Latest news with #BrianKrzanich
Business Insider
08-05-2025
- Automotive
- Business Insider
Cerence reports Q2 EPS 46c, consensus 30c
Reports Q2 revenue $78.01M, consensus $75.34M. 'I'm incredibly proud of what our team has accomplished. We surpassed the high end of our revenue and adjusted EBITDA guidance and posted our fourth consecutive quarter of positive free cash flow, demonstrating the high value we provide to the world's leading automakers as they work through the ongoing macro uncertainties and complexities facing the industry today,' said Brian Krzanich, CEO, Cerence (CRNC) AI. 'As we look to the future and based on currently available information, we believe we are well-positioned to continue supporting our customers as they work to bring an enhanced experience to their drivers. With Cerence xUI, we are partnering with OEMs as they contemplate and build their future infotainment platforms, as well as delivering enhanced user experiences via over-the-air updates as automakers upgrade their current systems to deliver next-gen features and capabilities to their drivers today.' Protect Your Portfolio Against Market Uncertainty
Globe and Mail
11-04-2025
- Business
- Globe and Mail
Where Will Intel Stock Be in 3 Years?
Intel (NASDAQ: INTC), the world's largest manufacturer of x86 CPUs for PCs and servers, was once considered a reliable blue chip tech stock. It had a wide moat, generated stable profits, and paid out reliable dividends. But over the past decade, that moat evaporated, its market share shriveled, and its profits plunged. It finally suspended its dividend last year, and it's now being led by its fourth CEO in just seven years. That's why Intel's stock has declined nearly 60% over the past three years. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » But could that pullback represent a good buying opportunity for investors who plan to hold it for at least another three years? Let's review its biggest challenges to find out. Why did Intel's stock plummet? Intel is an integrated device manufacturer (IDM) that designs, manufactures, and sells most of its own chips. That capital-intensive business model sets it apart from "fabless" chipmakers like Advanced Micro Devices and Nvidia, which outsource their manufacturing to third-party chip foundries like Taiwan Semiconductor Manufacturing (TSMC) and Samsung. Intel's foundries once produced the world's smallest and densest chips. But instead of ramping up its R&D spending to maintain its lead in the "process race," it squandered too much of its cash on clumsy acquisitions, wasteful buybacks, and big dividends. As a result, Intel struggled with chip shortages and persistent delays as TSMC pulled ahead in the process race with a stable supply of more advanced chips. AMD, which redesigned its chips and outsourced its production to TSMC, then drew away Intel's PC customers with cheaper and more power-efficient chips. According to PassMark Software, Intel's year-end share of the x86 CPU market shrank from 82.2% in 2016 to 58.9% in 2024. AMD's share during that time more than doubled from 17.8% to 38.4%. As Intel lost its core market, it missed the seismic shift toward artificial intelligence (AI) chips -- a booming market that Nvidia conquered with its high-end GPUs for data centers. Nvidia also replaced Intel in the Dow Jones Industrial Average last November. As Intel struggled with its existential crisis, it endured abrupt strategic shifts under three CEOs. Brian Krzanich, who led Intel from 2013 to 2018, "di-worsified" Intel's business with too many acquisitions. Successor Bob Swan divested some of those noncore businesses, aggressively cut costs, and even considered turning Intel into a fabless chipmaker before he was ousted in early 2021. Pat Gelsinger then doubled down on upgrading Intel's fabs to catch up to TSMC, but those efforts relied heavily on government subsidies and didn't impress too many investors before his dismissal last December. After Gelsinger's departure, rumors swirled regarding a potential sale of Intel to TSMC and Broadcom. President Trump even encouraged TSMC, which is expanding its presence in the U.S. with more fabs, to take over Intel's plants. Will Intel's newest CEO turn around its business? But this March, Intel hired Lip-Bu Tan, the former CEO of chip designer Cadence Design Systems, as its new CEO. Tan doesn't seem interested in selling the chipmaker. Instead, he wants Intel to improve its engineering capabilities, develop more CPUs with built-in AI features, and expand its struggling foundry business. He also warned that "bureaucracy kills innovation" and wants Intel to simplify and streamline its sprawling business. However, those vague plans don't sound too different from Gelsinger's strategies -- and it will take at least a few quarters to tell if Tan can reform Intel's aging development model and stabilize its shaky business. For now, Tan needs Intel to deliver a steady supply of its current-gen Meteor Lake chips, gear up for the launch of its next-gen Panther Lake CPUs this year, and deal with the Trump administration's "Liberation Day" tariffs and ongoing push to end its CHIPS Act subsidies for domestic chipmakers. Where will Intel's stock be in three years? For now, analysts expect Intel's revenue to grow at a compound annual growth rate (CAGR) of 4% from 2024 to 2027. And after two years of net losses, they expect it to return to profitability in 2026 and grow its EPS by 187% in 2027. We should take those optimistic estimates with a grain of salt, but they might be realistic if Tan reboots Intel's business in the same way Lisa Su saved AMD. Like Su, Tan is going back to the drawing board by developing fresh chips again -- but we still don't know if that 11th-hour effort will fare any better than Intel's previous plans. At $19 a share, Intel trades at 17 times its estimated earnings for 2027. Assuming Intel matches Wall Street's estimates, grows its EPS by another 20% in 2028, and trades at a reasonable 20 times forward earnings by the first quarter of 2028, its stock price might rise about 37% to $26.20 per share within the next three years. That would be a decent three-year gain, but Intel simply doesn't have much room to make any more mistakes. If Tan's turnaround fails to stabilize Intel's business, its stock could either stagnate or slip even lower over the next three years. So while it could potentially bounce back by 2028, I'd rather wait for a few more quarters before pulling the trigger. Should you invest $1,000 in Intel right now? Before you buy stock in Intel, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Intel wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $509,884!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $700,739!* Now, it's worth noting Stock Advisor 's total average return is820% — a market-crushing outperformance compared to158%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of April 10, 2025 Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
