Ladies and gentlemen, thank you for standing by and welcome to the Cerence's Q4 2020 Earnings Conference Call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question-and-answer session [Operator Instructions]. Please be advised that today's conference is being recorded [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Richard Yerganian, Vice President of Investor Relations. Thank you. Please go ahead, sir.

Thank you, Dillon. Welcome to Cerence's fourth quarter and fiscal year 2020 conference call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. These statements are subject to risks and uncertainties as described in the press release preceding today's call. Cerence makes no representations to update those statements after the date hereof. In addition, the company may refer to certain non-GAAP measures 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. Joining me on today's call are Sanjay Dhawan, President and CEO of Cerence and Mark Gallenberger, CFO of Cerence. As a reminder, the only authorized spokespeople for the company are Sanjay, Mark and me. Once again, on this conference call we will be demonstrating Cerence Technology. The prepared remarks will be read using our voice cloning technology driven by our neural AI based system called Geely. What you're about to hear are computer AI generated voice clones of Sanjay and Mark. Following the voice clone’s prepared remarks, the real Sanjay and Mark will join the call for Q&A. Pay close attention see if you can hear the difference. Before handling the call over I would like to announce couple upcoming investor events. They are all virtual events, so the exact timing of our participation is subject to change. The conferences include the Wells Fargo TMT Summit 2020, Raymond James 2020 Technology Investments Conference, the Needham growth conference in the 2021 Goldman Sachs Tech Interconnect Conference. Please visit the events page in the investors section of the Cerence website for the most up to date information on our participation. Now I want to the call, Sanjay.

Welcome to everyone on the call, and thank you for joining us to discuss Cerence's fourth quarter and our fiscal year results. The majority of my comments will be on the achievements of our exciting first fiscal year as a stand-alone public company, but I would be remiss by not first reviewing the great results of our fourth fiscal quarter. By all accounts, our fiscal fourth quarter was the best quarter in the company's history. We had record revenue, record gross margin, record EBITDA and record cash collections. The financial performance of the company was amazing with 10% revenue growth year-over-year, and 22% revenue growth sequentially. In particular, non-GAAP earnings per share at $0.61 per share was 88% above the midpoint of our guidance of $0.33 per share. The outperformance was primarily driven by great adoption of our products and services by the auto OEMs, the strong recovery in the auto market, coupled with the prudent financial controls we have implemented in recent quarters. As you can see in the guidance that we provided in the press release, we expect our first quarter revenue to be up approximately 10% to 16% compared to the same period in the prior year. For the full year, we expect revenue to grow between 9% to 15% over fiscal '20. We recently celebrated our 1-year anniversary as an independent company. And despite the challenges from the onset of COVID-19, we are extremely pleased with the progress the company made during its first year. We separated from nuance with minimal disruption, delivered a steady stream of new products and technologies had record bookings, including two of the company's largest contracts in its history and delivered fiscal year results on track or better than the guidance that we provided at the beginning of the fiscal year…

Thank you, Sanjay. I'll first review the strong performance for the fourth quarter and then review our results for the full fiscal year. I will then provide guidance for our first quarter of fiscal '21 and for the full year. By all accounts, our fourth quarter results exceeded all expectations. Revenue came in at $90.9 million, almost $11 million, above the high end of our guidance. The higher revenue was driven by a strong recovery in our license business, which was up 43% over the third quarter along with a 12% sequential growth in our professional services business. Our profit performance was exceptionally strong with non-GAPP operating margin coming in at 42%, adjusted EBITDA of $40 million or 44% margin and non-GAAP earnings per share of $0.61. The lower spending plan that we implemented in April is the key factor for the elevated margins in the second half of the fiscal year, particularly in the fourth quarter. However, these cost savings will ultimately return in fiscal year '21. So I would caution investors and analysts not to read too much into the elevated margins achieved this quarter. Regarding the breakdown of our revenues. As previously mentioned, we had a strong recovery in our license business, which was up 43% from the third quarter and up 3% from the same period last year. Our variable license revenue recovered from the low point in the third quarter and was up 64% sequentially as auto production exhibited a very strong recovery during the quarter. For the full year, our license revenue declined 5% due to the impact of COVID-19, while auto production was down 19% over the same time period according to IHS. Our fourth quarter connected services revenue grew by 9% year-over-year, driven by an increase of 23% from our new connected…

[Operator Instructions] I show our first question comes from the line of Raji Gill from Needham & Company.

