NASDAQ:CRNC Cerence Q4 2024 Earnings Report $9.71 +0.78 (+8.73%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$9.62 -0.09 (-0.88%) As of 04/25/2025 07:55 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Cerence EPS ResultsActual EPS-$0.17Consensus EPS -$0.32Beat/MissBeat by +$0.15One Year Ago EPS-$0.13Cerence Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ACerence Announcement DetailsQuarterQ4 2024Date11/21/2024TimeBefore Market OpensConference Call DateThursday, November 21, 2024Conference Call Time8:30AM ETUpcoming EarningsCerence's Q2 2025 earnings is scheduled for Wednesday, May 7, 2025, with a conference call scheduled at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q2 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Cerence Q4 2024 Earnings Call TranscriptProvided by QuartrNovember 21, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Good day, and welcome to Cerus' 4th Quarter 2024 Earnings Call. At this time, all participants Speaker 100:00:05are in Operator00:00:06a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, this call may be recorded. I would now like to turn the call over to Jason Gold, Investor Relations at Cerence. Please go ahead. Speaker 200:00:31Welcome to Cerence's Q4 of fiscal year 2024 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, beliefs, outlook, strategy, goals, objectives, targets and plans should be considered to be forward looking statements. Cerence 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 8 ks with the press release preceding today's call, our Form 10 ks filed on November 29, 2023, and our most recent Form 10 Q. Speaker 200:01:23In addition, the company may refer to certain non GAAP measures, key performance indicators and pro form a 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 Brian Krzanich, CEO of Cerence and Tony Rodriguez, Interim CFO of Cerence. Please note that the slides with further context are available in the Investors section of our website. Speaker 200:02:00Now on to the call. Brian? Speaker 100:02:04Thank you, Jason, and good morning, everyone, and welcome to the Q4 2024 Cerence earnings call. I'm excited to talk to you this morning as Cerence's new CEO. While Tony will walk you through the details of our Q4 and fiscal year 2024 earnings, I'm very proud of what the organization has delivered for Q4. The top line revenue of $54,800,000 and adjusted EBITDA of negative $1,900,000 both exceeded the high end of our guidance. I couldn't be more proud of what the team has accomplished and the head start this gives us for 2025. Speaker 100:02:45Before I give you our forecast for 2025, I'd like to spend a few minutes now to talk to you about my vision for CEREX, which also gives you insight into why I chose to come to the company. So Cerus is at the forefront of the revolution that is occurring in the automotive industry as AI and specifically generative AI and large language models grow in use and importance. Cerence already has a large footprint in the automotive space with a broad range of products that bring voice assistance to the vehicle, including 28 design wins in fiscal year 2024. Our vision moving forward is that every product in our solution portfolio will have artificial intelligence and specifically large language models built into them to bring simplicity and convenience to in car interaction. And this is not a transition that will happen far out in the future, but rather one that has already begun in earnest. Speaker 100:03:48This is evidenced by the strong momentum we've seen for our generative AI solutions with 10 customer wins and 6 program launches for these products in fiscal year 2024, including Volkswagen, Renault, Skoda, Audi and Smart. And importantly, more Gen AI programs shipped than any of our competitors and key wins across our solution portfolio with automakers like BMW, Great Wall Motor and Zeekr. It's worth mentioning that in these deals we've signed so far, our generative AI solutions are commanding unit economics that meaningfully exceed the rest of our portfolio, fueling PPU growth on the cloud side. These first deployments also show an increase in overall usage and adoption and this is based on a small sample size and short timeframe, but we are encouraged by these results. This quarter, we also signed our 1st customer deal for the 1st generation of our new AI platform, which is based on our proprietary family of language models. Speaker 100:04:58By the Q4 of this year, we will launch the 2nd generation of this platform, which leverages large language models across the entire solution and allows us to greatly simplify and speed up how we bring new products to the market. In fact, just last week, we introduced Calm Edge, which builds on our strength in embedded solutions as the first LLM running in automotive on the edge, allowing for advanced and simplified voice interaction with the vehicle even when not connected. We did this in collaboration with Microsoft. We selected Cirrus as their preferred automotive industry partner as they announced their adapted AI models ahead of this week's Ignite conference. Microsoft is partnering with Cerus and other industry leaders like Bayer and Siemens to create fine tune models pre trained using industry specific data to address customers' top use cases as was highlighted in the Microsoft CEO Satya Nadella's keynote earlier this week in their Ignite conference. Speaker 100:06:04The implementation of LLMs is an important transition for voice in the vehicle and I want to spend a moment explaining why. In most cars today, in order to interact with the various systems in the vehicle, you have to use very specific commands. For example, to enter an address, you can use navigation or to operate systems within the vehicle like air conditioning or windows. With the implementation of LLMs, we removed the need for script for interaction and the system's ability to understand complex and multi step commands in natural human language becomes virtually limitless. The vehicle now becomes an assistant that saves you time and simplifies your life. Speaker 100:06:48In addition to our deep technical expertise, the world's leading automakers and Tier 1 suppliers love to work with CEREX because we're uniquely neutral and highly specialized supplier, living and breathing automotive and speaking the same language as our customers unlike our competitors. As auto OEMs faced a threat of commoditization much like what was seen in the mobile handset industry years ago, they are becoming increasingly focused on the in cabin experience as a differentiator from their competitors as well as the main touch point between their drivers and their brand. And they're also choosing to partner with Cairns to drive their in car experiences forward. Now looking at fiscal year 2025, we're issuing initial fiscal year 2025 revenue guidance of $236,000,000 to $247,000,000 with related adjusted EBITDA in the range of $15,000,000 to 26,000,000 dollars and free cash flow in the range of $20,000,000 to $30,000,000 And this anticipates a return to profitability that represents both our strong market position, partnerships with vehicle OEMs and the hard work the organization has already done in terms of cost reductions, which Tony will cover in detail in a few minutes. For fiscal year 2025, we will transition from doing broad cost cutting to simplifying and streamlining our organization and our structure to continue taking cost and spending out of Cerence. Speaker 100:08:24It's been my observation that Cerence has been burdened by the operational and business process and complexities that resulted from the company's 2019 spin from Nuance. With a new set of eyes, I believe that I can provide a perspective to find more efficient and productive ways to accomplish the same task, while also finding opportunities to vastly improve our speed to market and get exceptional products into the hands of our customers at a more rapid and competitive pace. This is my first earnings call as CEO of CERES and I hope you see the vision and potential of the company that I do. And that led me to joining the company. Cerence is bringing AI and large language model capabilities to the vehicle now, not just in the future. Speaker 100:09:12Fiscal year 2025 will be a year of execution, streamlining the company and bringing these industry leading products to our partners in the market. Our fiscal year 2025 plan is to return to Cerence to profitability, a critical step to fuel the future growth. Cerence is a strong company with an exciting path ahead. And it's now my job to turn the strong company into a great business. With that, I'll turn it over to Tony to go through the details of our quarterly numbers, our guidance and our restructuring activities. Speaker 100:09:50Tony? Speaker 300:09:53Thanks, Brian. Today, I'll be covering 3 major topics. First, I'll review our Q4 and full year 2024 results. Then I'll go into some details of our restructuring. Lastly, I'll provide some guidance for fiscal Q1 and the full fiscal year of 2025. Speaker 300:10:12Let's get into the Q4 and full year 2024 figures. At the top, we achieved Q4 revenue of $54,800,000 which exceeded our high end of our guidance range of $50,000,000 Revenue ahead of guidance this quarter was aided by approximately $5,000,000 in license royalty true ups for 2 of our OEM customers. Our customers self report royalty volumes that approximate their auto shipments that include our technology each quarter and periodically true up to actual. This is not uncommon and we will call this out whenever we believe it is meaningful to the numbers. Our gross margin of 64% in Q4 also exceeded our high end of our guidance of 60%. Speaker 300:10:57Approximately 4 points of this were due to the drop through benefit of the noted revenue true ups. Moving down our income statement, our adjusted EBITDA loss of $1,900,000 well exceeded our guidance of a loss of $13,000,000 This was driven by the improved gross profit from the higher than expected revenue and decreased operating expenses from the accelerated restructuring efforts during the quarter of approximately $6,000,000 As compared to prior year, Q4 revenue declined by $26,000,000 or 32%. This highlights some of the noise in our P and L that makes year over year comparison somewhat difficult. The 2 biggest drivers of the year over year decline were that in Q4 of last year, we signed $12,800,000 of fixed license revenue during the quarter and had $9,200,000 of revenue associated with the legacy Connected Services contract with Toyota. You may remember that this contract was acquired by Nuance in 2013 and that Toyota decommissioned the solution in Q1 of 2024. Speaker 300:12:07After Q1 of 2025, we expect that the full year over year comparison for our quarterly results will be more meaningful. Our non GAAP operating expenses were $39,500,000 for Q4 compared to $44,500,000 for the same quarter in fiscal 2023. The decrease of $5,000,000 or 11% represents some of the in quarter savings from the Q4 restructuring efforts. We ended the quarter with $130,400,000 of cash and marketable securities, up $4,100,000 versus Q3. Our free cash flow during the quarter was $4,700,000 With Q4 in the books, we landed at full year revenue of $331,500,000 or $244,900,000 excluding the legacy revenue of $86,600,000 Full year adjusted EBITDA was $80,600,000 Adjusting for the impact of the non cash legacy contract, adjusted EBITDA would have been negative $6,000,000 highlighting the importance of the Q4 cost restructuring efforts, which I will now spend a few more minutes discussing. Speaker 300:13:26Last quarter, we mentioned that we identified net savings of approximately $35,000,000 to $40,000,000 We are on track to meet or exceed the upper end