Yahoo
04-03-2025
- Business
- Yahoo
Cerence (NasdaqGS:CRNC) Stock Soars 44% Despite Disappointing Q1 Earnings
Cerence reported disappointing earnings for Q1 2025, revealing declines in both revenue and net income. Despite this, the company's stock rose 44% over the last quarter. Key events, such as the strategic partnership with Mapbox and an enhanced collaboration with NVIDIA, may have bolstered investor confidence regarding future growth prospects. Cerence's Q2 guidance, predicting a revenue increase to $74-77 million, could also have positively influenced market sentiment. Amid a broader market slump where major indices and stocks, like Tesla and Nvidia, experienced declining performance due to concerns about tariffs and economic uncertainty, Cerence's position and guidance contrastingly suggested resilience and optimism about its innovative technology offerings. Combined with the ongoing amendments to its corporate governance structure to mitigate liability, these factors likely contributed to a significant positive movement in Cerence's stock amidst a volatile economic landscape. Unlock comprehensive insights into our analysis of Cerence stock here. Despite more recent positive news for Cerence Inc. (NasdaqGS: CRNC), over the past year, the company's total shareholder return has been a decline of 29.44%. This performance lags behind the broader US market, which returned 15.3% and the US Software industry with a return of 4.4% over the same period. Cerence's financial challenges have been evident, with significant declines in revenue and increasing net losses, as reflected in its Q1 2025 earnings report, showing revenue at US$50.9 million and a net loss of US$24.29 million. Amidst these challenges, the company has pursued growth through key partnerships, including alliances with Jaguar Land Rover and Audi announced in 2024, using Cerence's AI capabilities. Leadership changes, such as appointing Brian Krzanich as CEO and the launch of new AI products, underscore efforts to pivot towards innovation in the automotive sector while managing unprofitability and volatile share performance. See whether Cerence's current market price aligns with its intrinsic value in our detailed report Assess the downside scenarios for Cerence with our risk evaluation. Are you invested in Cerence already? Keep abreast of every twist and turn by setting up a portfolio with Simply Wall St, where we make it simple for investors like you to stay informed and proactive. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NasdaqGS:CRNC. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
07-02-2025
- Business
- Yahoo
Q1 2025 Cerence Inc Earnings Call
Brian Krzanich; Chief Executive Officer; Cerence Inc Tony Rodriquez; Chief Financial Officer; Cerence Inc Nick Doyle; Analyst; Needham & Company Mark Delaney; Analyst; Goldman Sachs Colin Langan; Analyst; Wells Fargo Jeff Van Rhee; Analyst; Craig-Hallum Capital Group Jeff Osborne; Analyst; TD Cowen Operator Welcome to Cerence's first quarter of fiscal year 2025 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 estimates as described in our SEC filings including the Form 8-K with the press release preceding today's call and our Form 10-K filed on November 25, 2024. In addition, the company may refer to certain non-GAAP measures, key performance indicators and pro forma financial information during this call. Please refer to today's press release for further details of the definitions, limitations and uses of those measures and reconciliations of non-GAAP measures to the closest GAAP equivalent. The press release is available in the IR section of our website. Joining me on today's call are Brian Krzanich, CEO of Cerence; and Tony Rodriquez, CFO of Cerence. Please note that slides with further context are available in the Investors section of our website. Now on to the call, Brian. Brian Krzanich Thank you, Jason and good afternoon, everyone and welcome to the Q1 2025 Cerence's earnings call. I'm really excited to speak with you today while Tony will walk you through the details. I have the pleasure of sharing our great Q1 results with you first. Top line revenue of $50.9 million and adjusted EBITDA of $1.4 million both exceeded the high end of our guidance, and we had strong free cash flow of $7.9 million. On our last call I shared that our fiscal year 2025 goal is to return Cerence's to profitability a critical step to fuel the future growth. With our Q1 results on a non-GAAP basis we have moved toward profitability even earlier than we forecasted. I couldn't be more proud of what the team has accomplished and the great start this has given us for 2025. In addition, during Q1, we repurchased [27 million] of our convertible notes due in June of 2025. And as we've discussed in the past, our plan is to extinguish this step through some combination of repurchases and financing. And we will decide the best path for taking into account shareholders interests and with a view towards driving long term value. As many of, you know that those who are new to the call may not. Cerence AI delivered AI powered multi-modal and conversational agent experience for automotive and beyond. We partner with the world's leading automakers and transportation OEMs to create AI powered assistance. Empowering them to deliver incredible user experiences to their drivers while also maintaining their unique brand and data ownership and keeping costs in line. In addition to our deep technical expertise and our exciting product road map more on that in a moment. The world's leading automakers and tier one suppliers love to work with Cerence because we are a neutral and highly specialized supplier, living and breathing automotive and speaking the same language as our customers unlike our competitors. With the ongoing challenges