Cerence Inc.

Good day and thank you for standing by. Welcome to the SAHRN's third quarter 2025 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'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Kate Hickman, Vice President of Corporate Communications and Investor Relations. Please go ahead.

Hello everyone and welcome to SAHRN's third quarter 2025 conference call. I'm Kate Hickman, VP of Corporate Communications and Investor Relations. 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, anticipations, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, objectives, targets and plans are forward-looking statements. SAHRN's 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 and expectations, as described in our SEC filings, including the form 8K with the press release proceeding today's call, our most recent form 10Q and our form 10K filed on November 25th, 2024. 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 investor section of our website. Joining me on today's call are Brian Krzanich, CEO and Tony Rodriguez, CFO. Please note that slides with further context are available in the investor section of our website. Before handing the call over to Brian, I would like to mention that we will be participating in the Raymond James Industrial and Energy Showcase on August 13th and 14th and the Needham Virtual Semiconductor and Semi-Cav Conference on August 20th and 21st. Now onto the call, Brian.

Thank you, Kate. Good afternoon, everyone, and welcome to the Q3 2025, Serent's earnings call. I'm excited to speak with you today. We are very pleased with our strong results this quarter, exceeding the high end of our guidance with revenue of $62.2 million and adjusted a bit of $9 million. Importantly, we generated strong free cash flow of $16.1 million, marking our fifth consecutive quarter of positive free cash flow. And for the full fiscal year, we are raising and narrowing revenue guidance to $244 million to $249 million. This brings the low end of our guidance range above the previous midpoint. And Tony will provide further details on our results later in the call. We continue to make progress on our three key deliverables for 2025, advancing our AI roadmap, growing our business with new and existing customers, and continuing our transformation in cost management. First, we continue to advance the development of Serent's XUI, our next generation hybrid, agentic AI assistant platform. While we previously differentiated between XUI Gen 1 and Gen 2, it's important to understand that XUI is not a static product, but rather a dynamic platform that is continuously evolving with new capabilities and features like multimodal modality and emotion detection, rolling out over a strategic multi-year roadmap. In addition, XUI is designed to scale alongside our OEM customers development cycle, ensuring alignment with their evolving -to-market strategies and technical roadmap. We are firmly on schedule with the major milestones on this roadmap, highlighting our disciplined execution and commitment to delivering long-term, scalable value through AI innovation. And with that, we reach several important milestones for XUI within the quarter, including increasing language availability and advancing the platform's contextual reasoning capabilities. In addition, we continue to expand our partnerships with chip providers like ARM, enabling us to flexibly distribute and share computational nodes between CPUs and GPUs to deliver improved speed and performance on the edge. And we believe this approach makes XUI one of the most powerful and flexible agentic AI platforms in the automotive space. And we're gearing up for another exciting milestone in September when we will showcase XUI at the International Auto Show in Munich. In Q3, we also continue to define and advance our AI agentic strategy within XUI. We're focused on developing our own standalone agents, namely a real-time knowledge agent and an integrated navigation and EV charging agent, as well as empowering OEMs to integrate their own agents. Our CALM family of proprietary language models is critical to this effort, enabling streamlined interoperability by serving as the orchestrator that helps ensure consistent behavior and seamless integration across agents to deliver a seamless user experience. And we believe that the flexibility and openness of our architecture, alongside our unmatched automotive expertise, continue to be differentiators for Serence, especially as OEMs navigate the complexity and ambiguity of the current market while still looking for ways to improve the user experience in their vehicles. And we believe OEMs continue to choose Serence and are excited by XUI for three main reasons. One, our deep automotive expertise, which allows us to quickly and efficiently integrate into the OEMs hardware to access vehicle data and manage vehicle functions. There are up to thousands of automotive-specific operations and commands, along with complex hardware and software, that require intelligent integration to function. Two, our open agnostic architecture and business model. Technology is evolving rapidly, making it difficult for OEMs to predict the future. At the same time, their customers are expecting LLM-based solutions in their vehicles today. This puts automakers in a difficult position to having to make decisions today without knowing what the future will hold. This is a tailwind for Serence. As we offer the architectural and operational flexibility and domain expertise that can help them bridge this gap, enabling OEMs to bring LLM-powered capabilities to customers today and in the future, while also maintaining ownership over their brand experience and data. And third, our team. We believe we have the best in the industry working at Serence AI, and the