Q3 2023 Cerence Inc Earnings Call
Good day, and thank you for standing by.
Welcome to the CRH quarter, three 2023 earnings call.
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Please be advised that today's conference call is being recorded I would now like to hand, the conference over to your speaker today.
Rich Eugenia senior Vice President of Investor Relations. Please go ahead.
Thank you Britney and welcome to <unk> third quarter fiscal year 2023 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 goals targets employers should be considered to be forward looking statements.
<unk> makes no representation 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-K with the press release preceding today's call. Our Form 10-Q filed on August eight 2023, and our Form 10-K filed on November 29 2020.
To.
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 on the IR section of our website.
Joining me on today's call are Stefan <unk> CEO of <unk>, Tom Bogan CFO of <unk>.
Our Chief Technology Officer as a reminder, the only authorized spokespeople for the company are Stephane, Tom and me.
Before handing the call over to Stefan I would like to mention that we'll be presenting at the Goldman Sachs commuter Copier Investor Conference in San Francisco on September six and the Raymond James Virtual Lean mean, and Green vehicle Investor Conference on September 18th.
Now I want to recall Stephane.
Thank you rich and welcome everyone and thank you for joining us to discuss our third quarter results.
There were several important developments in the quarter I would like to highlight first we delivered solid results with revenue of approximately $62 million come in at the high end of our guidance. In addition, our strong focus on operational excellence contributed to our profitability metrics performing better.
Rather than expected.
Except for GAAP net income, which included a charge associated with our convertible debt financing.
Operationally, we delivered on everything we committed to invest also in our last call.
I am extremely pleased with the progress the company has made in the last 12 months, creating an organism organizational structure committed to three key principles.
First continue to lead innovation in AI towards the transportation space second delight, our customers with on time and quality products.
When strategic accounts.
Our long term growth.
At the core of our commitment to innovation are the enhancements, we are making to several <unk> products using large language motives and genetics.
If possible detailed these important product updates in his remarks.
At a high level, our deep expertise in the eye for automotive and strong OEM relationships.
Put us in a unique and favorable position to partner with our customers to deliver game changing application of these technologies.
Bringing us one step closer to our future production the immersive companion.
<unk> remains well positioned to capitalize on the transformative trends within AI.
Incorporating new inputs into our prototype mobility AI platform as we continuously strive to enhance customer experience and expand product functionality.
Our core auto business continues to perform well.
With our global out of penetration rising to 54%.
That means that 54% of total new global light vehicle production include some level of technology from <unk>.
This is the third consecutive quarter of increasing penetration and this figure is the highest we have seen in nearly two years. This elevated level of penetration continues to be a straightforward endorsement of severance superior technology.
Tom will comment on the product mix associated with this market expansion in a few minutes.
While there are some crosscurrents, creating a level of uncertainty about the macroeconomic environment, we remain quite confident in our visibility and our ability to deliver a strong Q4 and full fiscal year.
While semiconductor shortages for the auto industry are becoming less of an issue the uncertain effect of rising interest rates and the slowing global economy remain our motives concern on auto demand and production.
We are monitoring this closely and have considered us for our Q4 and full year guidance.
Also in the quarter, we successfully restructured our debt through the insurance of new convertible notes, we used the proceeds to pay off the term loan that was at a high interest.
Interest rate and to buy back half of the existing notes at half the coupon rates.
This cash interest savings of approximately $8 million a year.
Moving a sizable portion of our depth from.
2025 maturity to.
2028, very pleased with the result of the transaction.
Overall, we continue to make solid progress across key areas.
Advanced to a destination next our vision for the future for all aspects of our business.
Innovation target markets and the financial model and performance, we believe in our ability to achieve our long term objective of double digit revenue growth with strong EBITDA margins.
And of course, one of the keys to achieving our long term objective is winning new business with customers.
Securing new business and next generation platform is key to our future success as many of you know once designed in your other supplier of the technology for the program's life. This means a new contract can generate revenue for many years.
I'm happy to say that in Q3, we had several strategic wins.
Im expecting additional ones in Q4.
And our core out of the business, we had two strategic wins.
The first was for a major Japanese OEM, where we displaced a competitor to provide connected services.
The second was for our emergency vehicle detection technology for a major Korean car company.
We also continued to make progress in the two Wheeler and truck markets.