OEMs are facing cost pressure slowdown in EV and car sales and an ever-changing geopolitical landscape. Cerence AI is uniquely positioned as the AI innovation partner who can help automakers deliver a premium experience while also navigating the impact impacts of a complex and rapidly changing industry. This quarter, the team has been laser focused on our three key deliverables for 2025. First, continuing our work to bring [Cerence Xey], our next generation product based on our CaLLM family of language models to market. [Xuis Agentic Multi LOM] architecture provides deep customization and enables compatibility with both new and existing in containment systems. Making it easier for automakers to deploy to both current and future vehicles. We reached several important milestones. For [Ex U I gen one] within the quarter, including delivering five proof of concepts and kicking off our first major customer program further validating and solidifying our product and go to market strategy. And we've partnered with leading AI companies like NVIDIA and Microsoft. Empowering us with tools and resources to deliver improved performance and cost efficiency to our customers and their drivers. These AI leaders are eager to work with us given our position with global OEMs and install base. And you'll see more announcements in this space as we approach NVIDIA's GTC in March and the Shanghai Auto Show in April. The [XU I GEN] two which we are demonstrating now and will be available to our customers by the end of 2025 will deliver a single conversational interface that works across both cloud and embedded applications to complete tasks based on user preferences, integrating all aspects of a user's interaction into a seamless conversational interface that extends beyond voice. Our future product vision is to enable the driver to get into the vehicle and put their phone down. Using the in-car system to complete the tasks they would normally do in their phone. In this new agentic world. We can combine activities like navigation, phone, calling, text messaging and web search that even with your phone today would require multiple footsteps and switching between various apps. [Xu I] brings the future of agentic and conversational eye to your vehicle and transforms the car into an assistant that saves you time and truly simplifies your life. The second key deliverable for 2025 is continuing to grow our business with new and existing customers. In this first quarter of fiscal 2025 we secured six new design wins across our current product line and two new wins for our Generative AI Solutions across large and global OEMs. We also saw start of production for six major customer programs and two generative AI programs within the quarter, including a large trucking customer and a major cloud win back in China and the Renault avatar program that includes our generative AI solution. The third key deliverable for 2025 is continuing our transformation and cost management. You've already seen the benefits of this work in our Q1 top and bottom-line results. And as I previously stated, we believe we should always be looking at how we can be more efficient from both a cost and operational perspective. For fiscal year 2025 we are focused on simplifying and streamlining our organization and our structure to continue taking cost and spending out of Cerence. We can 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 space. This work is underway as we've continued to evaluate our office space and legal entities kicked off a process to streamline and improve our relatively complex customer contracts. And continue to evaluate every rehire and new hire as we move forward. We're looking forward to fiscal [Q2] to 2025. We're issuing initial revenue guidance of $74 million to $77 million with GAAP net income expected to be in the range of $1million to 5 million and adjusted EBITDA in the range of $18million to 22 million. And Tony will provide further details on the second fiscal quarter in his remarks. But this is my second earnings call as CEO of Cerence AI & I, and the rest of the team are proud and encouraged by the first quarter results. Cerence AI is bringing conversational AI and true agentic capabilities to the vehicle now, not just in the future and we have an exciting road map ahead. With that I'll turn it over to Tony to go through the detail of our quarterly numbers, our guidance and our restructuring activities, Tony. Tony Rodriquez Thank you, Brian. Today, I will be reviewing our Q1 results for fiscal year 2025 and providing some guidance for our second quarter. I will also comment on our progression toward full fiscal year 2025 guidance. Let's get into the Q1 operating statement. At the top we achieved Q1 revenue of $50.9 million which exceeded the high end of our guidance range of $47million to $50 million. Our revenue this quarter was aided by $2 million in connected royalty true ups for one of our OEM customers. As a reminder, this is normal as our customers self-report royalty volumes that approximate their auto shipments with our technology in each quarter and periodically true up to actual. With this revenue achievement. Our gross margin for the quarter of 65% also exceeded our, the high end of our guidance of 60% gross profit was also benefited from a greater mix of higher margin license and connected service revenue as compared to professional services revenue. While our professional services revenue was lower than anticipated during the quarter, it performed at a higher gross margin than anticipated. Moving down the operating statement our non-GAAP operating expenses were $34.1 million for Q1 compared to $44.4 million from the same [quarter in fiscal year '24] this decrease of $10.4 million or 23% represents a full quarter of savings from the restructuring efforts conducted at the end of last year. We also delayed some planned R&D hiring until Q2. Additionally, the company received notice of acceptance of an international tax credit that allowed us to record $2.5 million in operating cost benefit. The tax credit benefit recognized this quarter related to 2021 through 2024 fiscal years and was anticipated in our full year guidance but later in the fiscal year. Our adjusted EBITDA of $1.4 million well exceeded our guidance of loss in the range of [$6.6million to $9 million]. This was driven by improved gross profit as well as