of that range. This includes cost reductions across all of our major cost drivers, including headcount and facilities. We are discussing our savings on a net basis because we have identified costs for removal that exceeded this amount, but plan to reinvest a portion of these cost savings back into driving the growth of our next generation products. To help you with your models, the expense base for these net calculations was based on an annual run rate of our non GAAP operating expenses of $189,000,000 as we entered Q4 of this year. Additionally, we reduced certain professional services cost of goods sold by approximately $9,000,000 We took action to implement much, but not all of the cost reduction actions in Q4. Speaker 300:14:25We expect to action the balance by the end of Q1. Accordingly, we did realize some of the P and L benefits associated with the cost reduction efforts in Q4, but expect to see the vast majority of the benefits in our Q1 non GAAP operating expense exit run rate of approximately $39,000,000 per quarter. We identified approximately $16,300,000 in one time costs associated with these actions, split primarily between severance, retention bonuses and consulting fees. We incurred $10,300,000 of total restructuring expenses in Q4 and expect to incur another $6,000,000 in Q1. Our Q4 free cash flow absorbed $7,500,000 of these costs and the guidance I will give for the fiscal 2025 free cash flow will absorb the impact of another $8,800,000 of these one time restructuring costs that we don't expect to incur in future periods. Speaker 300:15:25We also expect some revenue headwinds from these actions, particularly in our professional services business where we have made the decision to reduce staff and refocus our efforts on projects that we expect will drive long term client engagement. We have reduced our focus on one off projects or those that don't we don't see having significant long term potential upside. Our revenue guidance for fiscal 2025 absorbs the headwinds of approximately $5,000,000 to $7,000,000 related to this. As we look at our revenue breakdown and operating metrics, variable license revenue was $25,300,000 down $5,000,000 or 17 percent for the same quarter last year, but up from Q3. As planned, there were no fixed license revenue during this quarter. Speaker 300:16:20Q4 Connected Services revenue without legacy was $12,100,000 up $1,300,000 or 12 percent from $10,800,000 the same quarter last year. And our professional services revenue was down 6% year over year. As a reminder, when we look at total licenses shift, pro form a license royalties is a life an operating measure we use representing the total value of variable licenses shipped in a quarter, including the shipment from fixed licenses where revenue was previously recognized upon contract signing. We refer to these shipments where revenue was recognized in a prior period as fixed license consumption. Our pro form a royalties were $42,200,000 which were flat compared to Q4 of last year and up from $39,600,000 for Q3. Speaker 300:17:17Consumption of our previous fixed license contracts totaled $16,900,000 this quarter, higher than the same quarter last year by 9%. However, because the annual value of fixed contracts has been trending down, over time there will be lower consumption of royalties associated with past fixed contracts and correspondingly that will result in variable license growth in future periods. We continue to expect our consumption run rate to normalize by the end of fiscal year 'twenty 6, at which time new fixed contracts should roughly align with the level of consumption during the year. As we review our key performance indicators this quarter, our penetration of global auto production for the trailing 12 months declined slightly to 52% due primarily to weaker production volumes among our top customers. We shipped approximately 10,600,000 cars with Cerence Technology in the quarter, down 14% year over year, while IHS production for the same period declined 5%. Speaker 300:18:20Quarter over quarter, we were down 11%, while IHS production was also down 3%. The number of cards produced that use our connected services increased 16% on a trailing 12 month basis compared to the same metric a year ago, as some programs that were previously delayed started ramping in production. Total adjusted billings of $220,700,000 adjusted to exclude professional services, prepaid billings and prepaid consumption increased 1 percentage point for the trailing 12 month period this year compared to the previous year. Our 5 year backlog metric is currently approximately $969,000,000 Now turning to our guidance. Currently, the Street consensus for revenue for the full fiscal year 2025 is $234,000,000 and Q1 is 57,000,000 As we go through the guidance, please remember that any 1 quarter can be materially impacted by the level of fixed license revenue signed in the quarter. Speaker 300:19:25And in Q1, we are not forecasting any fixed license revenue. For Q1, we currently expect revenue to be in the range of $47,000,000 to $50,000,000 This absorbs headwinds of approximately $1,000,000 related to the deemphasis of professional service projects I mentioned a moment ago. We currently expect Q1 adjusted EBITDA to be in the range of negative $9,000,000 to negative $6,000,000 and free cash flow to be in the range of negative $4,000,000 to 0. This absorbs the impact of approximately $6,000,000 in one time costs associated with our restructuring. For fiscal year 2025, we currently expect revenue to be in the range of $236,000,000 to $247,000,000 This was headwinds of approximately $5,000,000 to $7,000,000 related to the emphasis of professional service projects, as I mentioned. Speaker 300:20:21We currently expect adjusted EBITDA to be in the range of $15,000,000 to $26,000,000 and expect free cash flow to be in the range of $20,000,000 to $30,000,000 including the cost associated with our restructuring. I'd like to provide some additional factors to help you in understanding our business and how the 2025 model is coming together. At the midpoint of guidance, we are currently planning for $20,000,000 of new fixed licenses in fiscal year 2025. Had we planned for fixed licenses comparable to 2024 of $30,000,000 fiscal year 2025 midpoint revenue guidance would have reflected a 3% growth rate over 2024. We are also planning for very modest growth in our run rate of connected services lines. Speaker 300:21:11As a reminder, our new products are all connected in nature. The way we recognize these new contracts in our financial statements is that when units are shipped, we book them into deferred revenue. Then typically over a period of 12 to 20 quarters, we amortize that revenue onto our income statement. And so as these products begin to gain traction, variable license and connected services billings will increasingly become an indicator of how our business is progressing. As this develops over time, I'll make sure to point out and direct your attention to our leading metrics. Speaker 300:21:48For 2025, we expect variable license and connected services billings to increase by high single digits. Our gross margins for fiscal year 2025 are expected to be in the range of 67% to 69%. Now I'd like to address our convertible notes. As you may be aware, we have $87,500,000 of convertible notes that have gone current and are due in June of 2025. We believe that given our current cash position and positive cash flow expectations for 2025, it is in the best interest to our shareholders to pay down a portion of these notes when due. Speaker 300:22:25However, we also believe that refinancing some of the debt could put us in a better position to execute our long term strategic direction of the company, while allowing us to retain cash reserve and be flexible as we move forward. As such, we are actively looking at alternatives for refinancing a portion of these notes and anticipate having more to report in our next earnings call. Overall, we are pleased with the solid results of Q4. As we begin fiscal year 2025, we believe we are on the right track to continue to show improvement in our financial performance and to strengthen our balance sheet moving forward. I will now return it back to Brian to close our remarks. Speaker 100:23:09Thanks, Tony. In closing, we're happy with and motivated by this quarter's results. We remain focused on execution, business process improvement and cost reduction and advancing our generative AI roadmap. We take our commitments to The Street seriously and we are committed to streamlining our reporting so that investors can understand the trends in the business. We believe in our ability to deliver on our fiscal 2025 guidance and fueling in our growth for fiscal 2020 6 and beyond. Speaker 100:23:42We look forward to continuing to share our progress. We'll now open it up for questions. Operator00:23:50Thank you. Our first question comes from Jeff Van Rhee with Craig Hallum Capital Group. Your line is open. Speaker 400:24:07Hey, guys. Thanks for taking my questions. Good morning. A few for me. I wanted to start on the AI side. Speaker 400:24:13You touched on the economics of AI being more compelling. Just curious on the margin because that was one of the questions coming in. Just how the margins compare on AI related deals? And then you also referenced pricing uplift, I mean, without being well, be as precise as you're willing, but give us a sense of magnitude of the pricing uplift related to AI. Speaker 100:24:35Yes, I can start and then Tony can it's Brian, Jeff. And then Tony can add in some of the details. In general, we don't really give out absolute pricing, but in general, we're seeing a price uplift. And most of the AI models, the generative AI models actually have an equal relatively equal cost of development and operations as our current models. So the margins are improving with those applications. Speaker 100:25:12So we are seeing a margin uplift with those products. Now it's early as we said, and these are the first kind of deals and POCs that we've started with the product, but it's promising from that perspective. People are seeing the value and being able to just speak naturally, hey, my seat is cold. Well, the thing realizes that you want the seat heat turned on. Hey, crack open the window. Speaker 100:25:38It goes in 10% increments and opens up your window and it just knows how to interpret natural language much better and people see that value and you can build a systems and they can build onto the product. So in general, we're seeing a better margin and more importantly or as importantly, we're seeing a strong demand for the product and interest by our customers. Tony, do you need help? Speaker 300:26:04Yes. I mean, a couple of things on the margins. Yes, they're improving. Remember that these are our connected services products. You'll see that the margin that we're anticipating next year is higher than our margin for 2024 overall, primarily when you take out the legacy revenue and that's really a product mix for next year, more licenses and less professional services. Speaker 300:26:35But the connected service in these bookings that we're looking at now with higher margins really won't come into play until the latter half of twenty twenty five and into twenty twenty six that we'll start seeing connected service margin increase. So we'll really see that benefit in the 20 26 year and beyond. Okay. Speaker 400:26:54And I guess just Brian on that same topic as it relates to Connected, As you inherited the business, obviously, Connected has been talked about for years. A lot of bookings have been pointed to, backlogs have been pointing to, but the revenue stream just hasn't lifted. And I heard your comments