Congratulations on excellent results. Sanjay, a question on the growth that you're seeing in licensing, both on the backlog but also on the sequential. I was wondering if you could maybe elaborate further in terms of what you're seeing there in terms of the attach rates. And what is kind of making you outgrow the overall automotive market, even though you're not necessarily tied to auto production, there is a certain percentage of your revenue is tide dollar production and you seem to be outgrowing that. Just any color on the licensing. And then just on the connected services being down on a year-over-year basis. How do we think about connected services in terms of the attach rates for calendar '21, what kind of main application do you think will drive a higher attach rate for connected services next year? Thank you.

So in terms of the license revenue, I think we have talked about our penetration story over and over. Basically, what we see is that more and more voice conversational AI is becoming more and more important. More than important, it's becoming strategic as a function for the automotive OEMs, and they are basically bringing that technology more and more into what used to be mid to high end cars but also into the low end car as well. So that's the main reason why we continue to kind of increase and grow faster than the AUTOSAR. That trend will continue. We're absolutely seeing that and I cannot make it more clear that the customer discussions are basically leading to absolutely this technology being very strategic to an auto carmaker basically. On the connected services, same thing. As you know, our architecture is hybrid so we have a certain part of our product runs inside the car and. And with cloud connectivity, we can provide even better set of services and better interesting capabilities to the driver of the car. And we see a similar trend basically happening there as well. The thing is that connected services gets recognized as a SaaS revenue. It's sold as SaaS. It's recognized as SaaS. So obviously, kind of the growth rates are slightly slower from the adoption standpoint and so on. But there is no difference from a trend standpoint. And if anything, we expect connected services, as I look forward next three years, to be a bigger growth driver for our business than anything else. And you will see some very exciting new connected services products that we'll be releasing in December, which I'm hoping will increase the growth rate even more.

And just for my follow-up, Mark, when looking at the piece parts of licensing and connected services. So just on licensing, the prepay, there was 46% growth year-over-year in prepay. How do we think about prepay going into next year? This year, obviously, because of COVID-19, they're extenuating circumstances, which changed buying patterns for customers. So how do we think about that revenue stream next year? And then on the connected services side, the legacy some 3% growth year-over-year. How do we think about legacy revenue going into next year and how does it kind of roll off throughout the quarter?

So the first question as it relates to prepays. Last year, we did $54 million in fiscal year '20. The year before, it was around $43 million. If you go back to FY '18, it was around $53 million or $54 million. So we seem to be in this range of low 40s to low 50s. So going into fiscal year '21. I certainly would expect us to be within that range. If you recall, in the past, I have said that we're sort of biased towards reducing prepays. However, that's not always inside our control because we have our customers' demand as well and so that sometimes ebbs and flows. So I think going into FY '21, my view is that it would be down from fiscal year '20 but certainly, I think it's going to still be within the range that we have seen over the last several years, which is low 40s to high -- or low 40s to low 50s. So long-winded question, or answer to your question, but I think that's about the range that we're going to see for FY '21. Regarding the legacy connected revenue. We are seeing that revenue plateauing in FY '21. So last year, we did about $63 million in legacy connected revenue for the full year. I would expect for FY '21, that to be flat year-over-year. And then starting in fiscal year '22, you'll start to see a decline in that legacy revenue as that program just winds down. And by the time you get to fiscal year '26, fiscal year '26 should be the last year in which we'll see some revenue probably down in the $8 million range in fiscal year '26.

Our next question comes from the line of Daniel Ives from Wedbush.

Again, can you talk about geographically, just talk about maybe China and India as markets and sort of what that represents in terms of growth opportunity over the coming years?