majority of our team have long relationships with our automaker customers. This makes us easy to work with, as we know the ins and outs of how our customers work. Now as a result, we continue to see strong customer interest in XUI. In Fiscal Q3, we signed a deal within the Volkswagen Group for one of its brands to have XUI as the basis of its next gen system. We also expanded our work with JLR, bringing additional generative AI capabilities to their current platform, as we work in parallel to build their future in-car experience based on XUI. And importantly, we're continuing to see an increased PPU with these deals, and we continue to have a robust pipeline of ongoing customer interest, with a steady stream of proof of concept programs across North America, German, Japanese, and Chinese OEMs. Continuing on our deliverables for 2025, the second is to further grow our business with new and existing customers. We have a strong global momentum with our customers, including new design wins with Dahatsu and Hyundai, as well as program extensions and renewals with Great Wall Motors and GM. Six major customer programs started production this quarter, including a BYD program for outside of China that spans 14 languages, illustrating that Chinese OEMs continue to look at CERNs to support their global expansion. The previously announced generative AI program with SMART, as well as programs with Audi, Geely, Mahindra, Nissan, and PSA also went live within the fiscal Q3. Our commitment to partnering and supporting our customers is also being recognized. We received formal letters and appreciation of our collaboration from two major customers in China, and we signed a new professional services agreement with Mercedes-Benz. Our work with Mercedes-Benz signals our ability to deliver core foundational technology in coexistence with big tech and OEMs, evolving agentic AI strategies as evidenced by our work on the latest generation of MBUX that first rolled out in the new electric CLA. We continue our efforts outside of automotive as well, with deep focus on identifying new verticals where we think we have a solid value proposition and can win. We're being careful to understand these markets and the existing players within them, and we're working with vertical partners to help us with -to-market technology. This process, along with executing -of-concept programs, ensures we don't over-invest before we know we have a good product and a market. For example, we have developed a call center agent and are working to identify a -to-market partner for this offer. At this time, the agent is focused on service-related customer interactions in the car, where we can use our vast car knowledge and already ingested vehicle data to support incoming calls and requests. But we could see this solution being applied across a myriad of industries. We also formally announced our partnership with LG, which is leveraging our cloud, neural, and edge -to-speech to power voice interaction across its global television lineup, spanning 65 voices and languages across tens of millions of households. Seren's TTS enables LG TVs to quickly respond to user inquiries via natural spoken words, creating a more natural, human-like user experience and simplifying users' interactions as they search for content and programming. So for example, the user could say, find me movies with Tom Cruise, and the TV can respond out loud while displaying options on the screen, saying something like, you must like Tom Cruise. I looked up some of his movies. Do any of them interest you? Beyond the clear user experience benefits, Seren's TTS also enables LG to meet increasing accessibility requirements worldwide by ensuring that its television can be easily operated by people of all abilities. As a reminder, we believe the impact of our work to expand beyond automotive will be seen in our revenue and profitability in late fiscal 2026 and beyond. The third key deliverable for 2025 is to continue our transformation and cost management. As you can see from our continued strong cash performance, we are seeing the real benefits from this work, and it is being delivered to the bottom line for our shareholders. We continue to identify opportunities for further cost savings. Importantly, as we stated in our last earnings call, we did not see meaningful impact from tariffs on this quarter's results. For fiscal Q4, and therefore for fiscal 2025, we believe the impacts will remain limited. However, it's important to note that the situation remains fluid and may evolve over the remainder of the year. We are seeing third-party projections of vehicle volumes down approximately .5% for Q4, and we're seeing some programs continue to push out and be delayed. With this in mind, we're working cooperatively with our customers to find ways to optimize our partnership to best support them while also maintaining favorable conditions for tariffs. Lastly, we have a long history of investing in our technology, and we have and will continue to defend our strong IP. We want those who are infringing our intellectual property to know that we're serious about this effort. We have recently filed actions against Sony and TCL for their television's infringement of our voice technology patent. In conclusion, we're proud of what our team has accomplished this quarter, and are encouraged by our results and our ongoing opportunities. We believe that we remain well positioned to support our customers and differentiate by our combination of technology and innovation, our diverse and expansive customer base, and our deep automotive expertise. Our forecast for fiscal Q4 and 2025 demonstrates the strength of our products and the great work we've done to drive financial returns for our shareholders. With that, I'll turn it over to Tony.