the-air updates. And second, by creating a unique user experience with cutting-edge automotive-certified large language models. You will hear more from Nils on that in a moment. Due to the significant shift in our industry, we see further opportunities to position ourselves for growth. Therefore, we have slightly pivoted our strategy over the short term to capitalize on these exciting industry trends. While this opportunistic evolution of our strategy has an impact on targeted revenue for some of the outer years in our multi-year plan, our long-term performance targets remain unchanged. We believe that our focus moving forward will help us to accelerate the realization of our vision and to deliver on our performance targets of achieving double-digit revenue growth and approximately 30% adjusted EBITDA margins starting in fiscal 26. With that, I would like to point out some of the highlights from Q4 and the full fiscal year. In Q4, we delivered solid results with revenue of approximately 81 million, well above the high end of our guidance. Our core auto business delivered strong results, with our global auto penetration staying strong at 54% on a trading 12-month basis, which is a testament to our significant value add. Our innovation and strong capabilities continue to translate into significant new business. We secured several strategic wins during the quarter, including three in automotive and another in the two-wheeler space. One of the automotive wins was to support the global expansion of a major Chinese OEM, a continuing trend that we have benefited from, given the extensive language needs required at OEMs and the new markets. You may recall that on our Q3 conference call, our CTO, Iqbal Achad, shared with you our strategy for incorporating the latest developments in generative AI and large language models into our current product offerings. This has been extremely well received by our customers, leading us to deliver more than 15 proof-of-concept programs globally during Q4. On today's call, Niels, our Chief Product Officer, will provide some insight on how innovation in our current product lineup is expected to serve as a foundation for our future product vision and strategy. We have already shared our plans with select customers. and I'm very excited by the extremely promising feedback. I hope you will be able to visit our booth at CES to witness the new products in action. Moving on to review the full fiscal year, I'm very pleased to say that we delivered on our commitments for FY23, including revenue and all key profitability metrics we provided last November. Importantly, we remain committed to a strong focus on operational excellence. In FY23, we had 14 strategic wins. These wins come from across the globe and included five competitive win bags from both niche and consumer tech competitors. Our core production assistant had nine design wins during the year, including the first win for a Chinese OEM's domestic program. For one of these customers, we were able to achieve start of production in just four months. Overall, we hit start of production for more than 17 platforms that utilize our latest solutions. We also continue to make good progress in adjacent transportation markets, winning two more two-wheeler customers during the year for a total of nine, including some of the most recognizable names in the market. It's important to note that we have won every two-wheeler opportunity that we have pitched against both small and consumer tech competitors. We had our first start of production with five previously one-two wheeler customers and expect those revenues to begin ramping in fiscal year 24. We have also started to build a pipeline for our non-transportation business, also known as AIoT, with six design wins, two in North America and four in Asia Pacific. You may recall we are currently limited to what technologies we can market outside of transportation because of the field of use restriction we have with Nuance, now Microsoft. We are in the last year of this agreement and come next October, we will be able to freely take our scalable AI technology stack to any market where we think we can provide value. As we previously discussed, we entered FY23 knowing that from a revenue and profitability perspective, it was going to be a transition year. Overall, as a team, we are very pleased with our progress, and as we look forward, we are very excited about our expected near and long-term future success. Before Tom reviews the financial details of our performance, we wanted to share how we are approaching the market from a product perspective, especially in light of the market dynamics and demand for AI-driven solutions. At its core, there are three pillars that are key to our strategy. The first is providing our customers with a tailor-made solution. Second, the immersive in-cabin experience will continue to grow in importance in the buying decision of the consumer. Therefore, creating a unique branded experience is a key focus for our OEMs. The third pillar is advancing natural human-like interaction. People will use a system if it is easy, intuitive, and responsive. Our deep vertical expertise in the automotive industry and extensive set of data in combination with large language models and generative AI technologies are the cornerstones of our OEM-branded offering. With that, I'm pleased to turn it over to Niels Schantz, our Chief Product Officer and former Head of User Experience for Mercedes, to share a bit more about our product plans and technology vision. Niels, please.