Group 1: Earnings Performance - Cerence reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of a loss of $0.66 per share, representing an earnings surprise of +109.09% [1] - The company posted revenues of $60.64 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 10.02%, compared to year-ago revenues of $54.81 million [2] Group 2: Stock Performance and Outlook - Cerence shares have declined approximately 0.4% since the beginning of the year, while the S&P 500 has gained 12.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.06 on revenues of $58.65 million, and for the current fiscal year, it is $0.85 on revenues of $260.72 million [7] Group 3: Industry Context - The Computers - IT Services industry, to which Cerence belongs, is currently in the top 34% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported revenue of $60.6 million, exceeding the guidance range of $53-$58 million [17] - Adjusted EBITDA for Q4 was $8.3 million, significantly above the guidance range of $2-$6 million [21] - Full fiscal year 2025 revenue reached $251.8 million, reflecting broad-based strength across the business [18] - Free cash flow for Q4 was $9.7 million, marking the sixth consecutive quarter of positive free cash flow [22] - The company reduced total debt by $87.5 million during fiscal 2025, ending the year with $87 million in cash and marketable securities [22] Business Line Data and Key Metrics Changes - Variable license revenue for Q4 was $31.6 million, up 25% year-over-year, driven by strong customer utilization [18] - Connected services revenue for Q4 was $14.2 million, up 17% year-over-year, indicating continued expansion of the connected install base [18] - Professional services revenue for Q4 was $14.2 million, down 18% year-over-year, as the company streamlined custom projects [19] Market Data and Key Metrics Changes - The number of connected cars shipped increased by 14% on a trailing 12-month basis, indicating strong momentum in vehicle connectivity [23] - 52% of worldwide auto production included Cerence technology, consistent with historical penetration levels [23] Company Strategy and Development Direction - The company is focused on three key priorities for fiscal year 2026: driving top-line growth, advancing the XUI platform, and maintaining cost diligence [28] - The company aims to monetize its intellectual property and has ongoing legal actions against several companies, including Apple and Sony [7][8] - The company plans to showcase innovations at CES in Las Vegas, including new AI agents for vehicle services [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's foundation for long-term sustainable growth in fiscal 2026 and beyond [5] - The company expects fiscal year 2026 revenue to be in the range of $300 million to $320 million, representing a 23% year-over-year increase at the midpoint [15] - Adjusted EBITDA for fiscal year 2026 is anticipated to be between $50 million and $70 million [25] Other Important Information - The company resolved a lawsuit with Samsung, resulting in a one-time payment of $49.5 million, which will be recognized as revenue in Q1 [7][34] - The company initiated a restructuring plan to reduce operating expenses and position itself for profitable growth [13] Q&A Session Summary Question: Clarification on IP monetization and legal expenses - The $49.5 million payment from Samsung will flow through as revenue, with anticipated legal costs of approximately $24 million [34][38] Question: Interest in XUI and proof of concepts - The company is currently engaged in about half a dozen POCs with different OEMs for the XUI platform [40] Question: Connected services revenue and accounting practices - The connected services revenue is recognized over the life of the contract, with no unusual accounting practices applied in the current quarter [42][44] Question: Non-automotive opportunities - The company ranks kiosk implementations and phone answering chat services as top non-automotive opportunities [48][50] Question: Core business growth breakdown - The expected 8% growth in the core business is attributed to increased billings and amortization of previous billings [53] Question: Competitive landscape update - The competitive landscape remains stable, with a focus on large language model-based technologies and existing competitors like Google and Amazon [56]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported revenue of $60.6 million and adjusted EBITDA of $8.3 million, exceeding guidance [5][17] - Full fiscal year revenue reached $251.8 million, with