Mark, I'll start, then you can jump in. So I think China, we have been very focused in China almost 10 years now, and have a very good market share for China OEMs. We absolutely have a leading market share, 80%, 90% for global OEM shipping cars into China. So that's clearly a major leadership. But even for China, where we compete with some of the local competitors we’re neck to neck in terms of our market share in that space. So we announced number of new customers, almost four or five customers in the last quarter, Neo being one of them and others as well. So overall, I think we're making great progress there basically. And as you know, China remains a very -- it has the largest new car shipments in any given year and we are participating in that very, very nicely. India is a smaller market as compared to China for auto but we're definitely participating there as well. We did sign one of the top three local auto OEM in the quarter so that was a great win for us. Hopefully, we'll get the permission to announce the name soon. And we're making progress but it's clearly a smaller market as compared to China. Having said that, we have talked about the two wheeler space. We announced our first two wheeler customer in China last quarter. And we're also progressing with other two wheeler manufacturers, both in India and China because that's also a huge market where technology like ours can basically really assist the drivers for a hands-free usage when their hands are supposed to be on the steering wheel and eyes on the road, they can basically use technology from Cerence to kind of do conversational AI-based services. So we're looking at that space as well in active discussions with number of [e-scooter] companies in that space as well. Mark?

And so the only other thing I would add is China market for us, you've got two drivers, indigenous Chinese OEMs as well as the foreign OEMs that sell into China. I think we've got very good market position in both of those areas. I think the introduction of some of our, as Sanjay mentioned, some of our technology for two wheelers that's where we're going to see some good growth as well as the Cerence ARK product, which is really geared towards some of the lower-end, lower-cost markets. And so that would also be, I think, good opportunity and fertile ground for us to grow inside of markets such as China as well as India.

Our next question comes from the line of Chris Merwin from Goldman Sachs.

Congrats on a great finish to the year. I wanted to touch on the backlog, it looks like that increased, I think, by about $400 million relative to last year. I think it's almost 30% growth. So can you just give us a sense of that incremental backlog that was generated, how much of that was license versus connected? And then also, how should we be thinking about the timing of that backlog being recognized as revenue in the coming years? Thank you.

So the license backlog grew quite a bit, it went from about $600 million last year to over $960 million at the end of this year. So year-over-year growth on that portion was almost 60%. So pretty substantial growth there, cannot followed by connected and then lastly, pro services. But in terms of our overall growth, we had over $800 million in total bookings. When you factor out what we shipped out of backlog this year, our total growth in the backlog, it was about 32%, 33%. So very, very strong year for bookings. Regarding how that's going to shift in terms of revenue over the next several years that gives us a lot of good visibility. Clearly, I would say, I don't have the numbers in front of me, but I would say 50% or more of this backlog is likely going to ship over the next three year period. And so we've mentioned those numbers in the past. I think those numbers are still valid in terms of how much we'll ship over the next several years. And that, of course, it's not 50% every year it's going to be much higher this year of course. And then as you get further out, those percentages naturally decline a little bit. But all in all, it gives us good visibility into the business. It really sets us up for good growth in the future, gives us some predictability as to what's going to be happening. Over the long term. And there will be obviously ebbs and flows. We had one ebb this year, which was COVID where things kind of slowed down but I do expect things to pick up next year and beyond.

And just one clarification. In terms of the -- it sounds like license was the fastest source of growth in the backlog but I think, Sanjay, you mentioned earlier that connected is going to be a bigger driver of the business in the future. How do we kind of square those two things? Obviously, both pieces of the business are growing very well. But just trying to understand what's going to be the bigger driver going forward here. Thanks.

So Chris, I was going to say was that we have introduced a number of new products last quarter and then you will see some more very interesting connected services, products that absolutely brand-new innovations that obviously were in early stage discussions with a number of OEMs. And combined I expect these also along with this we plan to release our what we call our [1.x] cloud, which basically will completely refresh our cloud performance, cloud offerings and cloud services. And the early discussions we are having with number of OEMs, there's a lot of interest in the market around these new products. And I expect the bookings and revenue growth, as I look forward, will drive the growth even more. I mean if you look at year-over-year, our new connected services grew about 60%, something like that as compared to the legacy. So the growth is pretty strong on the new connected services if you take the legacy effect out.

I show our next question comes from the line of Chris McNally from Evercore.

Thanks so much for the detail guys and fantastic demo, continue to impress. One model question and then one auto tech question. So on the model itself, I know you guys -- your assumptions are bottoms-up and not based on IHS per se. But just curious how conservative you may be on the actual global production number? When we look IHS is plus 13%, LMCs plus 15% to 16% and that's going to help drive your license revenue in particular. So just any detail that you can add around that.

