Cerence Inc. (NASDAQ:CRNC) Q3 2023 Earnings Call Transcript

Operator: Our next question comes from the line of Daniel, I’m sorry, I can’t pronounce your last name.

Unidentified Analyst: Hey, this is Daniel on for Jeff, Craig-Hallum. Just on the connected units really strong performance, I see it up 50% year-over-year, the number of units. Just wondering, would you view that sort of as lumpy numbers or indicative really of a larger trend there in terms of the strength of connected? And in terms of if that is more of a larger trend, more success than we’ve been seeing in a while? Do you view that as a change in buyer behavior? Is that the product sort of reaching a critical mass on the capabilities is how would you see that momentum.

Stefan Ortmanns: So let me start for us and then I will hand it over to Tom. So overall, we reported over the last three, four quarters, a couple of design wins, and win back also on connected services, and again, this is our foundation. And also across the globe, I think we have clearly improved the quality for connected services. And also, we are in discussion for more because we have, as I said, also in the last call this order opportunities. And we’re driving quite a lot of new innovation, especially on the connected side. And clearly this our advantage also in various benchmarks was way across the globe. Tom?

Tom Beaudoin: Yes, I mean, as we said, I mean connected as a great opportunity for us because it sits on top of our embedded and it provides some of the key elements of our destination next and immersive cabin, you do have to adjust a little bit the previous quarter where we had a $700,000 true-up from a customer that underreported, but even when you adjust to that you’re right, we’re starting to see growth there. And that’s Stefan said that some of these programs going live. We’ve also talked about over the last few quarters that there were some older contracts that were coming to the end of their amortization schedule, and they weren’t up for renewals, they’re just older programs that’s separate from the legacy one that we split out separate.

And for the most part, we probably replaced newer technologies on newer platforms going forward. So as those continue to wind down that kind of tailwind gets minimized, and the effect of the newer platforms start to take effect. So, we’re pretty excited about the connected opportunities, and a lot of it plays to what Iqbal was talking about, around the enhancements there, that are being made to the products.

Unidentified Analyst: Thanks for that. And then just one follow up for me on the — actually jumping back to the press release that you guys had out in July talking about working with a partner on IoT use cases, can you just refresh us reiterate what the nature of the agreement with nuances what the freedom is to enter adjacencies? And is this just sort of tech development? Or is there an ability to really go in actually to customers or where we’re at in that kind of timetable?

Stefan Ortmanns: So also here, I think, no, we have a restriction here. The field of use restriction, was [inaudible] Microsoft, and this FOU expires in a year from now, October ‘24. And as you can imagine, we already planning here are the areas where we can go in. There was also recently a press release from us, that we have also optimized the embedded AI stack for new devices. And we see huge potential for us also in the future beyond ‘24.