decreased operating expenses from continued effort of managing our ongoing operating cost and the previously discussed international tax credit of [$2.5 million]. As compared to prior year, our Q1 revenue declined $87.4 million but this was driven by $86.6 million of non-cash revenue recorded in last fiscal year associated with our Legacy Connected Services contract that was decommissioned in Q1 of fiscal 2024. Our net loss for Q1 was $22.4 million compared to net income of $23.9 million for the same quarter in fiscal '24 again, the decline driven by the decommissioned Legacy contract. We ended the quarter with $110.5 million of cash and marketable securities down $19.9 million compared to where we ended last fiscal year. The lower cash balance this quarter related to our repurchase of $27.4 million in principal value of our 2025 convertible notes offset by our positive free cash flow during the quarter of $7.9 million. Our cash flow in Q1 absorbed approximately $8.9 million of cash restructuring costs associated with the transformation efforts of Q4 last year. We believe the good start to the to the year positions us well, to achieve our full year cash flow expectations. During the quarter, we recorded restructuring another cost of $11.1 million which included a $10.2 million charge primarily related to our transformation initiatives of which $3 million related to accelerated stock-based compensation associated with the termination of former senior management employees. As we look at our revenue breakdown and operating metrics there, the license revenue of $22.7 million was up $1.9 million or 9.1% from the same quarter last year and slightly ahead of our expectations. As planned, there was no material fixed license revenue during the quarter. Q1 connected services revenue of $13.7 million was up $3.5 million or 34% from $10.2 million the same quarter last year. When excluding the legacy revenue. We believe this this reflects a positive trend of increased demand for our connected vehicles. As planned. Our professional service revenue was down year over year. However, the work performed was more profitable than a year ago. As we review our key performance indicators, this quarter total adjusted billings which are defined as our total billings adjusted to exclude professional services, prepaid billings and prepaid consumption was $227 million. An increase of 3% for the trailing 12-month period this year compared to previous year. Total billings including professional services for Q1 of $69 million were up 7% compared to $64.6 million for Q1 last year. As a reminder when we look at our total licenses shipped pro forma royalties is an operating metric. We use representing the total value of variable licenses shipped in a quarter including the shipments from fixed licenses where revenue was previously recognized upon contract signing. We refer to shipments where revenue was recognized in prior periods as fixed license consumption. Our pro forma royalties were $36.7 million which were higher by approximately $1.4 million as compared to Q1 last year and in line with our expectations. Consumption of previously fixed contracts totaled $14 million this quarter lower than the same quarter last year by about 3% and lower than projected. Going forward we anticipate a lower level of consumption of royalties associated with past fixed license contracts. Our penetration of global auto production for the trailing 12 months declined by 251%. We shipped approximately 11 million cars with [San technology] the Q1 up 2.6% compared to last quarter but down 10.5% year over year. Q1 worldwide IHS production declined 1.2% compared to the same quarter last year and was up 10.8% quarter over quarter, excluding China, worldwide car production was only up 2.8% quarter, over quarter and down 4.8% versus same quarter last year. This is important to note as this shows that part of our worldwide penetration decline relates to the increase in China production within worldwide auto production. And to date, we have not been significantly successful at selling to Chinese OEMs into the chinese domestic market. Weaker production volumes among our top customers also contributed to our year over year total volume decline. That said the number of cars produced that use our connected services increased 5.1% on trailing 12 months basis compared to the same metric a year ago and 5.6% compared to last quarter. This reflects the increased demand for connected vehicles. Now turning to our guidance for Q2, we currently expect revenue to be in the range of 74 million to $77 million. This includes $20 million projected fixed license revenue expected to be signed during the quarter. Additionally, our Q2 revenue guidance absorbs approximately $2 million of headwinds in professional services we saw in Q1. We're projecting, we're not projecting any additional fixed license revenue for the remainder of the year. With the level of fixed license revenue forecasted in Q2, we expect gross margins to improve to between 74% and 76% that income to be in the range of $1million to $5 million and adjusted EBITDA to be in the range of $18million to $22 million. When taken in the context of full year guidance this means that the implied second half guidance for adjusted EBITDA would be negative if you simply base your calculations off the midpoint of our range. To be clear, this is not our intention to signal any change in direction of the business rather it is still early in the year. And as mentioned, Q1 was aided by a few timing related factors on the expense side that will catch up to us later in the week in the year. With that said, we had a positive first quarter but are not yet prepared to officially revise our [20 fiscal '25] revenue profitability and cash flow guidance. The strong start to the year position us very well and gives us confidence that our full year numbers are likely to come in towards the top end of the range of our guidance that we gave last quarter, especially full year adjusted EBITDA and free cash flow. When looking at our liquidity as previously noted, we repurchased $27.4 million of outstanding 2025 convertible notes. As Brian mentioned, our plan is to extinguish the remaining $60 million of convertible notes due in June through some combination of payoff and financing. Between now and June, we will continue to evaluate potential capital