Excited when Iconix model cycle, Brent chose our technology over several other competitors, including niche players and consumer Tech.
While the revenue contribution from the tubular segment is expected to be small this year for two reader solutions started started production in Q3 and should support revenue growth in this segment in FY 'twenty four and beyond.
Our sales team is laser focused on finishing the fiscal year strong.
And I am confident we will win key strategic pipeline opportunities to drive our business forward. We continue to be extremely pleased with our continued success in building upon our strong core and capitalizing on adjacent market opportunities on our Q4 earnings call. Tom will provide you with an update on bookings.
And their expected contribution to backlog backlog and revenue growth.
While it may be repetitive for some of you I want to again highlight our operational priorities as they are vitally important to our near and long term success. This means.
<unk> are exceeding our customers expectation for our technology.
Maintaining a strong competitive advantage continuing.
Continuing to focus on operational excellence and.
And knocking down the new business opportunities in front of us, including several <unk> opportunities.
We believe very strongly in meeting our commitments to our customers employees and you our investors.
We are on a strong track to deliver fiscal year results better than we anticipated at the beginning of the fiscal year.
I'm excited to have it but I'll shut our chief Technology officer on the call with us today.
Since joining the company three plus months ago equal has had an immediate impact and we're excited about how he and near Chung, our chief product officer at teaming up to execute the future vision and direction of our technology.
It probably will brief you on how we are leveraging the latest in generator AI and large language models to enhance our product offerings.
I'm looking forward to how these advancements can help us deliver a truly immersive companion experience to our customers.
And I look forward to the role <unk> can play and continuing to unite.
Era of technology in the car, while maintaining a uniquely branded experience for our customer and delighting our users.
Thank you Stefan.
With decades of extensive vertical expertise in the automotive industry and a rich history of leading AI innovation.
Severance is uniquely positioned to bring the latest advances in AI into the car.
We bring unmatched experience and knowledge to the application of generative AI and large language models in transportation as well as a strategic methodical focus on creating groundbreaking user experiences.
As we envision the future of in car experiences we have.
Keenly focused on solving user problems by harnessing transformer base foundational AI models.
These models enabled us to develop intuitive voice and.
<unk> multi modal user interfaces.
As well as generative AI applications that empower our customers to deliver high value user experiences.
These new capabilities seamlessly extend our existing AI based product portfolio.
At the core of this offering is a next generation settings assistant.
Powered by generative AI.
Through the implementation of large language models and our architecture, we're taking significant strides towards realizing our vision of an immersive companion.
The next generation severance assistant is optimized to provide users with more natural and intuitive and accurate interactions.
<unk> assistant Adapalene handles complex securities and Multistep tasks within a single request.
The assistance deep customize the ability caters to both our automaker customers and end users.
Leslie adapting to their preferences as it learns.
Please allow me to show you some severance assistance, new generative AI powered capabilities.
Yeah.
Introducing the next generation <unk> assistant.
Assistant will be fully capable of handling various scenarios, ensuring you will no longer hear sorry again.
It's starting to rain outside.
Got it I will close the Windows 10 is.
For Ya.
Next generation severance assistance capability of handling multi intent will be increased significantly you can ask your car to perform a theoretically unlimited number of tasks by saying just one single sentence. Please.
Please turn on the AC that temperature to 'twenty four.
The fan sweep to massillon and navigate to work.
Got it turning on AC setting.
Setting the temperature to 'twenty four degrees for driver in increasing the speed to the highest level for the driver.
I will start the navigation for you.
Sure.
Your conversation with your car will be much smoother with the systems powerful contextual awareness.
Which one was written by Paul Mccartney for his wife.
Sure.
Paul Mccartney relative maybe I'm amazed for his wife, Linda Mccartney Hassan was released in 1970 as part of these pages solo album. It is considered one of its most heartfelt and then gearing songs dedicated to it right.
Great can you. Please play out for me on Apple music.
Sure.
For Ya.
Okay.
Yes.
Okay.
Okay.
Designed to be friendly helpful and enjoyable the next generation <unk> assistant add meaningful value to drivers daily journeys <unk>.
These capabilities will be available to our existing <unk> customers, who will greatly benefit from these new generative AI powered features.
In addition to science assistant we continue to gain traction for our generative AI powered car knowledge product discussed during our last quarter's earnings call.
Sharon scar knowledge offers users real time contextual answers to all car related curious.