adjusted EBITDA of $48.1 million, and free cash flow grew almost threefold year-over-year to $46.8 million [6][21] - The price per unit (PPU) increased to $5.05 for the trailing 12-month period, up 12% from the previous year [6][24] Business Line Data and Key Metrics Changes - Variable license revenue for Q4 was $31.6 million, up 25% year-over-year, while connected service revenue was $14.2 million, up 17% year-over-year [18][19] - Professional services revenue for Q4 was $14.2 million, down 18% year-over-year, reflecting a shift towards standardized offerings [19][20] - Total license revenue for the full year grew 13%, despite a decrease in fixed license contracts [18] Market Data and Key Metrics Changes - The company shipped approximately 11.7 million units in Q4, an increase from 10.6 million in the prior year [22][23] - The number of connected cars shipped grew by 14% on a trailing 12-month basis, with 52% of worldwide auto production including Cerence technology [23] Company Strategy and Development Direction - The company is focused on three key priorities for fiscal year 2026: driving top-line growth, advancing the XUI platform, and maintaining cost diligence [28] - The strategy includes expanding partnerships with Microsoft and NVIDIA, and continuing IP monetization efforts [12][15] - The company anticipates fiscal year 2026 revenue in the range of $300 million to $320 million, marking a 23% year-over-year increase at the midpoint [15][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's foundation for long-term sustainable growth, with expectations for continued strong performance in fiscal 2026 [4][15] - The competitive landscape remains stable, with increasing competition from large language model-based technologies [58] Other Important Information - The company resolved a lawsuit with Samsung, resulting in a one-time payment of $49.5 million, which is expected to contribute to future revenue [7][34] - A restructuring plan was initiated to reduce operating expenses and position the company for profitable growth [13][14] Q&A Session Summary Question: Clarification on IP monetization and legal expenses - The $49.5 million payment from Samsung will flow through as revenue, with anticipated legal costs of approximately $24 million [34][38] Question: Interest in XUI and proof of concepts - The company is currently engaged in about half a dozen proof of concepts with various OEMs for the XUI platform [40] Question: Connected revenue and accounting practices - Revenue from connected services is recognized over the life of the contract, with no unusual accounting practices affecting the current quarter [42][44] Question: Non-automotive opportunities - Key non-automotive opportunities include kiosk implementations and a phone answering chat service targeting dealerships [48][50] Question: Breakdown of expected growth in core business - The anticipated 8% growth in core technology is driven by increased billings and amortization of deferred revenue [54] Question: Update on competitive landscape - The competitive landscape remains consistent, with major players like Google and Amazon continuing to drive competition through AI technologies [58]

Financial Data and Key Metrics Changes - For Q4 2025, the company reported revenue of $60.6 million and adjusted EBITDA of $8.3 million, exceeding guidance [5][16] - Full fiscal year revenue reached $251.8 million, with adjusted EBITDA of $48.1 million, and free cash flow grew almost threefold year-over-year to $46.8 million [5][20] - The price per unit (PPU) increased to $5.05 for the trailing 12-month period, up 12% from the previous year [5][23] Business Line Data and Key Metrics Changes - Variable license revenue for Q4 was $31.6 million, up 25% year-over-year, while connected service revenue was $14.2 million, up 17% year-over-year [17][18] - Professional services revenue for Q4 was $14.2 million, down 18% year-over-year, reflecting a focus on higher gross margins [18][19] - Total license revenue for the full year grew 13%, despite lower fixed license contracts [17] Market Data and Key Metrics Changes - The company shipped approximately 11.7 million units in Q4, an increase from 10.6 million in the prior year [21] - The number of connected cars shipped grew by 14% on a trailing 12-month basis, with 52% of worldwide auto production including Cerence technology [22] - Adjusted total billings were $236 million, an increase of 8.4% year-over-year [22] Company Strategy and Development Direction - The company aims to monetize its intellectual