Cerence(US:CRNC)2021-05-10 19:37Financial Performance - Cerence achieved record revenue of $98.7 million in Q2 2021, representing a 14% year-over-year growth, driven by strong growth in license and connected services product lines, both up approximately 20% year-over-year [10][31] - Non-GAAP gross margin was reported at 77%, with adjusted EBITDA of approximately $39 million, reflecting a 40% margin, and non-GAAP EPS of $0.69 [11][32] - The company generated over $16 million in cash flow from operations, maintaining a strong balance sheet with total cash and marketable securities at $137 million [32] Business Line Performance - Total license product revenue increased by 22% year-over-year, while variable license revenue grew by 32% due to a recovery in auto production [33] - Connected services revenue grew by 18% year-over-year, with new connected services revenue (excluding legacy business) expanding by 51% year-over-year [34] Market Performance - The company reported a total of $293 million in first half bookings, approximately flat compared to the second half of fiscal 2020, with expectations for a stronger second half [12][14] - Cerence is building its presence in the Chinese automotive market, historically its least penetrated geography, with significant customer wins including EV start-ups like Xpeng and Nio [23][24] Company Strategy and Industry Competition - Cerence aims to enhance its technology offerings by integrating voice AI with vision AI for improved safety and driver experience [46][47] - The company is focused on expanding its cloud services and increasing revenue per car, particularly in North America and Europe, while also improving penetration in China [65] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the company's performance and growth opportunities, despite potential short-term impacts from semiconductor shortages [38][39] - The long-term vision includes playing a key role in driver AI, cabin AI, and road AI, with a commitment to innovation and growth [30] Other Important Information - Cerence announced a partnership with P97 networks for its Cerence Pay application, enhancing its market position [16] - The company received multiple Project Voice Awards, recognizing its achievements in voice and conversational AI [20] Q&A Session Summary Question: Booking details for new applications - The $30 million in bookings came from two customers, with strong momentum and additional OEMs signing up for new products [40][41] Question: Sustaining high booking levels - Management aims to meet or exceed last year's bookings number, with a strong pipeline supporting this goal [43][44] Question: Semiconductor impact on Q3 - The company expects a modest impact from semiconductor shortages, with 35% to 40% of business directly affected by auto production [35][51] Question: Two-wheeler market opportunity - The two-wheeler market presents a significant opportunity, with approximately 60 million to 80 million units shipped annually, similar in size to the automotive market [57] Question: Electric vehicle market activity - The EV market is a key growth area, with management focused on winning accounts despite current low volumes [61] Question: Variable revenue growth dynamics - Variable revenue growth is outperforming industry volume growth, indicating strong demand for embedded licensing [62] Question: Average contract duration increase - The increase in average contract duration is driven by more cloud contracts, which tend to be longer [88][89] Question: Cost action benefits in the quarter - The company is adding back expenses as planned, with a focus on R&D investments [92][93] Question: RFP landscape and competition - The competitive landscape remains similar, with ongoing discussions about integrating voice AI with vision AI for enhanced safety [96][99]