about, look, these contracts take time. Totally understood. I get the rev rec on it. Speaker 400:27:15But over the last several years, the lack of growth in that line suggests something deeper about the competitive landscape, share loss, functionality, maybe just a little deeper sense of what you think your competitive position is in connected and your right to win. And I get it, you just touched on AI like going forward, you think that's going to be a part of it. But curious beyond that, how you would frame the connected opportunity and competitive position? Speaker 300:27:45Hey, this is Tony. And I'll start first with a comment on growth and then Brian can take the other second part of that question. But if you look at our I mean, there's we've talked about in this script and we've mentioned it before in calls that there's a little bit of noise within our P and L as we compare year over year. So but if you look Q4 of last year and take out the Toyota legacy non cash legacy revenue from connected last year a year ago quarter, we actually grew the connected business 12% year over year. So we see that growing in fiscal 2025 as we move forward and then growing beyond that with the new bookings that were that are happening that happened in the Q4 of this year, 3rd Q4 of this year and as we go into the Q4. Speaker 300:28:34So that business is growing and we anticipate it to be a growth area of the business. Speaker 100:28:39Yes. And Jeff, let me answer kind of your the second part or another part of your question, which was what's our right or position to be in that business. And it's really around 1, our product is quite strong. It's designed and we understand the automotive space. So there's for example 23,000 different instructions you have to be able to understand and manage and put through those large language models to operate the car, right. Speaker 100:29:14Everything from windows and seats and charging ports and all kinds of very automotive specific functions that we work with the OEMs to really introduce and that partnership is very strong. 2nd is our willingness and our ability to customize and really create the experience that the OEM wants that is very different than most of our competitors, especially the big guys. They tend to come in with one answer, one structure, one product. It's connected all the time. We have the ability to be connected, to be local. Speaker 100:29:55We will customize around their feature set. Sometimes, for example, they want to go and look at any kind of a call out to an LLM model and say they want to not have it go to the public LLMs, they want to go to their own private LLM that they have that for whatever business strategy they have, they want to use those models to guide the instruction set that comes back. We have the ability to structure that so that we can architect where the request goes to, whether it goes to the public search or whether it goes to a private search at the OEM. And our competition tends to only go to the public or where they're preferentially treated. So it's all of this customization, the number of languages we can deal with that really gives us much more of a customized experience for the OEM. Speaker 100:30:54And that's really where we are strongest and where we perform and why they typically want us for their experience. Speaker 400:31:07Understood. And one last brief one if I could, Brian. As it relates to the you coming in and taking the reins here and I realize this is somewhat unfair because you just got in and you're getting your hands around what the business is and where we're headed. But if you look over the last handful of years, the pro form a royalty number which adjusts for all the prepaids and everything else have been relatively flattish. And clearly, some things have worked, many have not. Speaker 400:31:32But you're sizing up the business. Essentially, why would you why do you think if you look at the last 5 years as a company not been able to grow? Is this fundamentally a product market fit? Is it a go to market sales function? Is it something else? Speaker 400:31:47Just your early takes on kind of the brief history lesson of what hasn't worked and what you think you can get working? Speaker 100:31:56Well, I'm still kind of digging into the past and I've been a little hesitant to think too much about the past because if you take a look at, as you said, where it came from, it was a very different kind of model and experience where they were really focused on driving bookings and just really trying to grow at any cost and rather than really focusing on what are the products and how do we really differentiate ourselves relative to the competition. So as I look forward, the large language models and the whole AI application and how there's really 2 things that are changing. 1, you're seeing large language models go into the end user experience, right? So we've talked a lot about that. What we haven't talked a lot about is how those models are going into actually how we create the product. Speaker 100:32:55And so there's our speed of how fast we can put a product into a customer's hands, into their product themselves, into their vehicle has shrunk now from like 8 to 12 months down to 4 months of development work on our part to customize and focus our product to the customer. So those are the things that are really changing the business, right, that we get paid more for that. We can produce the large language models that make the end user experience much better, but also by driving those models into our own product and how we develop the product, it makes it quicker, it makes it faster, it makes it less expensive for us to develop them and to customize them around the what the customer needs are. And those are the things that are really shifting now versus the old models, which were using the standard software where it's much harder to differentiate and speed up the time to production and all for the customer. And so when I look at this, we've already seen price increasing and getting paid for these products and we're seeing our costs go down over this kind of time period as it's much quicker and simpler for us to develop the product. Speaker 100:34:22So that's what's really changing in my mind. Speaker 400:34:26Got it. Great. Thanks for the thoughtful answers. I appreciate the detail. Operator00:34:32Thank you. And our next question comes from Colin Langan with Wells Fargo. Your line is open. Speaker 500:34:40Great. Thanks for taking my questions. Maybe just to kick it off, if I look at the KPIs, shipments were down actually double digits year over year and quarter over quarter. What is driving that and sort of what I think if I sort of scrub out some of the fixed contracts and the exit of some of the professional services, underlying growth still seems to be up maybe 5% -ish. What's driving the underlying growth if your shipments are actually underperforming the market? Speaker 300:35:19Yes. So yes, it's really if we think about this, it's kind of more average PPU. So if we think about our if we strip out fixed out of our license year over year, we are down in the license business year over year. So that kind of falls in line with some of the volume decreases. But what's interesting is that connected is up. Speaker 300:35:42So one of the last questions is again where are we going in growth? I think that a couple of things. One is that the license business will grow in 2025 primarily because that more that we have less of the fixed license consumption in 2025. So we're shipping cars, but more of that will drop down. So there's growth there. Speaker 300:36:07And then the Connected Services business, the volumes are up with those cars that include our Connected Services business, so growth there. So as we think about overall volumes being down, it's really kind of that if you average out the growth in Connected and the higher PPU in Connected that provides the growth there in total dollars with volume down. Speaker 500:36:32Got it. And trying to frame the last time you updated the 5 year backlog, but I think it was something like $1,100,000,000 last time that you did the analysis. Is that right? And then that backlog is shrinking. When should we think about that as inflecting that pressure? Speaker 500:36:52And I guess, Brian, from your perspective, I mean, what are your priorities? Is it right now just get the costs in line and then focus on revenue or yes, I mean, how do we think about that? Speaker 300:37:04Yes. So as we looked at our backlog, yes, it's close to $1,000,000,000 in backlog. You got to remember a couple of things with backlog. It is represents our current contracts that are in place, the prices that we have in those contracts with expected volumes through either a contract term or in certain cases where we have a long contract, it could be a particular program of a car and when we expect that that particular program will cease. So it doesn't really reflect the true relationships over time. Speaker 300:37:35And it's kind of an arbitrary close of a program where we anticipate that the next program we will pick up. So and then so accordingly, it denigrates over time a little bit because as those dates hit whether that's contract terms or program end dates. So I think it's still extremely healthy at close to $1,000,000,000 And if we look at our 25 numbers, most of all of our revenue for 2025 is represented in backlog. So it's effectively baked as long as we hit the volume expectations that we have. But the next growth of that backlog will be in the next generation connected billings bookings that we anticipate going forward. Speaker 100:38:23Yes. And those I mean just to add to Tony's and I'll answer your other question, Colin, about priorities is you got to remember that's trying to estimate out 5 years the volume of any car model and when car models are going to stop and start. And that's just so I look at that with kind of a bit of a grain of salt. It gives us insight into what our revenues and billings will be, but it's not a perfect number. So as long as it sits around that billion number, I'm okay. Speaker 100:39:03What's more important is we have to really look at what are the actual deals that we're signing and what are the prices that we've signed up for and that's really gives to me an insight and then the volumes will be what they are. To your question on priorities, when I look at 25, we mentioned in the speech that 25 is really a return to profitability. And to me that means execution. And there are, as Tony mentioned in his talk, there are still some things we need to do to continue to cut costs out of the organization. Most of those plans and items have already been identified. Speaker 100:39:49And it's just a matter of finishing out the execution and continuing to hold those costs in line, not let things creep back in. It's finishing the generative AI work. Our first gen model brings Gen I to the end user. Our 2nd gen model, which is targeted towards the end of our fiscal year, which is really kind of like the end of Q3 of the calendar year of next year brings the generative AI, large language models all the way through our product. And as I mentioned earlier, that really simplifies our work and reduces the workload that we have. Speaker 100:40:29It's critical that we finish that work. And then the 3rd priority that I'm really starting to focus on with the organization. So right, first is execution, finish our products, get the Gen AI. 2nd one is get the Gen AI products across the board. And third is, we have some usages outside of automotive. Speaker 100:40:56We're just launched with Garmin 2 brand 2 models of the Garmin watch. We've been working with LG on TVs. Voice and these products can go into other