structures that could position the company to execute our longer-term strategic direction while also allowing us to retain a cash reserve to be flexible as we move forward. Overall, we are pleased with the solid results for Q1 and our continued financial performance. I will now turn it back to Brian to close our remarks. Brian Krzanich Thanks Tony. In closing. We're happy with our Q1 results and motivated by our Q2 forecast. We remain focused on execution, business process improvement, cost reduction and advancing our next generation road map. Now before we close, I want to take a moment to explain my philosophy on forecasting. We take our commitment to the street seriously and our goal is always to meet or beat our forecast. I have a firm policy not to change guns after the first quarter, our first quarter results and second quarter forecast give us confidence in our fiscal year 2025 forecast for revenue and we are projecting to be in the upper end of the range for adjusted EBITDA and free cash flow. With regards to the recent tariff announcements, we don't believe that there will be a meaningful impact to Q2 as we're already halfway through the quarter and the recent tariffs were paused earlier this week. Now for the rest of the fiscal year, considering the number of changes that have occurred just in the last several weeks. We believe the situation is still incredibly fluid. It would be too speculative for us to say what if any impact there will be on our results at this time. And we'll provide an update on our next earnings call in May if there is meaningful impact. We continue to believe in our ability to deliver on our Q2 and Fiscal year '25 guidance and in our growth for Fiscal year '26 and beyond. And we look forward to continuing to share our progress with you and we will now open it up for questions. Operator Thank you. (Operator Instructions) Nick Doyle, Needham and Company. Nick Doyle Hey guys, thanks for taking my questions. The design line and sop commentary is really positive so two questions there. How big can that first major customer program with [SXU I] be and second, how many units or any help around, sizing the six SOPs that are expected to really start here and, and how does that impact your PPU going forward? Thanks. Brian Krzanich Sure. So, Nick, this is Brian. I tell you that the first one is with the European auto manufacturer. If you look over the life of the contract, it's several million units, I think in the first year it's roughly a [million ish], maybe slightly less. And we're seeing the PPU upgrades that we've talked about in the past. Tony's going to talk to you a little bit about PPU after I'm done here because we really have a plan to start bringing PPU to you guys moving in and starting in the next quarter. If you take a look at the rest of the POCs that we have going, it's with all of the major OEMs just about in various levels of completion or start. And so again, it could be for the next gen one one that we're looking at right now. It could be multiple millions of units as we move forward and we're seeing the PPU upgrade that we expect for this product. So, there's interest and we're getting paid for the product we bring this technology is really the beginning of the agentic connected vehicle model that we have. And it will continue in next gen one and then next gen two as well. Nick Doyle Thanks. Tony Rodriquez Hi, Nick. Yeah, I mean, just bridging that on PPU. We, we've talked in the past on these calls that, we really needed to simplify the model and get to a volume times price model effectively. What we can say, we're not prepared to guide on PPU or effective PPU going for at this point by next quarter, we will. And we'll be able to give you more of these volume questions and PPU questions, but what I can say is there's really two fronts to us growing our PPU and I'll comment a little bit about the how we are kind of seeing that trajectory. But, but the two fronts are the number of connected cars. How many of our overall car's shift are connected? The second is the price in the, with the additional features of these newer products on the connected side, that increase in price and how it's driving our effective PPU. And again, at this point, though, I'm not prepared to provide a number, I would say that our effective PPU is really thinking about our license revenue in a quarter for those cars shipped so divided. So, the revenue divided into those cars shipped. And then on the connected side, it's the volume of the connected vehicles times really invited the billings, because as you, as we talked about before those billings are then recognized over a subscription period. So, we want to get to an effective PPU. What was the value of those cars shipped. What I have seen, kind of precursor to next quarter is that we are seeing the benefits of those two fronts, the increased number of connected cars and the increased price impacting positively and growing that effective PPU number. Nick Doyle Really helpful. Thank you. And then second, billings is trending in the right direction. Can the conversion of some of what's in the pipeline today? Get you to the [$290 million] that you talked about. And then if I could just squeeze in, why take in all the fixed contracts this quarter? Thanks. Tony Rodriquez Yeah. Two things. Yes. So yeah, the number that we, the company has historically given on is trailing 12 months billings, right? And we quoted that [$227 million] of trailing 12 months adjusted billings. And again, it's adjusted for not including billings related to professional services and then gives up and down associated with previous fixed and current fixed. So that, that's a good number. We've talked about that, billings this quarter will outpace our, our projected revenue and again, our projected revenue, which we have noted is, [$236million to $247million]. So again, the billings outpacing that I think we're on track to certainly do that. The second question, what was the, so. Brian Krzanich The second question was why do all the prepaid now? And really, it's just a combination nick of customers and what we're able to negotiate. You gotta remember the prepaids come with a discount in the past. That discount was often quite high. And by a shrinking the total footprint that we're going to do down to $20 million. And really being more selective and making sure that it's