We are engaged with customers globally to adopt and expanded car knowledge product that leverages large language models.
And the specific data associated with the car supplied by the OEM.
This is just the beginning.
We are expanding our architecture with fine tune Llm's based on our curated transportation data and leveraging our industry, leading edge technologies like audio AI automatic speech recognition nearer text to speech biometrics and most.
AI and in car communications to create the future of automotive user experiences.
I will now turn it over to Tom to review the Q2 results in more detail.
Thank you Rick I'll review, our guidance for Q4, and the full fiscal year in a moment.
First I wanted to share more details on our Q3 results.
Our Q3 results continue Stefan and my commitment to consistently deliver on our guidance here.
Q3 revenue came in just shy of $62 million at 61 6 million.
At the high end of our guidance.
This is due to strength in our core business.
As we guided on our last call we closed a new fixed contract in Q4 originally planned for Q3.
Consumption of fixed contracts was higher than expected I will explain why in a few minutes.
As revenue came in at the high end of the range combined with our focus on operational excellence.
We exceeded most of the key profitability metrics, we guided for the quarter.
non-GAAP gross margin was 66, 5%.
non-GAAP operating margin was a positive <unk>, 5%.
Adjusted EBITDA was $2 8 million or four 5% margin.
And non-GAAP loss per share was <unk> <unk>.
Except for our GAAP net income, which was impacted by the refinancing of our convertible debt. Most key financial metrics came in above the high end of our guidance.
During the quarter, we had negative cash flow as expected.
Cash flow from operations was approximately negative $8 2 million.
We expect positive cash flow in Q4 and for the full fiscal year.
Our balance sheet remains strong with total cash and marketable securities of approximately $116 million.
Okay.
Here is a breakdown of revenue for the quarter.
Variable license revenue was up 16%.
I'm, the same quarter last year and down slightly quarter over quarter.
Due to a higher than expected level of fixed contract consumption.
As you will see in a few moments our penetration of global auto production rose to 54% as we continue to maintain a strong position in the market.
The higher level of penetration is partially due to single component solutions in emerging markets, which yield a lower revenue per car.
We view this as a strategic market expansion opportunity.
And potential watching point.
Again on further business.
And eventual higher PPE is with Oems in emerging markets.
New connected services revenue was up 3% from the same quarter last year.
While down 3% from the last quarter.
You may recall last quarter, we had a true up of approximately $700000.
From a customer.
Adjusting for the onetime true up new connected revenue was up quarter over quarter.
We expect our new connected services to continue to ramp up in FY 'twenty four as several key programs that have been delayed by customers go into production.
Finally, and as expected.
Our professional services revenue was down 24% year over year and down 8% quarter over quarter.
As we have stated previously professional services will vary based on the progress or completion of customer projects.
We do not project to professional services as a revenue growth driver for the company.
Instead, as an enabler for future license and connected revenue.
Additionally, our newer products and solutions include improved implementation and integration features which lowers the requirement for professional services.
Moving on to the details in our license business overall, the license business remains strong.
And is indicating improvement from the issues that have plagued auto production over the last few years.
While the semiconductor shortage wants to be resetting the macro economy, and especially higher interest rates have the potential to slow demand and production growth.
There's been other factors have led IHS to reduce their calendar year production growth to 1%.
Pro forma royalties were up 7% year over year, and 6% quarter over quarter due to increased auto production and penetration of our technology.
Part of the growth in pro forma royalties in the quarter was due to a one time true up with a customer that had underreported royalties of approximately $1 million.
Most of this upside revenue was reported in consumption.
This customer was operating under a minimum commitment deal.
As a result, you can see higher than expected consumption in the quarter.
Q3 pro forma royalties represented the highest amount in over two years, even while adjusting for the true up.
As we discussed on the call last quarter, we pushed out.
Unexpected fixed contract from Q3 to Q4.
As a result, we did no fixed contracts in Q3.
Since the quarter closed we have signed the expected fixed contract and will be staying within our commitment of $40 million for the full year.
As you may recall.
We have previously stated we model prepay fixed contracts based on our assumed six quarter consumption period.
We have also noted that Q1 fixed contracts that we signed had unexpected consumption over eight quarters.
Leading to lower consumption in FY, 'twenty, three versus our model and expanding consumption through FY 'twenty four.