products, other usages. We're starting to go and ask ourselves where can that go and beyond. Now it's not going to really be a 25 impact, but 25 is where we really need to go and figure out the 1 or 2 spaces we want to move into beyond automotive as well to continue to grow this company in voice activation. Speaker 500:41:32Got it. That's very helpful. Thanks for taking my questions. Operator00:41:36Thank you. Our next question comes from Nicholas Dole with Needham. Your line is open. Speaker 600:41:43Hi, guys. Thanks for taking my questions. The first one, professional services was up quarter over quarter. I know you mentioned it was down year over year. But that comes despite the cuts over the last couple of quarters. Speaker 600:41:57And then you mentioned $5,000,000 to $7,000,000 I was just wondering if you could explain what's driving that kind of change quarter over quarter. And then you mentioned the $5,000,000 to $7,000,000 headwind in fiscal $25,000,000 is that off the fiscal 2024 number? Thanks. Speaker 300:42:14So yes, there is a reduction anticipated in PS $5,000,000 to $7,000,000 in fiscal 2025 over 2024. So as we look at it, yes, year over year it was down. We did have a slight uptick from Q3, but we anticipate that with some of the cost cutting that we've done and headcount reductions, there's really a deeper focus within TS that we really are looking at driving those teams to the relationships that are driving most meaningful results to us. So we anticipate that that number will be down year over year. And but remember some of those cuts really were for Q4. Speaker 300:43:00So we really didn't see a lot of that. We saw $1,000,000 of that headwind in Q1, but as we think about it again year over year. But looking at it going forward, it will be a more focused effort. Speaker 600:43:16Okay. Just clarifying. So just asking I guess again is it was up quarter over quarter and I guess we expected it to be flat to down. So any explanation on what to drove the strength there this quarter? Speaker 100:43:32It's just this is Brian, Nicholas. It's just going to be a little bit lumpy from quarter to quarter. It's really, as Tony said, we're focusing more on where do we actually add value and where do we get paid for professional services. And so when we looked at the business, we said this thing should go down and we went ahead and let some people go and shrunk the organization in professional services to kind of right size it to where we thought the quality business was. Now that said, we've told them, hey, if there's good business and we can get paid for the work, we'll do it. Speaker 100:44:12And so you're going to see kind of a lumpiness and as projects come in and somebody wants the professional services because they don't want to do the work or they cannot do the work themselves either way and they're willing to pay us to go do it, we'll do it. And so you're just seeing a little bit of that lumpiness of, hey, there's some more work. And some quarters, it may be a little bit less than that quarter over quarter or year over year trend. But when we look at the long term, the full year guidance, we think we've rightsized the organization and rightsized the amount of work relative to professional services. So that the margin and getting paid for what we do is right. Speaker 100:44:58Does that help answer why? Like I wouldn't worry about 1 quarter. Yes, yes. Got it. Speaker 600:45:03Just a little lumpy and I know splitting hairs, it's like about $1,000,000 change here. Yes. Speaker 100:45:09No, I think it's a good question. Speaker 600:45:10Go ahead. Okay. Thank you. Second question, I think the license average PPU jumped to the highest level since fiscal 2022, did those gen those 6 gen AI rollouts this year or the past 1 or 2 quarters really drive that much of a change? Or just any detail on what drove the strength this quarter in the average PPU and thoughts on fiscal 2025? Speaker 600:45:35Thanks. Speaker 300:45:36Yes. And again, it's hard, right? And we're trying to Brian and I both have an effort as we go forward to try and simplify kind of how we describe the business and try to get to a P times Q model. But as we do disclose some of the shipments, it is kind of difficult. One is from a license standpoint, yes, that drops down. Speaker 300:46:02You'd have to take out the fixed. But then if you take out the fixed and then drop that down and look at our volumes, you can kind of see calculate an average PPU because those do get recorded in GAAP revenue on shipment. Connected is a little harder because we will bill for something and that's one thing we need to continue to highlight is as a leading metric is our billings, which were $80,000,000 this quarter compared with GAAP revenue of $54,500,000 But those billings then are deferred and then amortized into revenue over a subscription period. So it's really hard to look at those connected volumes and try and do an average PPU because really have some legacy stuff from deferred that's going in there and then the higher PPU for the new next generation products you really won't see into revenue until future periods. So and then from a license standpoint, you got to it's really trying to understand how much of a license or components of a license are being built within that number. Speaker 300:47:05So do we have volumes? What are we shipping? And do those shipments have more of our license components, so effectively an average higher PPU for those components and or weighted PPU, if you will, for the components that we're actually selling there. But that's the short answer is that in the license area is that we have higher PPUs because of effectively higher components within that license that are being built. Speaker 600:47:39Thank you. Operator00:47:42Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open. Speaker 700:47:52Hi, yes. Thank you for taking our questions. You have a man Gupta on for Mark Delaney. First, I guess, last quarter, you guys provided the framework for fiscal 2025 of kind of a flat to low single digit decline for revenue year on year excluding the legacy business and midpoint now is showing growth year on year. Can you kind of speak to maybe some of the puts and takes that drove that and what's driving some of that strength you're seeing? Speaker 300:48:25Yes, certainly. I think we're fairly close. Yes, we took out the legacy business. I think at that point, we were looking at a framework of mid guidance of $238,000,000 And right now, we're doing our guidance is $236,000,000 to $247,000,000 So we are seeing some growth. It's as we look at a couple of things. Speaker 300:48:47One is on the license side, looking at our volumes and making sure we right size that backlog and the expectation of what will be shipped within the quarter. As we mentioned, professional services will be down, but in line with what we were kind of providing the framework, we said that it was going to be down. And then, connected services actually being slightly up than what we were thinking about in the framework. So but overall, I think it's actually very close to what we had guided in the framework last quarter. Speaker 700:49:20Thank you for that color. I appreciate it. And then maybe kind of a higher level one on the AI products and appreciate the context for the 1st gen versus 2nd gen. Given that you have kind of the 2nd gen product that's supposed to be a little simpler to make, how should we think about both AI kind of launches and pipeline going through the year? Are you kind of waiting to get more of that 2nd gen product before you pursue kind of a higher level of AI wins? Speaker 700:49:48Or how should we think about that pipeline? Speaker 100:49:53No. What's nice is that all of these products from for the most part Chat Pro through Jexgen through NextGen 1 through NextGen 2 are backward compatible. So we can upgrade people to those products. So we don't slow this down at all and I wouldn't want to do that. So if a customer comes in and they seen our whether they want to look at Chat Pro or whether they want to look at the next Gen 1, whether they want to do Chat Pro and then skip Gen 1 and go to Gen 2, we are able to manage all of those with them. Speaker 100:50:31We show them the various products and where we're headed with them. And then we help guide them through that selection process, right? And there's a series of things we kind of go through with them as they're going through that. What are the features they want? What is the experience they want? Speaker 100:50:52Some of the customers just want a really good operational experience. You can do things in a natural language. Some others want a true assistant in the car. Renault is a good example of that. We just launched with them where they have their avatar called Reno and that really helps it becomes like an assistant and they have plans to move that assistant all the way through their product line and much further beyond even just the auto. Speaker 100:51:27In that case, we're working with them to go from what we can do today to looking out at Gen 2. So you're going to see it's going to be a kind of Speaker 400:51:37like a Speaker 100:51:38continuum for people as they go through these products. And so it's going to be kind of seamless. You're not going to see break offs or we don't have to make a decision of, hey, stop selling Chap Pro because we want everything Gen 1 or stop selling Gen 1 because we want everything Gen 2. We can seamlessly move between those and we can upgrade people even upgrade their cars with down the wire upgrades if they want to upgrade everybody's experience later on. So we have all of that ability in these products. Speaker 100:52:17Does that help you understand kind of the product portfolio? Speaker 700:52:22Yes. That was super helpful. Thank you very much. Operator00:52:26Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Brian for any closing remarks. Speaker 100:52:35Okay. So, I just want to thank everybody for attending the call this morning. I thought the questions were excellent and I really appreciate the interest in our business. I hope you see from Tony and I's remarks that, we're really excited about where the business is headed. For 2025, our priorities, as we said, 1, it's execution. Speaker 100:52:56Execution in order to achieve the numbers we talked about this morning, to return the company to profitability. Tony mentioned that we're have plans in place to work through the debt and we think we'll have answers for you by the next quarter's update. And I think the organization overall, we've made through this transition and we're all really excited about our next generation products. So that's the other real focus for 2025 is execution of those and really getting our customers to see and feel the experience that we're able to generate. And so with that, I just want to thank everybody again for attending this morning. Speaker 100:53:44And we look forward to seeing you at the end of the next quarter and showing you the progress we've made so far. So thank you very much. Operator00:53:54Thank you for your participation. This does conclude the program and you may now disconnect. Everyone have a great day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCerence Q4 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Cerence Earnings HeadlinesCerence to demo Cerence xUI at Auto Shanghai 2025April 23, 2025 | markets.businessinsider.comAuto Shanghai 2025: Cerence AI Partners with Industry Leaders to Showcase xUI, its Hybrid, Agentic AI Assistant PlatformApril 22, 2025 | globenewswire.comReal Americans Don’t Wait on Wall Street’s Next MoveWhat's happening in the markets right now should concern every freedom-loving American who's worked hard and saved smart. Your 401(k) doesn't deserve to be dragged through the mud by tariffs, trade wars, reckless spending, and political standoffs. And you don't have to stand by while Wall Street plays roulette with your future.April 27, 2025 | Premier Gold Co (Ad)Cerence to Announce Fiscal Second Quarter Results on May 7, 2025April 16, 2025 | globenewswire.comCerence price target lowered to $8 from $14 at Goldman SachsApril 10, 2025 | markets.businessinsider.comCerence AI Honored with HARMAN's Best Technology AwardApril 10, 2025 | finance.yahoo.comSee More Cerence Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Cerence? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Cerence and other key companies, straight to your email. Email Address About CerenceCerence (NASDAQ:CRNC) provides AI powered virtual assistants for the mobility/transportation market in United States, Other Americas, Germany, Europe, Middle East, Africa, Japan, and Other Asia-Pacific. The company offers edge software components, cloud-connected components, virtual assistant coexistence, and professional services. It also provides conversational artificial intelligence-based solutions, including speech recognition, natural language understanding, speech signal enhancement, text-to-speech, and acoustic modeling technology. 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There are 8 speakers on the call. Operator00:00:00Good day, and welcome to Cerus' 4th Quarter 2024 Earnings Call. At this time, all participants Speaker 100:00:05are in Operator00:00:06a listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, this call may be recorded. I would now like to turn the call over to Jason Gold, Investor Relations at Cerence. Please go ahead. Speaker 200:00:31Welcome to Cerence's Q4 of fiscal year 2024 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, beliefs, outlook, strategy, goals, objectives, targets and plans should be considered to be forward looking statements. Cerence 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 8 ks with the press release preceding today's call, our Form 10 ks filed on November 29, 2023, and our most recent Form 10 Q. Speaker 200:01:23In addition, the company may refer to certain non GAAP measures, key performance indicators and pro form a 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 Brian Krzanich, CEO of Cerence and Tony Rodriguez, Interim CFO of Cerence. Please note that the slides with further context are available in the Investors section of our website. Speaker 200:02:00Now on to the call. Brian? Speaker 100:02:04Thank you, Jason, and good morning, everyone, and welcome to the Q4 2024 Cerence earnings call. I'm excited to talk to you this morning as Cerence's new CEO. While Tony will walk you through the details of our Q4 and fiscal year 2024 earnings, I'm very proud of what the organization has delivered for Q4. The top line revenue of $54,800,000 and adjusted EBITDA of negative $1,900,000 both exceeded the high end of our guidance. I couldn't be more proud of what the team has accomplished and the head start this gives us for 2025. Speaker 100:02:45Before I give you our forecast for 2025, I'd like to spend a few minutes now to talk to you about my vision for CEREX, which also gives you insight into why I chose to come to the company. So Cerus is at the forefront of the revolution that is occurring in the automotive industry as AI and specifically generative AI and large language models grow in use and importance. Cerence already has a large footprint in the automotive space with a broad range of products that bring voice assistance to the vehicle, including 28 design wins in fiscal year 2024. Our vision moving forward is that every product in our solution portfolio will have artificial intelligence and specifically large language models built into them to bring simplicity and convenience to in car interaction. And this is not a transition that will happen far out in the future, but rather one that has already begun in earnest. Speaker 100:03:48This is evidenced by the strong momentum we've seen for our generative AI solutions with 10 customer wins and 6 program launches for these products in fiscal year 2024, including Volkswagen, Renault, Skoda, Audi and Smart. And importantly, more Gen AI programs shipped than any of our competitors and key wins across our solution portfolio with automakers like BMW, Great Wall Motor and Zeekr. It's worth mentioning that in these deals we've signed so far, our generative AI solutions are commanding unit economics that meaningfully exceed the rest of our portfolio, fueling PPU growth on the cloud side. These first deployments also show an increase in overall usage and adoption and this is based on a small sample size and short timeframe, but we are encouraged by these results. This quarter, we also signed our 1st customer deal for the 1st generation of our new AI platform, which is based on our proprietary family of language models. Speaker 100:04:58By the Q4 of this year, we will launch the 2nd generation of this platform, which leverages large language models across the entire solution and allows us to greatly simplify and speed up how we bring new products to the market. In fact, just last week, we introduced Calm Edge, which builds on our strength in embedded solutions as the first LLM running in automotive on the edge, allowing for advanced and simplified voice interaction with the vehicle even when not connected. We did this in collaboration with Microsoft. We selected Cirrus as their preferred automotive industry partner as they announced their adapted AI models ahead of this week's Ignite conference. Microsoft is partnering with Cerus and other industry leaders like Bayer and Siemens to create fine tune models pre trained using industry specific data to address customers' top use cases as was highlighted in the Microsoft CEO Satya Nadella's keynote earlier this week in their Ignite conference. Speaker 100:06:04The implementation of LLMs is an important transition for voice in the vehicle and I want to spend a moment explaining why. In most cars today, in order to interact with the various systems in the vehicle, you have to use very specific commands. For example, to enter an address, you can use navigation or to operate systems within the vehicle like air conditioning or windows. With the implementation of LLMs, we removed the need for script for interaction and the system's ability to understand complex and multi step commands in natural human language becomes virtually limitless. The vehicle now becomes an assistant that saves you time and simplifies your life. Speaker 100:06:48In addition to our deep technical expertise, the world's leading automakers and Tier 1 suppliers love to work with CEREX because we're uniquely neutral and highly specialized supplier, living and breathing automotive and speaking the same language as our customers unlike our competitors. As auto OEMs faced a threat of commoditization much like what was seen in the mobile handset industry years ago, they are becoming increasingly focused on the in cabin experience as a differentiator from their competitors as well as the main touch point between their drivers and their brand. And they're also choosing to partner with Cairns to drive their in car experiences forward. Now looking at fiscal year 2025, we're issuing initial fiscal year 2025 revenue guidance of $236,000,000 to $247,000,000 with related adjusted EBITDA in the range of $15,000,000 to 26,000,000 dollars and free cash flow in the range of $20,000,000 to $30,000,000 And this anticipates a return to profitability that represents both our strong market position, partnerships with vehicle OEMs and the hard work the organization has already done in terms of cost reductions, which Tony will cover in detail in a few minutes. For fiscal year 2025, we will transition from doing broad cost cutting to simplifying and streamlining our organization and our structure to continue taking cost and spending out of Cerence. Speaker 100:08:24It's been my observation that Cerence has been burdened by the operational and business process and complexities that resulted from the company's 2019 spin from Nuance. With a new set of eyes, I believe that I can provide a perspective to find more efficient and productive ways to accomplish the same task, while also finding opportunities to vastly improve our speed to market and get exceptional products into the hands of our customers at a more rapid and competitive pace. This is my first earnings call as CEO of CERES and I hope you see the vision and potential of the company that I do. And that led me to joining the company. Cerence is bringing AI and large language model capabilities to the vehicle now, not just in the future. Speaker 100:09:12Fiscal year 2025 will be a year of execution, streamlining the company and bringing these industry leading products to our partners in the market. Our fiscal year 2025 plan is to return to Cerence to profitability, a critical step to fuel the future growth. Cerence is a strong company with an exciting path ahead. And it's now my job to turn the strong company into a great business. With that, I'll turn it over to Tony to go through the details of our quarterly numbers, our guidance and our restructuring activities. Speaker 100:09:50Tony? Speaker 300:09:53Thanks, Brian. Today, I'll be covering 3 major topics. First, I'll review our Q4 and full year 2024 results. Then I'll go into some details of our restructuring. Lastly, I'll provide some guidance for fiscal Q1 and the full fiscal year of 2025. Speaker 300:10:12Let's get into the Q4 and full year 2024 figures. At the top, we achieved Q4 revenue of $54,800,000 which exceeded our high end of our guidance range of $50,000,000 Revenue ahead of guidance this quarter was aided by approximately $5,000,000 in license royalty true ups for 2 of our OEM customers. Our customers self report royalty volumes that approximate their auto shipments that include our technology each quarter and periodically true up to actual. This is not uncommon and we will call this out whenever we believe it is meaningful to the numbers. Our gross margin of 64% in Q4 also exceeded our high end of our guidance of 60%. Speaker 300:10:57Approximately 4 points of this were due to the drop through benefit of the noted revenue true ups. Moving down our income statement, our adjusted EBITDA loss of $1,900,000 well exceeded our guidance of a loss of $13,000,000 This was driven by the improved gross profit from the higher than expected revenue and decreased operating expenses from the accelerated restructuring efforts during the quarter of approximately $6,000,000 As compared to prior year, Q4 revenue declined by $26,000,000 or 32%. This highlights some of the noise in our P and L that makes year over year comparison somewhat difficult. The 2 biggest drivers of the year over year decline were that in Q4 of last year, we signed $12,800,000 of fixed license revenue during the quarter and had $9,200,000 of revenue associated with the legacy Connected Services contract with Toyota. You may remember that this contract was acquired by Nuance in 2013 and that Toyota decommissioned the solution in Q1 of 2024. Speaker 300:12:07After Q1 of 2025, we expect that the full year over year comparison for our quarterly results will be more meaningful. Our non GAAP operating expenses were $39,500,000 for Q4 compared to $44,500,000 for the same quarter in fiscal 2023. The decrease of $5,000,000 or 11% represents some of the in quarter savings from the Q4 restructuring efforts. We ended the quarter with $130,400,000 of cash and marketable securities, up $4,100,000 versus Q3. Our free cash flow during the quarter was $4,700,000 With Q4 in the books, we landed at full year revenue