with deep partners and the right discounts, we're able to get this discount down to record levels. So, it was really, we had more demand than we had budgeted of 20 we got the right discounts. And so we went ahead and administrate it. That's, that's why we always tell you and I always say you really need to look at the full year. There's going to be lumpiness in our numbers quarter to quarter. But it's just, right, customers great discounts lower than we've almost ever achieved and it's the right thing to do now. Tony Rodriquez And lastly the timing in these cases, these, these customers with those lower discounts and everything that Brian said are coming to a point where their previous fixed is now consuming, down to a point where they want, they want to re up that prepayment and it fits into their fiscal year as well, which starts April 1st or well, sorry, within this quarter. So, they want to get it ahead of the next quarter. So, I think all those things are why we would do it. It's not that we planned per se to do it. It's we're taking we're being opportunistic with that $20 million. Nick Doyle Thank you. Operator Mark Delaney, Goldman Sachs. Mark Delaney Yes and good afternoon. Thanks for taking the questions. Good to hear about the breadth of your customer engagements and momentum with your Gen AI Solutions. I'm hoping you can expand a bit more on that topic and maybe speak to the competitive landscape for digital assistance and any sense of how your market share may trend relative to what you've seen with your traditional products. Brian Krzanich Sure. So, I tell you the competitive landscape is, really pretty much what it was last quarter as well. We continue to see some of the big players like Google and Amazon in there. We see some of the, I'll call it software providers like ourselves. We see [Sound Homeone] and some of the others. And then we see some, I'll call it DIY where there are either [SoC] providers or some of the OEMs starting. Now, what happens is they're biting off bits and pieces. And they're often times being very prescriptive in some of the things like they must be connected, or you're locked into certain LLMs. So, our approach to that is always, hey, we're agnostic, we can use the latest and greatest LLMs, you can choose, we can customize, you can choose customized wake up words. A good example was Renault avatar where we customize the Wake-up word around Renault, which is their, their Avatar's name and really customize the user experience. And that's really how we approach these. So, and then we offer, embedded capabilities that are quite strong and as we move through this year get even stronger, next gen two. And this is what Microsoft is really helping us with around the CaLLM embedded LLM capabilities, shrinking the footprint and getting, two agentic LLM capabilities embedded in a car, which means you have to get small footprint from memory the right sizing the [SoC] and, being able to get it capable of having the right latency, those are all the things that we compete with, but otherwise the competitive landscape hasn't really changed. Mark Delaney That's a whole context, right? And, maybe too soon to try and quantify. But I mean that the share of market, do you think it's similar to what you've seen before? Do you think you can maybe gain some share with all the traction you're seeing? Brian Krzanich Yeah. So, I mean, Tony tried to kind of walk you through and, and basically, if you look at the OEMs that we typically participate in which although I'll call it, let's call it the Western OEMs, our market share is relatively flat in that space. What we're seeing is, China inside of China, which, is taken away from our traditional OEMs and our ability to progress into China in China has not been there yet. And we're continuing to look at options and ways to do that. We believe our technology competes very well in that space. It's all about, basically, national winners that they're selecting. Now China outside of China we have good relationships and are in BYD and Zeekr and Great Wall [Neo]. So, we're in some of the Chinese outside of China. But if you look at the OEMs that we typically the Western OEMs that we typically play in our market share is relatively flat. Yes. Mark Delaney Got it. So, one last one for me, just on the restructuring actions, I think you said on the last call you expected to be at the high end or maybe even someone above the $35million to $40 million annualized target, maybe update us on where that came in. And I think you said it's all in place, exiting the fiscal first quarter, but just to clarify where you stand on cost action and if there's any more to come or it's in place. Thank You. Brian Krzanich So, I can start that, and Tony and Tony can answer in more detail. I think also Mark; I may not have completely answered your first question. So, I do think we will in the OEMs that we play with or that we participate with, we will gain share. Our target is to gain share. We saw a win back in China around the cloud. We're continuing to drive we believe a leading-edge road map of products. So, our goal is to continue to gain share in the guys that we typically play with. And then, we're aggressively seeing what we can do inside of China. Now, your question was cost reduction. Your second question was around cost reductions and, and cost improvements and tell you that what we've already forecasted for 26 or excuse me for 25 is already, is work that's for the most part, already done. So, you're seeing the results of it filters through the cost system. So, whether it's headcount reductions or site closures or site reductions, things like that are already filtering through as the year goes on. We do have a set of programs that I talked about that we're continuing to look at and drive. And if we take something like improving our contracts and the efficiency within our finance unit, that's what Tony has ongoing right now. That work will probably take through at least halfway through this year and into probably the second half of next year. And you're really going to see the benefits of that one roll into 26 and it's hard for us to forecast right now because if we look at things like, reducing the number of legal entities or improving how we financially account for things and improving and streamlining that, we're still trying to figure out how do we account for