property and protect it against infringers, with ongoing actions against major companies [6][7] - A multi-year roadmap for IP monetization is in place, expected to support non-automotive business growth [8][12] - The company is focused on advancing its AI roadmap, growing its business with new and existing customers, and continuing transformation and cost management initiatives [8][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the foundation for long-term sustainable growth in fiscal 2026 and beyond, with expected revenue in the range of $300 million to $320 million [15][24] - The anticipated growth reflects an 8% increase in the core technology business and a focus on increasing adoption of Cerence XUI [15][24] - Management highlighted the importance of maintaining cost diligence while driving top-line growth [26] Other Important Information - The company resolved a lawsuit with Samsung, resulting in a one-time payment of $49.5 million, which is expected to contribute to revenue in Q1 [6][27] - A restructuring plan was initiated to reduce operating expenses and position the company for profitable growth [12][13] Q&A Session Summary Question: Clarification on IP monetization and legal expenses - Management confirmed that the $49.5 million payment from Samsung will flow through as revenue, with anticipated legal costs of approximately $24 million [27][28] Question: Interest in XUI and proof of concepts - Management noted ongoing POCs with about half a dozen OEMs, indicating increased interest in the XUI platform [28][29] Question: Connected revenue and accounting practices - Management clarified that connected revenue is recognized over the life of the contract, with no unusual accounting practices affecting the current quarter [29][30] Question: Non-automotive opportunities - Management identified kiosk implementations and a phone answering chat service as key non-automotive opportunities [32][33] Question: Core business growth breakdown - Management explained that the expected 8% growth in core technology is driven by increased billings and amortization of deferred revenue [34][35] Question: Competitive landscape update - Management indicated that the competitive landscape remains stable, with a focus on large language models and agentic AI driving competition [36]

Q4 FY25 Financial Performance - Total revenue increased to $60.6 million, exceeding the guidance of $53 million to $58 million[5] - Gross margin improved to 72.6%, surpassing the guidance of 68% to 69%[5] - Adjusted EBITDA reached $8.3 million, exceeding the guidance of $2 million to $6 million[5] - Cash provided by operating activities was $12.8 million[5] - Cash balance and marketable securities stood at $87.5 million[5] Revenue Breakdown - Total license revenue was $32.3 million, with variable license revenue at $31.6 million and fixed license revenue at $0.7 million[7] - Connected services revenue reached $14.2 million[7] - Professional services revenue amounted to $14.2 million[7] Operational Metrics - Adjusted Total Billings TTM reached $236 million, an increase of 8.4% compared to the same period last year[12] - Cerence technology was present in 52% of worldwide auto production (TTM)[12] - The number of Cerence connected cars shipped increased by 14% (TTM)[12] - The connected attach rate increased to 32.5% versus 28.8% a year ago[12] - Average PPU on a TTM basis was $5.05, up from $4.50 a year ago[12] FY26 Guidance - Revenue is projected to be between $300 million and $320 million[13] - Gross margin is expected to be between 79% and 80%[13] - Adjusted EBITDA is forecasted to be between $50 million and $70 million[13] - Cash provided by operating activities is estimated to be between $61 million and $67 million[13] - Free cash flow is projected to be between $56 million and $66 million[13]

Core Insights - Cerence, Inc. reported fourth-quarter earnings that exceeded both revenue and earnings estimates, leading to a significant increase in stock price [1][2] - The company raised its first-quarter revenue guidance substantially above analyst expectations [4] Financial Performance - Cerence reported a quarterly loss of $0.24 per share, outperforming the analyst estimate of a loss of $0.45 [2] - Quarterly revenue was $60.63 million, surpassing the consensus estimate of $55.25 million [2] Future Outlook - The company anticipates first-quarter revenue between $110 million and $120 million, significantly higher than the analyst estimate of $61.46 million [4] - However, Cerence lowered its fiscal 2026 revenue outlook to a range of $300 million to $320 million, compared to the previous estimate of $246.38 million [5] Stock Performance - Following the earnings report, Cerence's stock price increased by 28.66%, reaching $10.19 in extended trading [5]