Sure. I can start, and Sanjay, if you want to fill in. Yes, we do a bottoms-up based upon our backlog. We try to sanity check all those estimates with third-party forecast information. I think when you look at our growth in fiscal year '20, we grew 9% year-over-year while auto production for that same time period was down 19%. So we had 28-point spread in fiscal year '20. However, when you look at some of the prepays that we did in fiscal year '20 and you adjust that to be kind of flat year-over-year that probably accounted for about 4 points of growth. So if you adjust for that relative to our guidance for fiscal year '21, you could effectively add another 4 points, just to kind of get you to an apples to apples comparison on the effects of prepays. And then, of course, you got to factor in what I mentioned before, which is the legacy connect it is plateauing whereas historically that was growing each year. Now we're going to see that not grow in fiscal year '21. So those two points, in conjunction with -- there is still a fair amount of uncertainty out there as it relates to COVID. And different flare-ups here and there may put certain forecasts at risk. So we just want to make sure that we are conservative going into the year just because COVID is still an unknown quite frankly.

But it sounds like license is still going to be quite strong next year. If we take the sort of 10% to growth that you have for the total business and assume there's not much in professional, we can pretty much lay that maybe not equally, but it sounds like license will be a little bit stronger than even connected for next year's growth?

I think license will continue to show growth. And I think our pro services, even though we're coming off a very strong year, I would also expect pro services to grow year-over-year as well just because we've got a very good pipeline of new opportunities and new design wins. So I don't think I would put all the growth in license. I think also pro service is going to show good growth. Not to mention the new connected services, that's been growing. So just a smaller base, of course, but it's still showing very good growth, 62% year-over-year growth on the new connected services. So I would expect all of our three line items to grow year-over-year. It's not going to be all just in license.

Maybe it's just hard to nail down a specific number, but it sounds like the growth is continuing to be good in all these. Perfect. Maybe onto the new tech, when you talked about the $75 million for 2024 in your first CMD, the new revenue streams, you have the SaaS opportunities and I think you've talked about Car Life Cerence Pay. I think we're going to get details on maybe even the third one soon. Could you just order of magnitude, talk about the order book from those specific opportunities, maybe you can just Car Life Cerence Pay since they've been announced, how much of the $800 million plus bookings again ballpark, just to gauge how early are we in OEM interest for those products?

So Chris, firstly, thank you for recognizing the demo. The engineer in me was very excited about using Mark and my clone. And I think this was, I think, world's first, a earnings call was done by clone, while Mark and I were sitting a cup of coffee and waiting for our turn a bit Q&A. It's an interesting experience. Clearly, we need to train our AI models a little bit more on financial terms. So I could see the -- our clone was getting a little jittery when it came to non-GAAP in some of those words. I think the financial terms, we need to train more. So to my team, a great job. But let's train the models more on some of these financial terms. But coming to your question, the number for the new SaaS is small. We signed our first contract with a big OEM, but it was a small contract because they want to, obviously, PoC it go through some more work on the new products before they can make a bigger commitment but we did sign one in the last quarter. There were a couple of bigger discussions going on, which I was hoping will be signed in Q4, but they have been spilled over into kind of Q1, Q2. And what we are finding, Chris, is that for some of the apps customers -- remember, these are rev share transaction type of models where they are tied to not be the COGs of the car. The COGs of the car, the auto OEMs really know very well how to purchase. When it comes kind of purchasing connected services, which are a different business model. There is a little bit more deeper discussions that happened. But our pipeline for the new products, new services is very strong and I hope to kind of come back with some, hopefully, major wins in the fiscal '21.

Our next question comes from the line of David Kelley from Jefferies.

Maybe starting with the margin guidance. It's interesting it looks like you're effectively guiding to your longer-term 2024 target this year. Just wondering, Mark, if you could walk us through maybe the assumed timing impact of the roll-off of some of those COVID-related cost cuts? What benefits we'll see this year? And then from where we stand today, do you see any upside to that 2024 EBITDA margin target of 35%, given how we're tracking thus far.