how much effort and work? Does that remove from the system and spend it? You know, how many fewer tax returns do we have to do? How many filings do we not have to do? But most of those will roll into 26 for additional cost reductions as we move forward. Operator Colin Langan, Wells Fargo. Colin Langan Oh, great. Thanks for checking my questions. You mentioned you got it to the high end of the range. You said there were some factors in Q1 that were outliers. You just remind me what they are? Was it the $2 million of royalty? And then the 2.5 of tax credit. Are those the items you're referring to that were kind of? Tony Rodriquez Yeah, a couple of the onetime items, we say onetime items and I'll talk through a couple of it. One is the true ups and as we, as our royalty reports come in our OEMs and tier one's report royalties, they report and then they oftentimes will true up to actually report an estimated number of true up the actual. So, in this case, there was a connected services contract, and we did some work with an OEM, and you wanted to make sure we were capturing all of our activity and got $2 million of a true up for past. So, some of that was in quarter of that $2 million. So, it isn't it would have, it would have hit the quarter as well. So, and then some of this is before the quarter. But if you, even if you take that $2 million away, we were kind of smacked down in the middle of, of our, our guidance. This put us over, over the edge on guidance on the top line. The tax credit was something that was baked into our full year expenses. We just happened to get a confirmation of that credit in Q1. We were able to record it for previous years, [20 the years], 2021 through 2024 in the first in Q1 where we had [that B] into a savings of [CapEx] for fiscal '25 but not necessarily in Q1. So those were the two main items that drove in improved profitability to the bottom line. Colin Langan And the tax credit isn't a special, wasn't treated as a special item. Tony Rodriquez I'm sorry, say that again. Colin Langan The tax credit wasn't a special adjustment on special item. Just out. Tony Rodriquez Yeah, the tax credit was, it's an [off X] credit international tax credit associated with offsetting R&D costs. And, so, in previous years we incurred the entire international for this international, this country. We incur the cost for R&D without the same of the credit, this was a catch up for that country. And again, that 2.5 related to 24 and before, so we will have some savings, in 25 as well the rest of the year for the 25 expectations for that credit. But that was kind of the catch up. Colin Langan And you mentioned in the closing commentary about tariff risk, I got a bit, I'm a little surprised. I kind of assume software wouldn't have much risk, but where is your tariff exposure? If there are tariffs? I should be thinking about that. If you could frame it. Brian Krzanich Sure, it would just be in unit volume. So, if the projections were at one point that if the tariffs were applied, it could affect 25% of the cars and multiple [$1000] increases in cost. And so, if people buy fewer cars. That's when, we get paid from a shipment standpoint. Right. So, it would be purely volume. So, we don't get we are a US company. And so at least right now the talk of tariffs it's, it doesn't apply quote to our product, but it applies to the [Poten] or would have applied potentially to our customers products. And that's all we were, [counting again]. And as I said right now, they've all been put on hold and we're halfway through the year. So, we don't see it right now. It's just an impossible prediction. Colin Langan And just lastly, you talked about [XUI], how quickly can this ramp, how quickly can adoption be? Because are our contracts 2 to 3 years or is this something that could be, added and drive that pricing higher in the next year or two pretty quickly? Brian Krzanich Sure. So, you have to remember that there's two versions of our agentic large language model software version that we think about. One is an embedded non connected version and the other one is a connected version and the connected version gives you the ability to do things like, hey, what was the latest score on the football game or, who won La Liga this weekend? You know, it gives you real time data. It also gives you points of interest that are updated and all of that kind of information. But it's not required to run the car, do navigation. Those are all embedded efforts. Typically the cars come from anywhere, Tony and I were talking about this this morning from one to we've seen as long as 10 year contracts for connectivity. I tell you that the majority of them are probably somewhere in that 2 to 3 years. At that point, the customer, the end user, the driver makes some agreement with the OEM the manufacturer of the car to continue connectivity at some rate, we don't drive that. And we're just, it's the early days of seeing what we sign up is for people. So we don't really have a forecast for that. When we look at this, we look at just most cars are being connected as we ship them. What's that rate? And that's how we project through 25 and all from that perspective because most of those cars are going to still be within the one year to three-year terms. Colin Langan Got it. Alright. Thanks for taking my question. Operator Jeff Van Rhee, Craig-Hallum Capital Group. Jeff Van Rhee Hey, Brian Tony, this is Daniel on for Jeff. Maybe just sort of as an example of the sort of places where you're seeing momentum if you could speak to that Chinese win back, you mentioned, maybe just describe that deal in a little bit more detail, what that bake off was like, how you won, why you won, etcetera. Brian Krzanich Sure. So that one was with the Western OEM cloud infrastructure, and we won based on again, the technology leadership that we provided and our willingness to be much more flexible and configure their cloud system exactly how they want it. So, it was a win back that we've had against a very strong competitor, prior local competitor. Jeff Van Rhee That's helpful. And then just on connected, either for Brian or Tony, just on the metrics that we should be looking at, a few different ways we could read this in new connected, I guess if you exclude the [$2 million] up this quarter, I guess it's down sequentially, it's up single digits, year over year, the