of $331,500,000 or $244,900,000 excluding the legacy revenue of $86,600,000 Full year adjusted EBITDA was $80,600,000 Adjusting for the impact of the non cash legacy contract, adjusted EBITDA would have been negative $6,000,000 highlighting the importance of the Q4 cost restructuring efforts, which I will now spend a few more minutes discussing. Speaker 300:13:26Last quarter, we mentioned that we identified net savings of approximately $35,000,000 to $40,000,000 We are on track to meet or exceed the upper end of that range. This includes cost reductions across all of our major cost drivers, including headcount and facilities. We are discussing our savings on a net basis because we have identified costs for removal that exceeded this amount, but plan to reinvest a portion of these cost savings back into driving the growth of our next generation products. To help you with your models, the expense base for these net calculations was based on an annual run rate of our non GAAP operating expenses of $189,000,000 as we entered Q4 of this year. Additionally, we reduced certain professional services cost of goods sold by approximately $9,000,000 We took action to implement much, but not all of the cost reduction actions in Q4. Speaker 300:14:25We expect to action the balance by the end of Q1. Accordingly, we did realize some of the P and L benefits associated with the cost reduction efforts in Q4, but expect to see the vast majority of the benefits in our Q1 non GAAP operating expense exit run rate of approximately $39,000,000 per quarter. We identified approximately $16,300,000 in one time costs associated with these actions, split primarily between severance, retention bonuses and consulting fees. We incurred $10,300,000 of total restructuring expenses in Q4 and expect to incur another $6,000,000 in Q1. Our Q4 free cash flow absorbed $7,500,000 of these costs and the guidance I will give for the fiscal 2025 free cash flow will absorb the impact of another $8,800,000 of these one time restructuring costs that we don't expect to incur in future periods. Speaker 300:15:25We also expect some revenue headwinds from these actions, particularly in our professional services business where we have made the decision to reduce staff and refocus our efforts on projects that we expect will drive long term client engagement. We have reduced our focus on one off projects or those that don't we don't see having significant long term potential upside. Our revenue guidance for fiscal 2025 absorbs the headwinds of approximately $5,000,000 to $7,000,000 related to this. As we look at our revenue breakdown and operating metrics, variable license revenue was $25,300,000 down $5,000,000 or 17 percent for the same quarter last year, but up from Q3. As planned, there were no fixed license revenue during this quarter. Speaker 300:16:20Q4 Connected Services revenue without legacy was $12,100,000 up $1,300,000 or 12 percent from $10,800,000 the same quarter last year. And our professional services revenue was down 6% year over year. As a reminder, when we look at total licenses shift, pro form a license royalties is a life an operating measure we use representing the total value of variable licenses shipped in a quarter, including the shipment from fixed licenses where revenue was previously recognized upon contract signing. We refer to these shipments where revenue was recognized in a prior period as fixed license consumption. Our pro form a royalties were $42,200,000 which were flat compared to Q4 of last year and up from $39,600,000 for Q3. Speaker 300:17:17Consumption of our previous fixed license contracts totaled $16,900,000 this quarter, higher than the same quarter last year by 9%. However, because the annual value of fixed contracts has been trending down, over time there will be lower consumption of royalties associated with past fixed contracts and correspondingly that will result in variable license growth in future periods. We continue to expect our consumption run rate to normalize by the end of fiscal year 'twenty 6, at which time new fixed contracts should roughly align with the level of consumption during the year. As we review our key performance indicators this quarter, our penetration of global auto production for the trailing 12 months declined slightly to 52% due primarily to weaker production volumes among our top customers. We shipped approximately 10,600,000 cars with Cerence Technology in the quarter, down 14% year over year, while IHS production for the same period declined 5%. Speaker 300:18:20Quarter over quarter, we were down 11%, while IHS production was also down 3%. The number of cards produced that use our connected services increased 16% on a trailing 12 month basis compared to the same metric a year ago, as some programs that were previously delayed started ramping in production. Total adjusted billings of $220,700,000 adjusted to exclude professional services, prepaid billings and prepaid consumption increased 1 percentage point for the trailing 12 month period this year compared to the previous year. Our 5 year backlog metric is currently approximately $969,000,000 Now turning to our guidance. Currently, the Street consensus for revenue for the full fiscal year 2025 is $234,000,000 and Q1 is 57,000,000 As we go through the guidance, please remember that any 1 quarter can be materially impacted by the level of fixed license revenue signed in the quarter. Speaker 300:19:25And in Q1, we are not forecasting any fixed license revenue. For Q1, we currently expect revenue to be in the range of $47,000,000 to $50,000,000 This absorbs headwinds of approximately $1,000,000 related to the deemphasis of professional service projects I mentioned a moment ago. We currently expect Q1 adjusted EBITDA to be in the range of negative $9,000,000 to negative $6,000,000 and free cash flow to be in the range of negative $4,000,000 to 0. This absorbs the impact of approximately $6,000,000 in one time costs associated with our restructuring. For fiscal year 2025, we currently expect revenue to be in the range of $236,000,000 to $247,000,000 This was headwinds of approximately $5,000,000 to $7,000,000 related to the emphasis of professional service projects, as I mentioned. Speaker 300:20:21We currently expect adjusted EBITDA to be in the range of $15,000,000 to $26,000,000 and expect free cash flow to be in the range of $20,000,000 to $30,000,000 including the cost associated with our restructuring. I'd like to provide some additional factors to help you in understanding our business and how the 2025 model is coming together. At the midpoint of guidance, we are currently planning for $20,000,000 of new fixed licenses in fiscal year 2025. Had we planned for fixed licenses comparable to 2024 of $30,000,000 fiscal year 2025 midpoint revenue guidance would have reflected a 3% growth rate over 2024. We are also planning for very modest growth in our run rate of connected services lines. Speaker 300:21:11As a reminder, our new products are all connected in nature. The way we recognize these new contracts in our financial statements is that when units are shipped, we book them into deferred revenue. Then typically over a period of 12 to 20 quarters, we amortize that revenue onto our income statement. And so as these products begin to gain traction, variable license and connected services billings will increasingly become an indicator of how our business is progressing. As this develops over time, I'll make sure to point out and direct your attention to our leading metrics. Speaker 300:21:48For 2025, we expect variable license and connected services billings to increase by high single digits. Our gross margins for fiscal year 2025 are expected to be in the range of 67% to 69%. Now I'd like to address our convertible notes. As you may be aware, we have $87,500,000 of convertible notes that have gone current and are due in June of 2025. We believe that given our current cash position and positive cash flow expectations for 2025, it is in the best interest to our shareholders to pay down a portion of these notes when due. Speaker 300:22:25However, we also believe that refinancing some of the debt could put us in a better position to execute our long term strategic direction of the company, while allowing us to retain cash reserve and be flexible as we move forward. As such, we are actively looking at alternatives for refinancing a portion of these notes and anticipate having more to report in our next earnings call. Overall, we are pleased with the solid results of Q4. As we begin fiscal year 2025, we believe we are on the right track to continue to show improvement in our financial performance and to strengthen our balance sheet moving forward. I will now return it back to Brian to close our remarks. Speaker 100:23:09Thanks, Tony. In closing, we're happy with and motivated by this quarter's results. We remain focused on execution, business process improvement and cost reduction and advancing our generative AI roadmap. We take our commitments to The Street seriously and we are committed to streamlining our reporting so that investors can understand the trends in the business. We believe in our ability to deliver on our fiscal 2025 guidance and fueling in our growth for fiscal 2020 6 and beyond. Speaker 100:23:42We look forward to continuing to share our progress. We'll now open it up for questions. Operator00:23:50Thank you. Our first question comes from Jeff Van Rhee with Craig Hallum Capital Group. Your line is open. Speaker 400:24:07Hey, guys. Thanks for taking my questions. Good morning. A few for me. I wanted to start on the AI side. Speaker 400:24:13You touched on the economics of AI being more compelling. Just curious on the margin because that was one of the questions coming in. Just how the margins compare on AI related deals? And then you also referenced pricing uplift, I mean, without being well, be as precise as you're willing, but give us a sense of magnitude of the pricing uplift related to AI. Speaker 100:24:35Yes, I can start and then Tony can it's Brian, Jeff. And then Tony can add in some of the details. In general, we don't really give out absolute pricing, but in general, we're seeing a price uplift. And most of the AI models, the generative AI models actually have an equal relatively equal cost of development and operations as our current models. So the margins are improving with those applications. Speaker 100:25:12So we are seeing a margin uplift with those products. Now it's early as we said, and these are the first kind of deals and POCs that we've started with the product, but it's promising from that perspective. People are seeing the value and being able to just speak naturally, hey, my seat is cold. Well, the thing realizes that you want the seat heat turned on. Hey, crack open the window. Speaker 100:25:38It goes in 10% increments and opens up your window and it just knows how to interpret natural language much better and people see that value and you can build a systems and they can build onto the product. So in general, we're seeing a better margin and more importantly or as importantly, we're seeing a strong demand for the product and interest by our customers. Tony, do you need help? Speaker 300:26:04Yes. I mean, a couple of things on the margins. Yes, they're improving. Remember that these are our connected services products. You'll see that the margin that we're anticipating next year is higher than our margin for 2024 overall, primarily when you take out the legacy revenue and that's really a product mix for next year, more licenses and less professional services. Speaker 300:26:35But the connected service in these bookings that we're looking at now with higher margins really won't come into play until