Sure, and I'll answer your last question first. And yes, given our performance even when I adjust out the short-term savings that we realized because of the COVID actions that we took I think long term our analyst model that we put in place for FY '24 is conservative as it relates to the margin profile. I think it's still a little early for us to go in and update those numbers, but I want to give it a little bit more time. But I do believe that we assume like 65% connected services margin for FY '24. We're doing close to 10 points higher than that already. For pro services, we assume 10% gross margin for FY '24. Last quarter, we did 20% plus. And so one data point doesn't necessarily dictate the new trend. But I do believe that we are going to be updating that model and make those assumptions more in line with what we think is going to be achievable. And so I think bottom line is those assumptions probably were a bit conservative. But I think once we get to our next Analyst Day, we'll be sure to update those numbers and share that with everybody at the appropriate time. And so in terms of your first question, we will be bringing back those expenses that we cut back in the second half of fiscal year '20. The way I look at it is in Q1, we'll probably be adding back around $3 million to $4 million of those expenses and those would stay in for the whole fiscal year. And then we would probably add in another $2 million in Q2, maybe another $2 million to $3 million in Q3 and then about another final $1 million in Q4. So that's about -- if you kind of look at how it gets feathered in that's about the $30 million increase in fiscal year '21 OpEx relative to our annualized run rate in Q4. This of course is non GAAP so take out the stock-based comp expense and depreciation and amortization. So that's how I kind of look at how we're feathering in those expenses as well as the unfreezing of the hiring.

And then maybe just a question on the -- I think you guys disclosed 14% growth in billings per car. I believe that was a fiscal 2020 number. You've talked about the layering impact of connected sales on top of licensing, but we also seem to be in the early stages of a cycle recovery that benefits licensing. Just curious how you all are thinking about the ASP expansion opportunity this year in 2021.

So I think the ASP expansion that we saw last year, you do have the layering effect on once more and more cars get connected, you're adding that revenue per vehicle on top of your embedded. And so that really helps drive that 14% year-over-year growth. But that's not the only thing. We're also seeing ASP expansion with, for example, our license products, because we're adding more features and functions, more bells and whistles that you can demonstrate value and customers are willing to pay for that additional value. So we are seeing expansion, not only because of the layering effect of connected services, but also just because we're continuing to innovate and add more features and functions we can get some growth there as well.

Our next question comes from the line of Joseph Spak from RBC Capital Markets.

Just going back to your outperformance versus the industry, especially in a portion of the business that is tied to production. So the variable portion. You've definitely been outgrowing that over time. But very specifically in the quarter, that was down about 12%, which actually is below what vehicle production was, which was maybe down 3%. So was there something unexpected there or is that just sort of some timing of some of the programs that you guys are on?

So I think it's a couple of things. One is a little bit of timing there but also in Q4 of last year, there was some accounting true-ups that flowed through that revenue, that license revenue line, which I think kind of drove that number a little bit higher in the quarter. And that's why you tend to want to look at year-over-year or trend lines versus just one quarter alone because there could be certain things that could potentially skew the numbers and you arrive at the wrong conclusion. So that's why if you look at FY '20 variable license versus FY '19 variable license, we were down 15%, while the whole industry was down 19% or 20%. So we still outperformed from that four quarter perspective. But in Q4 of last year, there was some true-ups that helped increase the revenue in that quarter of last year.

So that's sort of the spread you would expect, the outperformance from a variable portion that you would sort of expect us to…

I would expect outperformance over a trend period. And with the technology getting more and more penetrated inside vehicles, it should be natural to assume that over those trend periods, we should be outperforming the auto production.

And just bigger picture and more forward looking, as we think about some of the new products like Cerence Pay, et cetera. Any sense yet in talking to the automakers or customers in terms of how this is really going to work and adoptions or take rates, whether the automaker or dealers are going to pay for it or whether it's going to fall on shoulders of the consumer. And maybe to follow on or that also -- one of the things we've been hearing a lot about turning to pandemic is customers for instance looking for more convenience or touchless pay, et cetera. So was there anything you've seen even in the vehicles you have out there already or in conversations, or customers that gives you more confidence that customers are going to want and keep these services?

Firstly, I can absolutely say categorically that the conversational AI space is becoming more and more important from an OEM standpoint. I'm into customer discussions every week all over the world and that's one single message that I hear again and again and again. Second we did get our first renewal of connected services. I mentioned this in my press release comments basically. It's a small renewal. So not a big number to kind of boast about but it's a good trend that customers care about these services in the car, and these were cars that were shipped six, seven years ago. And they did a renewal with us to keep the service alive in those cars, which are fairly old cars on the road. Third point I would make is that on the connected services side, there is a lot of interest, a lot of sales discussions going on. The model that I see emerging is kind of that you have seen, many OEMs are bringing that out. For example, if you go to bmwusa.com connected services you will see a whole menu of connected services and you can purchase using a vehicle number and basically the cost gets back to the consumer. They basically package these connected services. You will see our voice as a connected service as well that when you buy BMW after four years, you basically have to go and pay them a yearly amount to basically renew those services. And what I'm hearing from OEMs is more and more customers are getting used to kind of buying these connected services through OEMs. And once the consumers do, a portion of the net revenue flows down to us.