The fixed contract we signed in Q4 has an expected consumption period of four quarters shorter than our model.
The net effect of the prepaid contracts that we signed in FY2023.
Yield lower FY2023 consumption versus our model.
And estimated higher consumption of approximately $10 million in FY 'twenty four.
We are providing you with an additional data point this quarter regarding fixed contracts.
We expect the inventory balance of fixed contracts at the end of fiscal 2023 to be approximately $98 million.
Down from approximately $125 million at the end of fiscal 2022.
We currently estimate the balance of fixed contracts to be approximately $70 million at the end of FY 'twenty, four and approximately $57 million.
In FY 'twenty five.
Our balance at the end of each year assumes the addition of $40 million of new fixed contracts less expected six quarter consumption.
Okay.
The majority of our Kpis continue to indicate strengthen the business.
Penetration of global auto production for the trailing 12 months increased to 54% from 53% last quarter.
This means over half of global auto production includes some level of science technology.
$12 2 million cars with <unk> technology were shipped in the quarter.
This is up 25% year over year and it reflects the improving production environment and a continuing strong competitive position.
Cars produced eight years, our connected services increased 50% year over year, and we frac the trend of more and more cars being connected and the growth of our ability to successfully provide our customers with innovative cloud based solutions.
We also saw a large increase in monthly active users 29% year over year.
Indicating increased popularity among consumers of our technology.
Billings per car Kpis declined, 6%, including a negative FX impact of 200 basis points.
The decline is primarily due to product mix.
Some of the new business contributing to growing license and increased penetration is coming from emerging markets.
Where Oems initially are adopting components of our full software stack.
These are important wins that are driving penetration and the opportunity for these customers to drive higher revenue per car over time as they adopt additional components of our technology.
The other factor, which we mentioned on our last conference call.
Macroeconomic and OEM driven delays in the startup production a higher price per car next generation platforms.
We see a positive trend in the Kpis and.
Got it to trend higher over the next few quarters.
Now turning to revenue guidance for Q4 and fiscal year as I mentioned earlier as expected we closed Q4 fixed contract of approximately $13 million.
For Q4, we are guiding revenue from $72 million to $76 million for Q4.
The tight range is due to knowledge of the fixed contract already close.
Strong visibility to our other revenue sources.
With our strong first three quarter results and strong visibility to Q4, we are providing a narrow range for our full fiscal year guidance of $286 million to $290 million.
Raising the midpoint of our full year guidance to $288 million.
You can see on this slide the revenue guidance and the effect of the associated financial metrics.
Overall, the business continues to perform.
As we outlined at the beginning of the fiscal year, we remain focused on innovation operational excellence and strong bookings in the second half to achieve our long term goals.
This concludes our prepared remarks, and now we will open the call for questions.
Okay. Thank you we will now conduct a question and answer session. As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Colin Langan with Wells Fargo. Your line is now open.
Oh, great. Thanks for taking my questions.
I did want to follow up on the I think you made some comments on billings there were down again.
Year over year I think at your Investor Day, you talked about kind of going from $3 80 to 480 in 'twenty three to 'twenty four.
How are you tracking now I mean is the 23 actually lower because of the billings are coming in lower and is there risk to 2024 sales targets. If some of these launches kept pushed out too much.
Yes, so first of all the metrics.
Related but different so.
The numbers that you talked about where the embedded PPE is and as we've talked about.
We have seen.
Some production delays across Oems.
And well provide updated.
Our guidance for 'twenty four.
November with respect to billings per car, which includes both.
Embedded and connected.
It's it's.
It's a factor of that which some of those higher.
<unk> is in.
Get delayed it's also a factor of I think this is a trailing 12 month, let Derrick I think during some of the.
The supply chain shortages some of the Oems, where we're leveraging to the to the higher.
Higher cars, which have more of our technology and that as we just pointed out.
Some of our higher penetration is driven by.
Winning.
New opportunities in emerging markets, where they start out with one or two of our components.
And therefore, it has a relatively lower.
Billings for car, but does provide an opportunity for accelerated penetration for winning additional business with those Oems in those markets.
And then adding additional components and features over time.
In association with the with those Oems.
Got it alright, thanks, Mike.
Thanks for the color.
The second question the other kpis that sort of stood out as the contract duration was six four years I think it was in Q4 was <unk> <unk>.
Seven years, but what is causing the contract average contract to shrink.