Financial Performance - Q4 revenue reached $60.6 million, exceeding the high end of guidance, with FY25 revenue totaling $251.8 million[3] - Adjusted EBITDA for Q4 was $8.3 million, while FY25 adjusted EBITDA was $48.1 million[5] - Free cash flow for Q4 was $9.7 million, contributing to a total of $46.8 million for FY25, nearly three times the previous year[3] - The company projects FY26 revenue guidance of $300 million to $320 million, reflecting a 23% year-over-year increase at the midpoint[3] - The company anticipates first fiscal quarter revenue between $110 million and $120 million, including a $49.5 million patent license payment[8] - GAAP revenue for Q4 2025 was $60.639 million, up from $54.805 million in Q4 2024, representing a growth of 3.1%[51] - The company reported GAAP net cash provided by operating activities of $12.752 million for Q4 2025, compared to $6.115 million in Q4 2024[51] Profitability Metrics - Gross margin for Q4 was 72.6%, compared to 63.7% in Q4 FY24[5] - GAAP gross profit increased to $43.995 million in Q4 2025, compared to $34.895 million in Q4 2024, resulting in a gross margin of 72.6%[51] - Adjusted EBITDA for the twelve months ended September 30, 2025, was $48.064 million, down from $80.616 million in the previous year[51] - The net loss for the twelve months ended September 30, 2025, was $18.714 million, a significant improvement from a net loss of $588.078 million in 2024[49] - The company anticipates GAAP net income for FY2026 to range from a loss of $8.117 million to a profit of $11.883 million[53] Cash Flow and Assets - Net cash provided by operating activities for FY25 was $61.2 million, significantly up from $17.2 million in FY24[5] - Cash and cash equivalents at the end of the period were $84.017 million, down from $121.485 million at the end of September 30, 2024[46] - Total current assets decreased to $190.757 million as of September 30, 2025, from $265.509 million in 2024, reflecting a decline of about 28.2%[46] - Free cash flow for FY2026 is expected to be between $55.5 million and $65.5 million[53] Operational Metrics - The core technology business is expected to grow by 8% in FY26, excluding professional services[2] - The percentage of worldwide auto production utilizing Cerence technology reached 52% over the trailing twelve months[7] - The number of Cerence connected cars shipped increased by 14% year-over-year[7] - The number of Cerence enabled cars shipped on a TTM basis was over 525 million, showcasing the company's strong market presence[37] - Research and development expenses for the three months ended September 30, 2025, were $26.403 million, slightly up from $25.227 million in the same period of 2024[41] Liabilities and Shareholder Equity - The total liabilities decreased to $479.915 million as of September 30, 2025, compared to $561.261 million in 2024, indicating a reduction of approximately 14.5%[46] - The weighted-average common shares outstanding for the three months ended September 30, 2025, were 43.339 million, compared to 41.866 million in the same period of 2024[41] - Capital expenditures for FY2026 are projected to be between $(5.5) million and $(1.5) million[53]

Core Insights - Cerence Inc. reported strong financial results for Q4 and fiscal year 2025, with Q4 revenue of $60.6 million and FY25 revenue of $251.8 million, both exceeding guidance [3][5] - The company anticipates FY26 revenue guidance of $300 million to $320 million, reflecting a 23% year-over-year increase at the midpoint [3][5] - Cerence's CEO highlighted significant progress in technology milestones and customer interest in the Cerence xUI platform, with the first xUI-powered cars expected to launch in 2026 [3][5] Financial Performance - Q4 GAAP revenue was $60.6 million, up from $54.8 million in Q4 2024, while FY25 GAAP revenue was $251.8 million, down from $331.5 million in FY24 [4][33] - GAAP gross margin improved to 72.6% in Q4 2025 from 63.7% in Q4 2024, and for FY25, it was 72.7% compared to 73.7% in FY24 [4][33] - The company reported a net loss of $13.4 million for Q4 2025, an improvement from a loss of $20.4 million in Q4 2024, and a net loss of $18.7 million for FY25 compared to a loss of $588.1 million in FY24 [4][33] Cash Flow and Guidance - Q4 free cash flow was $9.7 million, nearly double the $4.7 million