[Operator Instructions] I show our next question comes from the line of Jeffrey Van Rhee from Craig-Hallum.

A couple for me, on the connected car wins, can you talk about the competitive landscape? Who you're seeing, what a typical deal looks like? And in particular, do you feel like you're holding your market share gaining share over time, just a sense of how you see your share there trending? And then secondly, if you look at the pipeline coming into '21, how does the scope of the pipeline now compared to 12 months ago? I mean, obviously, a huge bookings year. And just wondering what you can share with respect to color about the size of the pipeline at this point.

So firstly -- I'll answer the second question first. The pipeline size is absolutely bigger, order of magnitude bigger as we enter fiscal '21. Although, we had a great booking for fiscal '20. You would think that we would have a pipeline that’s depleted a bit and we have to go and rebuild it. But the good news is that with the introduction of new products, new technologies and a very active and engaged sales force we’re able to kind of maintain a pipeline, which is almost, if I compare to the start of fiscal '20, is north of 2x plus, from where we were when we started fiscal '20. So that's going great. What was your first question?

The connected car competitive landscape in this year.

So no major change there. We saw one OEM, we mentioned Geely adopting who owns Volvo, also that was kind of a nice win back. We have seen one or two other win back from other competitors during the fiscal year. There are couple of similar discussions going on right now. So overall, I'm feeling quite good about our competitive landscape and how we're kind of competing. I think the biggest piece here, how we are competing against our niche competitors, whether it's a Silicon Valley based SoundHound or iFlytek, based in China. I think we continue to work closely on the -- extending the digital life of a consumer in the car and then making sure that we coexist very well with the likes of big tech companies, whether those are big tech companies there in US or Chinese big tech companies, or other big tech companies. So our products strategy there completely aligned with what we are hearing from OEMs and consumers.

If I could just sneak in two quick ones. The two wheeler, I don't know what you can share with respect to TAM or unit pricing, but just get a fair number of questions, people kind of wondering what the opportunity and scope of the opportunity is there. And then on connected services, in terms of looking at the bookings, the individual bookings and when they go live. Is there anything in terms of a bubble or a wave, if you will, of units that are expected to ship as you look over the next six, 12, 18 months, any particular windows where you say a lot of prior bookings are about to go live and start shipping?

So let me start and then Mark, maybe you can jump in. So I think a little too early for us to share the trends on the two wheeler space. We're in active discussions with about three more OEMs right now. And we're positively surprised because they see the value of this technology and one would think that the average ASP would be much, much lower than the auto just because the COG is lower than the automotive COG but we're positively surprised. But give us little bit more time to kind of get a couple of more deals under our belt so that we're not just making statements based on one or two deals. Mark, do you want to answer the connected services question?

So I think on the connected services, we are expecting SOPs and a continued ramp-up of our revenue as well as our billings. Our connected billings would obviously be more of a leading indicator because of the amortization schedule we have with the revenues. So yes, I think for '21 you're going to see decent growth there. But I think in '22 you will start to see even more SOPs hitting and you're going to start seeing an accelerated growth in our new connected billings kind of like a steeper slope in fiscal year '22 versus '21. So I think that's the sort of the horizon. And as we've talked about in the past, fiscal year '20 and '21 would be declines in our deferred revenues and then you'll see that flip and become a source of cash again in fiscal year '22. And so it's playing out the way we expected it. I think in fiscal year '20, it was a little bit more pressure just because of COVID and production being down. But in terms of the overall shape of how the change in deferred revenues is going to flip in '22, and that's largely going to be driven by a nice increase in new connected billings in fiscal year '22. But we are seeing some growth in '21. But I think more growth even more so in '22.

I'm showing no further questions in the queue at this time. This concludes our Q&A. I'd like to turn the call back over to Mr. Richard Yerganian for closing remarks. Please go ahead.

Thank you, and thank you, everyone for being on the call. Thanks for your support and interest in the company. We look forward to engaging with all of you in the near future. Have a good day. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.