What is driving that.
It's just that it's just a mix issue.
Deals and how those deals play out.
I mean, it's still.
It depends on how Oems sign up for our production schedules.
Well, it's still a quite a long.
About mid level four for Oems.
Okay, alright, thanks for taking my questions.
Alright, thank you.
One moment for our next question please.
Alright. Our next question comes from the line of Luke junk with Baird. Your line is now open.
Good morning, Thanks for taking the questions.
Wanted to start with a follow up question on billings per car metric again really through the lens of what you're expecting from a content per vehicle standpoint in fiscal 2024, and specifically I'm just wondering to what extent the single component solutions that you've spoken to today, we're all.
Already contemplated in your outlook or just how they impact the outlook for fiscal 'twenty for in general for starters. Thank you.
Thanks Luke.
I really can't comment much.
On FY 'twenty four well.
Provide a 2000 and for our guidance.
And we'll take a look at the longer range plans.
When we do the Q4 guidance in November .
But I think if you look across.
Most all the Kpis. It does show that we're continuing to win new business, we are continuing.
To get more active users that connected.
And embedded are continuing to grow.
And.
The billings per car I think is just a factor of all the things that that I mentioned and.
It does provide some growth opportunities for us with some of these.
Newer Oems and some of these emerging.
Countries.
And so I don't think it's.
It's a bad thing.
Got it and then for my follow up maybe just a bigger picture question question.
Revenue models going forward. So the press release discussed the idea of positioning <unk> as an enabler for large language models in consumer attacking the car sitting on top of the white label proposition that we all know just wondering to what extent you think you can get paid for that incrementally and just any thoughts you can share.
Sure on what that revenue model might look like or you can see thing is something thats more license like that would be one time or could we see more connected.
Subscription models Commoditized. Thank you.
Maybe let me take this question.
Christian good morning lithium.
So and.
I think what we've just seen and what Tom mentioned Tomorrow, and so overall, we have a very high penetration rates, that's our foundation.
We have a strong IP from compensation and a rock solid business model and also a good relationship with Oems and now how we can further improve the quality of our products right.
You have seen also in the video.
I think thats based on the integration of March language models and generative AI.
We're working across the globe.
MS are big Oems on our new applications for example.
Knowledge rights, we are prototyping with them and we are also in discussion on the business model I cannot go into the details here, but.
But we have huge opportunities and <unk>.
Ours is a church GPT is quite expensive.
And team are working on a very efficient cost efficient solution also covering privacy topics, maybe Paul do you want to add a bit from your side on the technology.
No I think you covered for the most part unless there is any other specific questions that would be more than happy to answer that.
Thanks for that Stefan I think I'll go ahead and leave it there for now.
Alright, thank you so much for that.
One moment for our next question please.
Alright. Our next question comes from the line of Nicholas Doyle with Needham. Your line is now open.
Hey, guys. Thanks for taking my questions.
Wanted to ask how youre thinking about the two Wheeler contributions.
Sure.
You had talked about production total production around $52 69 units and kind of making up the difference in your longer term assumptions.
That difference is coming from these transportation adjacencies.
Just wondering.
How big are these the three models that they make up a decent portion of that of.
Of those units.
And then also you talked about <unk>.
Seven design wins I think in the first quarter.
This year are these three wins coming out of that pipeline.
Yes.
Let me.
I hand, it over to you.
Yes, we've had a number of design wins I think that it's a we had some go into production in Q3 I'll have some more going in.
In Q4.
The two Wheeler market is about half the size of the auto.
And this is a new market for us So we'll have to see how these rep.
As we've said.
Some of the comments here.
It's not going to be.
Big contributor to FY2023.
But as these go into production and they start ramping and we get royalty reports and these are kind of hybrid solutions. So some of it will get.
Some of it the connected side of it we'll have to get amortized over the service life of the agreement.
Then again, we will provide some updates on this particular transportation adjacency market.
November .
Yeah, maybe let me just add here that we haven't totaled eight design wins.
For rent lives into production and last quarter I think it's also distributed across the globe in China and India.
Mass volume right in Japan, North America, and also Europe .
And I expect that we will see also revenue growth in FY 'twenty four.
As Tom mentioned.
Okay.
And then for the emerging market wins, they are adopting one or two components.
Is that related to the two wheelers like five question and can you just tell us more maybe what the one or two components are.