the latter half of twenty twenty five and into twenty twenty six that we'll start seeing connected service margin increase. So we'll really see that benefit in the 20 26 year and beyond. Okay. Speaker 400:26:54And I guess just Brian on that same topic as it relates to Connected, As you inherited the business, obviously, Connected has been talked about for years. A lot of bookings have been pointed to, backlogs have been pointing to, but the revenue stream just hasn't lifted. And I heard your comments about, look, these contracts take time. Totally understood. I get the rev rec on it. Speaker 400:27:15But over the last several years, the lack of growth in that line suggests something deeper about the competitive landscape, share loss, functionality, maybe just a little deeper sense of what you think your competitive position is in connected and your right to win. And I get it, you just touched on AI like going forward, you think that's going to be a part of it. But curious beyond that, how you would frame the connected opportunity and competitive position? Speaker 300:27:45Hey, this is Tony. And I'll start first with a comment on growth and then Brian can take the other second part of that question. But if you look at our I mean, there's we've talked about in this script and we've mentioned it before in calls that there's a little bit of noise within our P and L as we compare year over year. So but if you look Q4 of last year and take out the Toyota legacy non cash legacy revenue from connected last year a year ago quarter, we actually grew the connected business 12% year over year. So we see that growing in fiscal 2025 as we move forward and then growing beyond that with the new bookings that were that are happening that happened in the Q4 of this year, 3rd Q4 of this year and as we go into the Q4. Speaker 300:28:34So that business is growing and we anticipate it to be a growth area of the business. Speaker 100:28:39Yes. And Jeff, let me answer kind of your the second part or another part of your question, which was what's our right or position to be in that business. And it's really around 1, our product is quite strong. It's designed and we understand the automotive space. So there's for example 23,000 different instructions you have to be able to understand and manage and put through those large language models to operate the car, right. Speaker 100:29:14Everything from windows and seats and charging ports and all kinds of very automotive specific functions that we work with the OEMs to really introduce and that partnership is very strong. 2nd is our willingness and our ability to customize and really create the experience that the OEM wants that is very different than most of our competitors, especially the big guys. They tend to come in with one answer, one structure, one product. It's connected all the time. We have the ability to be connected, to be local. Speaker 100:29:55We will customize around their feature set. Sometimes, for example, they want to go and look at any kind of a call out to an LLM model and say they want to not have it go to the public LLMs, they want to go to their own private LLM that they have that for whatever business strategy they have, they want to use those models to guide the instruction set that comes back. We have the ability to structure that so that we can architect where the request goes to, whether it goes to the public search or whether it goes to a private search at the OEM. And our competition tends to only go to the public or where they're preferentially treated. So it's all of this customization, the number of languages we can deal with that really gives us much more of a customized experience for the OEM. Speaker 100:30:54And that's really where we are strongest and where we perform and why they typically want us for their experience. Speaker 400:31:07Understood. And one last brief one if I could, Brian. As it relates to the you coming in and taking the reins here and I realize this is somewhat unfair because you just got in and you're getting your hands around what the business is and where we're headed. But if you look over the last handful of years, the pro form a royalty number which adjusts for all the prepaids and everything else have been relatively flattish. And clearly, some things have worked, many have not. Speaker 400:31:32But you're sizing up the business. Essentially, why would you why do you think if you look at the last 5 years as a company not been able to grow? Is this fundamentally a product market fit? Is it a go to market sales function? Is it something else? Speaker 400:31:47Just your early takes on kind of the brief history lesson of what hasn't worked and what you think you can get working? Speaker 100:31:56Well, I'm still kind of digging into the past and I've been a little hesitant to think too much about the past because if you take a look at, as you said, where it came from, it was a very different kind of model and experience where they were really focused on driving bookings and just really trying to grow at any cost and rather than really focusing on what are the products and how do we really differentiate ourselves relative to the competition. So as I look forward, the large language models and the whole AI application and how there's really 2 things that are changing. 1, you're seeing large language models go into the end user experience, right? So we've talked a lot about that. What we haven't talked a lot about is how those models are going into actually how we create the product. Speaker 100:32:55And so there's our speed of how fast we can put a product into a customer's hands, into their product themselves, into their vehicle has shrunk now from like 8 to 12 months down to 4 months of development work on our part to customize and focus our product to the customer. So those are the things that are really changing the business, right, that we get paid more for that. We can produce the large language models that make the end user experience much better, but also by driving those models into our own product and how we develop the product, it makes it quicker, it makes it faster, it makes it less expensive for us to develop them and to customize them around the what the customer needs are. And those are the things that are really shifting now versus the old models, which were using the standard software where it's much harder to differentiate and speed up the time to production and all for the customer. And so when I look at this, we've already seen price increasing and getting paid for these products and we're seeing our costs go down over this kind of time period as it's much quicker and simpler for us to develop the product. Speaker 100:34:22So that's what's really changing in my mind. Speaker 400:34:26Got it. Great. Thanks for the thoughtful answers. I appreciate the detail. Operator00:34:32Thank you. And our next question comes from Colin Langan with Wells Fargo. Your line is open. Speaker 500:34:40Great. Thanks for taking my questions. Maybe just to kick it off, if I look at the KPIs, shipments were down actually double digits year over year and quarter over quarter. What is driving that and sort of what I think if I sort of scrub out some of the fixed contracts and the exit of some of the professional services, underlying growth still seems to be up maybe 5% -ish. What's driving the underlying growth if your shipments are actually underperforming the market? Speaker 300:35:19Yes. So yes, it's really if we think about this, it's kind of more average PPU. So if we think about our if we strip out fixed out of our license year over year, we are down in the license business year over year. So that kind of falls in line with some of the volume decreases. But what's interesting is that connected is up. Speaker 300:35:42So one of the last questions is again where are we going in growth? I think that a couple of things. One is that the license business will grow in 2025 primarily because that more that we have less of the fixed license consumption in 2025. So we're shipping cars, but more of that will drop down. So there's growth there. Speaker 300:36:07And then the Connected Services business, the volumes are up with those cars that include our Connected Services business, so growth there. So as we think about overall volumes being down, it's really kind of that if you average out the growth in Connected and the higher PPU in Connected that provides the growth there in total dollars with volume down. Speaker 500:36:32Got it. And trying to frame the last time you updated the 5 year backlog, but I think it was something like $1,100,000,000 last time that you did the analysis. Is that right? And then that backlog is shrinking. When should we think about that as inflecting that pressure? Speaker 500:36:52And I guess, Brian, from your perspective, I mean, what are your priorities? Is it right now just get the costs in line and then focus on revenue or yes, I mean, how do we think about that? Speaker 300:37:04Yes. So as we looked at our backlog, yes, it's close to $1,000,000,000 in backlog. You got to remember a couple of things with backlog. It is represents our current contracts that are in place, the prices that we have in those contracts with expected volumes through either a contract term or in certain cases where we have a long contract, it could be a particular program of a car and when we expect that that particular program will cease. So it doesn't really reflect the true relationships over time. Speaker 300:37:35And it's kind of an arbitrary close of a program where we anticipate that the next program we will pick up. So and then so accordingly, it denigrates over time a little bit because as those dates hit whether that's contract terms or program end dates. So I think it's still extremely healthy at close to $1,000,000,000 And if we look at our 25 numbers, most of all of our revenue for 2025 is represented in backlog. So it's effectively baked as long as we hit the volume expectations that we have. But the next growth of that backlog will be in the next generation connected billings bookings that we anticipate going forward. Speaker 100:38:23Yes. And those I mean just to add to Tony's and I'll answer your other question, Colin, about priorities is you got to remember that's trying to estimate out 5 years the volume of any car model and when car models are going to stop and start. And that's just so I look at that with kind of a bit of a grain of salt. It gives us insight into what our revenues and billings will be, but it's not a perfect number. So as long as it sits around that billion number, I'm okay. Speaker 100:39:03What's more important is we have to really look at what are the actual deals that we're signing and what are the prices that we've signed up for and that's really gives to me an insight and then the volumes will be what they are. To your question on priorities, when I look at 25, we mentioned in the speech that 25 is really a return to profitability. And to me that means execution. And there are, as Tony mentioned in his talk, there are still some things we need to do to continue to cut costs out of the organization. Most of those plans and items have already been identified. Speaker 100:39:49And it's just a matter of finishing out the execution and continuing to hold those costs in line, not let things creep back in. It's finishing the generative AI work. Our first gen model brings Gen I to the end user. Our 2nd gen model, which is targeted towards the end of our fiscal year, which is really kind of like the end of Q3 of the calendar year of next year brings the generative AI, large language models all the way through our product. And as I mentioned earlier, that really simplifies our work and reduces the