trailing 12 month car shipped, that's growing 5% but a little bit of a deceleration from last quarter. Just a bunch of different ways we could read that. How would you cutting through all that, speak to the metrics? What's the most relevant, how should we be looking at the trajectory there? Tony Rodriquez Yeah, so I think there's a couple ways to look at it as we think about our 22 fronts of growth with regard to connected, right, is the number of connected cars that connected rate. So, for every car that ships out, how many of those are connected? And then two, what is that price per unit that we're seeing over both, connected is that growing as we anticipate? And how is that contributing to overall PPU? So, it's, it's those two fronts, what I would say is that we're not ready to provide that, that, that guidance right now on connected rates and PPUs. But and then the second one is, or the third one would be billings. So just remember too that, we, so we, if a car ships out with a connected at that time, we're billing for two things. One is the embedded license which drops to revenue right away and then the connected, which then gets recognized over the future that's why as the first question was, hey, we're what's your billings? Are you on track for your billings this year which will outpace our GAAP revenue because the connected billings will be billed but not recognized until the future. So, and we're, we don't break apart our billings between license and connected. So there's components that if you're trying to model are missing and we, and we're, we know that it's important to you. It's important for us to know, to be able to give you that, that information to help you model. But that's the really next quarter. But I think the way things you need to think about as we go forward are the connection rate, the price per unit on the connected side, the price per unit overall of the car shipped. And then lastly the growing billings within connected. Jeff Van Rhee And then just last for me, just a modeling questions the professional services [COGS] dipped below $10 million this quarter. I think first time we've ever seen that and that's kind of been a little bit of a trajectory over the past year for those [COGS] have been going down. Is that sustainable? Is that structural, is, is that one time just sort of our expectations for PS COGS? Tony Rodriquez Yeah. So yeah, so PS is, is down as we, as we've said, what I mentioned in the call is that our margin for PS is, actually, proved, I think, we typically plan that business to see that business as a 30% margin business, which brings down our overall margin this quarter. It was north of that, which was beneficial to us. So overall COGS were down because professional service revenue was down. But also for what we did sell, we sold it at a higher margin. So, as you think about modeling, you could probably model professional service margins at north of 30 now. Jeff Van Rhee Okay, thanks, Brian. Thanks Tony. Operator Jeff Osborne, TD Cowen. Jeff Osborne Hey, thank you. Just two quick ones from my side. One, I think it was last quarter. You gave some usage stats on the gen AI platform. I want to say it was maybe June, July that your first customer in Europe pushed that update into the install base. Is there any metrics you can share about usage of the newer platform relative to the older conversational AI non-AI solutions. Brian Krzanich But I don't have any just any new metrics. I tell you we're continuing to see increased usage just if you look at our cloud traffic, that as the generative AI connected vehicles go out, we're continuing to see our cloud usage increase as well. But I don't have any new numbers for you from that perspective, but it is. Jeff Osborne Wasn't sure if there's like a halo effect in particular as you had an installed base of, I think it was the ID threes and fours if my memory is right that new users were using it for a month or two and then that tapered off, but it doesn't sound like that's the case. Is that right? Brian Krzanich That's, that's not what we're observing yet. No, we're continuing to see it. In fact, one of the biggest things we work on is really helping end users understand just what the car is capable of doing. So, what we're finding is as users see, all they can do with voice in their car, with these connected cars, with the gen AI, they're using it more and more. Jeff Osborne That's great to hear. My last question is just as we approach the June deadline for the debt, It remind us is there a minimum cash balance that you feel comfortable having? Obviously, you've got a nice EBITDA guidance here for Q2, I assume you generate nice free cash flow. But as you think about paying off the remaining tranche, how should we think about the options and then what the minimum cash balance you feel comfortable having? Tony Rodriquez Yeah, we don't, we don't have a minimum per se that, that said we're very comfortable with paying it if we pay it off and don't refinance any, we'll likely be north of $70 million at the lowest point. So, is, is that the exact right number? That's what we're looking at as far as overall capital structure to see, where we want to be, but we're comfortable that it if we need to, we can continue to grow the cash flow of the business and grow from a, a lower point of $70 million of cash after the payoff to you know, to where that optimal amount is. Jeff Osborne Got it. That's all I have. Thank you. Operator And I'm not showing any further questions at this time. I'd like to turn the call back over to Brian for any remarks. Brian Krzanich Okay. I would just like to, reiterate, we're really proud of our Q1 results. You saw our forecast for Q2, and we've also said that for the full year, we're comfortable in saying we'll be in the upper end of our guidance for both free cash flow and adjusted your data. We're really driving hard as we enter Q2 into continuing to push our generative AI development work and doing our POCs at the customers and we look forward to talking to you in May to give you an update and the progress on all of those. And with that, I'd just like to close the call with a Thank you very much and I look forward to talking to you all in May. Operator Thank you, ladies and gentlemen, let's conclude today's presentation. You may now disconnect and have a wonderful day. Sign in to access your portfolio