What customers are really liking taking too.
And then how they are working with the software component and how much of that is related to the immersive container.
So overall I think that was actually a contribution to this high penetration rate in the emerging markets here.
Yes.
<unk>.
Mid to low.
Range cost range.
Starting with typical audio AI, let's say four.
Speech signal enhancement for enabling third party opportunities.
Copney, but this gives us a huge opportunity for.
Our future solution for creating with so.
<unk> also.
Branded compensation AI solutions.
Alright, thank you so much for that.
And as a reminder, everyone to ask a question. Please press star one one on your telephone and wait for your name to be announced soon withdraw your question. Please press star one one again.
Please standby, while we compile the Q&A roster.
Okay.
Alright. Our next question comes from the line of Daniel hit.
Thank you.
Sorry, I can't pronounce your last name ship.
Hi, Brian .
Good.
Carlo.
Hi, This is Daniel on for Jeff Craig Hallum just.
On the connected units really strong.
Really strong performance.
50% year over year as the number of units.
Just wondering would you view that sort of is lumpy numbers indicative really have a loss trends there in terms of the strength of connected and in terms of if that is more of a larger trend more success than we've been seeing in a while would you view that changing buyer behavior products sort of reaching a critical mass on the capabilities is how would you see that momentum.
So let me start for US and then I will hand, it over to Tom.
So overall, we reported over the last three or four quarters.
A couple of design wins and win back also on connected services.
Our foundation.
And also across the globe I think we have clearly improved the quality.
For connected services.
So we are in discussion for more because we have as I said also in the last call.
OTA opportunities.
And we're driving quite a lot of new innovation, especially on the connected side and continue to lose our advantage also in various benchmarks.
Across the globe.
Tom.
I mean.
As we've said.
<unk> is a great opportunity for us because it sits on top of our embedded and it provides.
Some of the key elements of.
Of our destination next and immersive.
Cabin.
You do have to adjust a little bit.
Previous quarter, where we had a $700000 true up from a customer that underreported, but even when you adjust for that you're right. We're starting to see growth there and that's as Stefan said that some of these programs going live. We've also talked about over the last few quarters that there were some.
Older.
<unk>.
Contracts that were coming to the end of their amortization schedule and they weren't they were up for renewals there. They're just older programs. They are separate from the legacy one that we split out separate and for the most part ways, we probably replaced.
Newer technologies on <unk>.
Our platforms going forward, so as those continue to wind down that debt.
That kind of.
Tailwind.
Get some minimized and the effect of the.
Newer platforms.
Start to take effect so.
We're pretty excited about that.
The connected opportunities in a lot of it plays to what <unk> was talking about.
Around.
The enhancements that were there.
That are being made to the products.
Thanks for that and then just one follow up for me on the.
Actually jumping back to the press release that you have.
In July talking about working with a partner on Iot use cases can you just refresh us reiterate what the nature.
Agreement with nuances with the freedom is to enter Adjacencies.
Just order tech development or is there an ability to really go in actually to customers or where we're at in that kind of a timetable.
So also here I think.
You know we have a switching gears with frito fewest restriction.
Michael Coombs nuanced Microsoft.
And this.
You expressed in a year from now.
Global two.
<unk> 24, and as you can imagine we already planning here.
The areas, where we can go in and there was also recently a press release from US that we have also optimized.
The embedded istick for new devices.
And we see huge potential for US also in the future beyond 2004.
But.
In the short term.
This two or three technologies.
That were developed and owned by signs.
That way you can play some of it's in our <unk>.
<unk>.
Our audio stack.
All of it in our text to speech.
We also have.
Developed our own voice biometrics technology separate from what came over at the time of the spin.
So there are opportunities that we're pursuing.
And those particular areas.
They are exempt from the <unk> for the next year and then as Stefan said pretty much a year from now.
There are no restrictions.
And we have also established a team fully dedicated one non transportation opportunities for us.
Development and R&D people.
And thanks for taking my question guys great quarter. Thanks.
Alright, thank you so much Danielle.
I am showing no further questions at this time I would now like to turn the conference back to rich for closing remarks.
Thank you Britney and thank you for everyone joining us on the call. This morning, we look forward to having further discussions.
Enjoy the rest of the summer thank you.
Alright. Thank you. So much. This concludes today's conference call. Thank you for participating you may now disconnect.
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