in Q4 2024, while FY25 free cash flow reached $46.8 million, up from $12.2 million in FY24 [5][33] - For Q1 FY26, revenue is expected to be between $110 million and $120 million, with gross margins projected between 85% and 86% [9][10] - FY26 adjusted EBITDA is expected to range from $50 million to $70 million, with net cash provided by operating activities projected between $61 million and $67 million [10][9] Key Performance Indicators - Cerence's technology was present in 52% of worldwide auto production over the trailing twelve months [7] - The number of Cerence connected cars shipped increased by 14% year-over-year [7] - Adjusted total billings grew by 8% year-over-year [7] Company Overview - Cerence Inc. is a leader in AI-powered user experiences in the automotive sector, with over 525 million cars shipped with its technology [28] - The company focuses on creating safer and more connected journeys for drivers and passengers through innovative AI solutions [28]

Core Viewpoint - Cerence Inc. is set to announce its fourth quarter financial results for the period ending September 30, 2025, on November 19, 2025, at 4:05 PM Eastern Time [1] Group 1: Financial Results Announcement - The financial results will be discussed in a live conference call and webcast on the same day at 5:00 PM Eastern Time [2] - Interested investors and analysts can register for the audio conference call and access the webcast at investors.cerence.com [2] Group 2: Company Overview - Cerence Inc. is a global leader in creating AI-powered user experiences in the automotive and transportation sectors [3] - The company has shipped over 525 million cars equipped with its technology, partnering with leading automakers and technology firms [3] - Cerence is headquartered in Burlington, Massachusetts, and has a global presence dedicated to advancing AI innovation [3]

Core Insights - Voice AI is rapidly evolving, enhancing human-machine interaction across various sectors, particularly automotive, retail, and customer service. SoundHound AI and Cerence Inc. are leading players in this space, each focusing on different market segments [1][2]. SoundHound Overview - SoundHound specializes in enterprise-grade conversational AI, targeting industries such as restaurants, financial services, healthcare, and automotive. The company has made strategic acquisitions to broaden its market reach and enhance its technology [3][5]. - The Agentic AI ecosystem, centered around the Amelia 7 platform and Polaris model, positions SoundHound as a leader in automating customer service and enterprise workflows. The company has 15 large enterprise customers migrating to its platform [4][7]. - SoundHound's restaurant segment is a significant growth driver, with partnerships established with major brands like Red Lobster and Chipotle. The company also serves seven of the top ten global financial institutions, with automated conversation volumes doubling year-over-year [5][6]. - Financially, SoundHound raised its 2025 revenue outlook to $160-$178 million, reflecting strong enterprise contract visibility, although it faces challenges with high valuation and ongoing operating losses [7][8]. Cerence Overview - Cerence focuses on the automotive voice assistant market, leveraging its xUI platform, which integrates voice and contextual reasoning. The company aims to maintain control for automakers wary of larger tech ecosystems [10][12]. - Recent partnerships with Volkswagen, Jaguar Land Rover, and others highlight Cerence's commitment to the automotive sector, while also diversifying its revenue through collaborations with LG Electronics [11][12]. - Cerence's financial position remains strong, with projected free cash flow between $38 million and $42 million for fiscal 2025, and an average price per vehicle rising to $4.91, indicating improved monetization [12][18]. - However, Cerence's revenue for fiscal 2025 is expected to decline to $244-$249 million, reflecting a slower growth trajectory compared to SoundHound [13][14]. Comparative Analysis - SoundHound's market capitalization is approximately $7.6 billion, trading at a forward price-to-sales ratio of 37.99X, indicating high growth expectations. In contrast, Cerence has a market cap of about $512.9 million, with a forward price-to-sales ratio of 1.97X, reflecting a more conservative growth outlook [15][18]. - Both companies are currently rated with a Zacks Rank of 3 (Hold), but SoundHound is viewed as the stronger growth opportunity due to its rapid expansion and diverse industry presence [21][22].