workload that we have. Speaker 100:40:29It's critical that we finish that work. And then the 3rd priority that I'm really starting to focus on with the organization. So right, first is execution, finish our products, get the Gen AI. 2nd one is get the Gen AI products across the board. And third is, we have some usages outside of automotive. Speaker 100:40:56We're just launched with Garmin 2 brand 2 models of the Garmin watch. We've been working with LG on TVs. Voice and these products can go into other products, other usages. We're starting to go and ask ourselves where can that go and beyond. Now it's not going to really be a 25 impact, but 25 is where we really need to go and figure out the 1 or 2 spaces we want to move into beyond automotive as well to continue to grow this company in voice activation. Speaker 500:41:32Got it. That's very helpful. Thanks for taking my questions. Operator00:41:36Thank you. Our next question comes from Nicholas Dole with Needham. Your line is open. Speaker 600:41:43Hi, guys. Thanks for taking my questions. The first one, professional services was up quarter over quarter. I know you mentioned it was down year over year. But that comes despite the cuts over the last couple of quarters. Speaker 600:41:57And then you mentioned $5,000,000 to $7,000,000 I was just wondering if you could explain what's driving that kind of change quarter over quarter. And then you mentioned the $5,000,000 to $7,000,000 headwind in fiscal $25,000,000 is that off the fiscal 2024 number? Thanks. Speaker 300:42:14So yes, there is a reduction anticipated in PS $5,000,000 to $7,000,000 in fiscal 2025 over 2024. So as we look at it, yes, year over year it was down. We did have a slight uptick from Q3, but we anticipate that with some of the cost cutting that we've done and headcount reductions, there's really a deeper focus within TS that we really are looking at driving those teams to the relationships that are driving most meaningful results to us. So we anticipate that that number will be down year over year. And but remember some of those cuts really were for Q4. Speaker 300:43:00So we really didn't see a lot of that. We saw $1,000,000 of that headwind in Q1, but as we think about it again year over year. But looking at it going forward, it will be a more focused effort. Speaker 600:43:16Okay. Just clarifying. So just asking I guess again is it was up quarter over quarter and I guess we expected it to be flat to down. So any explanation on what to drove the strength there this quarter? Speaker 100:43:32It's just this is Brian, Nicholas. It's just going to be a little bit lumpy from quarter to quarter. It's really, as Tony said, we're focusing more on where do we actually add value and where do we get paid for professional services. And so when we looked at the business, we said this thing should go down and we went ahead and let some people go and shrunk the organization in professional services to kind of right size it to where we thought the quality business was. Now that said, we've told them, hey, if there's good business and we can get paid for the work, we'll do it. Speaker 100:44:12And so you're going to see kind of a lumpiness and as projects come in and somebody wants the professional services because they don't want to do the work or they cannot do the work themselves either way and they're willing to pay us to go do it, we'll do it. And so you're just seeing a little bit of that lumpiness of, hey, there's some more work. And some quarters, it may be a little bit less than that quarter over quarter or year over year trend. But when we look at the long term, the full year guidance, we think we've rightsized the organization and rightsized the amount of work relative to professional services. So that the margin and getting paid for what we do is right. Speaker 100:44:58Does that help answer why? Like I wouldn't worry about 1 quarter. Yes, yes. Got it. Speaker 600:45:03Just a little lumpy and I know splitting hairs, it's like about $1,000,000 change here. Yes. Speaker 100:45:09No, I think it's a good question. Speaker 600:45:10Go ahead. Okay. Thank you. Second question, I think the license average PPU jumped to the highest level since fiscal 2022, did those gen those 6 gen AI rollouts this year or the past 1 or 2 quarters really drive that much of a change? Or just any detail on what drove the strength this quarter in the average PPU and thoughts on fiscal 2025? Speaker 600:45:35Thanks. Speaker 300:45:36Yes. And again, it's hard, right? And we're trying to Brian and I both have an effort as we go forward to try and simplify kind of how we describe the business and try to get to a P times Q model. But as we do disclose some of the shipments, it is kind of difficult. One is from a license standpoint, yes, that drops down. Speaker 300:46:02You'd have to take out the fixed. But then if you take out the fixed and then drop that down and look at our volumes, you can kind of see calculate an average PPU because those do get recorded in GAAP revenue on shipment. Connected is a little harder because we will bill for something and that's one thing we need to continue to highlight is as a leading metric is our billings, which were $80,000,000 this quarter compared with GAAP revenue of $54,500,000 But those billings then are deferred and then amortized into revenue over a subscription period. So it's really hard to look at those connected volumes and try and do an average PPU because really have some legacy stuff from deferred that's going in there and then the higher PPU for the new next generation products you really won't see into revenue until future periods. So and then from a license standpoint, you got to it's really trying to understand how much of a license or components of a license are being built within that number. Speaker 300:47:05So do we have volumes? What are we shipping? And do those shipments have more of our license components, so effectively an average higher PPU for those components and or weighted PPU, if you will, for the components that we're actually selling there. But that's the short answer is that in the license area is that we have higher PPUs because of effectively higher components within that license that are being built. Speaker 600:47:39Thank you. Operator00:47:42Thank you. Our next question comes from Mark Delaney with Goldman Sachs. Your line is open. Speaker 700:47:52Hi, yes. Thank you for taking our questions. You have a man Gupta on for Mark Delaney. First, I guess, last quarter, you guys provided the framework for fiscal 2025 of kind of a flat to low single digit decline for revenue year on year excluding the legacy business and midpoint now is showing growth year on year. Can you kind of speak to maybe some of the puts and takes that drove that and what's driving some of that strength you're seeing? Speaker 300:48:25Yes, certainly. I think we're fairly close. Yes, we took out the legacy business. I think at that point, we were looking at a framework of mid guidance of $238,000,000 And right now, we're doing our guidance is $236,000,000 to $247,000,000 So we are seeing some growth. It's as we look at a couple of things. Speaker 300:48:47One is on the license side, looking at our volumes and making sure we right size that backlog and the expectation of what will be shipped within the quarter. As we mentioned, professional services will be down, but in line with what we were kind of providing the framework, we said that it was going to be down. And then, connected services actually being slightly up than what we were thinking about in the framework. So but overall, I think it's actually very close to what we had guided in the framework last quarter. Speaker 700:49:20Thank you for that color. I appreciate it. And then maybe kind of a higher level one on the AI products and appreciate the context for the 1st gen versus 2nd gen. Given that you have kind of the 2nd gen product that's supposed to be a little simpler to make, how should we think about both AI kind of launches and pipeline going through the year? Are you kind of waiting to get more of that 2nd gen product before you pursue kind of a higher level of AI wins? Speaker 700:49:48Or how should we think about that pipeline? Speaker 100:49:53No. What's nice is that all of these products from for the most part Chat Pro through Jexgen through NextGen 1 through NextGen 2 are backward compatible. So we can upgrade people to those products. So we don't slow this down at all and I wouldn't want to do that. So if a customer comes in and they seen our whether they want to look at Chat Pro or whether they want to look at the next Gen 1, whether they want to do Chat Pro and then skip Gen 1 and go to Gen 2, we are able to manage all of those with them. Speaker 100:50:31We show them the various products and where we're headed with them. And then we help guide them through that selection process, right? And there's a series of things we kind of go through with them as they're going through that. What are the features they want? What is the experience they want? Speaker 100:50:52Some of the customers just want a really good operational experience. You can do things in a natural language. Some others want a true assistant in the car. Renault is a good example of that. We just launched with them where they have their avatar called Reno and that really helps it becomes like an assistant and they have plans to move that assistant all the way through their product line and much further beyond even just the auto. Speaker 100:51:27In that case, we're working with them to go from what we can do today to looking out at Gen 2. So you're going to see it's going to be a kind of Speaker 400:51:37like a Speaker 100:51:38continuum for people as they go through these products. And so it's going to be kind of seamless. You're not going to see break offs or we don't have to make a decision of, hey, stop selling Chap Pro because we want everything Gen 1 or stop selling Gen 1 because we want everything Gen 2. We can seamlessly move between those and we can upgrade people even upgrade their cars with down the wire upgrades if they want to upgrade everybody's experience later on. So we have all of that ability in these products. Speaker 100:52:17Does that help you understand kind of the product portfolio? Speaker 700:52:22Yes. That was super helpful. Thank you very much. Operator00:52:26Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Brian for any closing remarks. Speaker 100:52:35Okay. So, I just want to thank everybody for attending the call this morning. I thought the questions were excellent and I really appreciate the interest in our business. I hope you see from Tony and I's remarks that, we're really excited about where the business is headed. For 2025, our priorities, as we said, 1, it's execution. Speaker 100:52:56Execution in order to achieve the numbers we talked about this morning, to return the company to profitability. Tony mentioned that we're have plans in place to work through the debt and we think we'll have answers for you by the next quarter's update. And I think the organization overall, we've made through this transition and we're all really excited about our next generation products. So that's the other real focus for 2025 is execution of those and really getting our customers to see and feel the experience that we're able to generate. And so with that, I just want to thank everybody again for attending this morning. Speaker 100:53:44And we look forward to seeing you at the end of the next quarter and showing you the progress we've made so far. So thank you very much. Operator00:53:54Thank you for your participation. This does conclude the program and you may now disconnect. Everyone have a great day.Read morePowered by