Core Insights - Cerence Inc. has launched Cerence xUI™, an AI assistant platform designed for in-vehicle user experiences, leveraging both edge and cloud technologies [1][5] - The platform aims to enhance user engagement by providing a conversational interface that can perform tasks, answer questions, and offer personalized suggestions based on user preferences [2][4] Group 1: Product Features - Cerence xUI utilizes the CaLLM™ family of language models, optimized in collaboration with NVIDIA and Microsoft, to deliver automotive-specific voice assistant capabilities [2][4] - The hybrid architecture of Cerence xUI allows deployment as a cloud-based add-on or as a fully integrated system, providing flexibility for automakers [3][5] - The platform supports streamlined interactions for complex queries and offers tailored conversational experiences suitable for in-car use [6] Group 2: Market Position and Strategy - Cerence AI has established strategic partnerships with global automakers to implement Cerence xUI in future vehicle models, enhancing the in-cabin experience [1][5] - The company emphasizes its role as a trusted partner for automakers, enabling them to integrate advanced AI features into both new and existing vehicles [5][8] - Cerence AI has shipped over 500 million cars with its technology, showcasing its significant presence in the automotive industry [8]

Industry Overview - The global virtual assistants market is experiencing significant growth, with a compound annual growth rate (CAGR) of 22.3% projected to reach a value of $23.57 billion by 2033 [1] Market Drivers - The integration of virtual assistants with smart home devices such as speakers, thermostats, and lighting systems is a key factor driving market growth [1]

Core Viewpoint - Cerence (CRNC) has shown significant stock performance, returning 75.1% year to date, outperforming the broader technology sector and the IT services industry [1] Financial Performance - In the first quarter of fiscal 2025, Cerence reported a non-GAAP loss of 3 cents per share, exceeding the Zacks Consensus Estimate by 88.89% [2] - Revenues for the same quarter were $50.9 million, surpassing the Zacks Consensus Estimate by 3.62%, although this represents a 63.2% decline year over year [2] Market Position and Technology - Cerence's technology was utilized in 51% of auto production in the first quarter of fiscal 2025, with approximately 11 million cars shipped, reflecting a 2.6% sequential increase but a 10.5% year-over-year decrease [3] - The company powers over 500 million cars globally, indicating strong market reach and leadership in automotive AI [4] Growth Prospects - For fiscal 2025, Cerence anticipates revenues between $236 million and $247 million, with adjusted EBITDA expected between $15 million and $26 million [7] - The second quarter of fiscal 2025 is projected to generate revenues between $74 million and $77 million, including an estimated $20 million from fixed contracts [7] - The Zacks Consensus Estimate for second-quarter fiscal 2025 revenues is $76.57 million, indicating a 12.89% growth compared to the previous year [8] Clientele and Partnerships - Cerence has expanded its automotive clientele, achieving 10 customer wins and launching six Gen AI programs in fiscal 2024 [11] - The company set a record with 22 platform launches in 2024 and has secured a multi-year agreement with JLR for next-generation in-car experiences [12] - Collaborations with NVIDIA and Microsoft enhance Cerence's technological capabilities, integrating advanced AI solutions into vehicles [13][14] Valuation and Market Sentiment - Despite strong growth prospects, Cerence shares are considered overvalued, indicated by a Value Score of D, and are trading above the 50-day and 200-day moving averages, suggesting a bearish trend [15][16] - The company faces intense competition in the automotive voice assistance domain, which may impact its future prospects [17]

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $50.9 million, exceeding the high end of guidance of $47 million to $50 million [20] - Adjusted EBITDA was $1.4 million, significantly better than the anticipated loss of $6.6 million to $9 million [23] - Gross margin for the quarter was 65%, surpassing the guidance of 60% [21] - The net loss for Q1 was $22.4 million, compared to a net income of $23.9 million in the same quarter of the previous year [24] - Cash and marketable securities at the end of the quarter were $110.5 million, down $19.9 million from the previous fiscal year [25] Business Line Data and Key Metrics Changes - License revenue increased to $22.7 million, up 9.1% year-over-year [27] - Connected services revenue rose to $13.7 million, a 34% increase from $10.2 million in the same quarter last year [27] - Professional services revenue decreased year-over-year but performed at a higher gross margin than anticipated [21][28] Market Data and Key Metrics Changes - The penetration of global auto production declined by 2% to 51% [31] - Approximately 11 million cars were shipped with Cerence technology in Q1, a 2.6% increase quarter-over-quarter but a 10.5% decrease year-over-year [32] - Worldwide car production declined by 1.2% compared to the same quarter last year [32] Company Strategy and Development Direction - The company aims to return to profitability in fiscal year 2025, focusing on cost management and operational efficiency [6][17] - Key deliverables for 2025 include launching the next-gen product Cerence XUI, growing business with new and existing customers, and continuing transformation efforts [11][15][16] - Partnerships with leading AI companies like Nvidia and Microsoft are expected to enhance product performance and cost efficiency [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year cash flow expectations and projected revenue guidance for Q2 between $74 million and $77 million [17][35] - The company is optimistic about its ability to navigate challenges in the automotive industry, including cost pressures and geopolitical factors [11] - Management noted that the recent tariff announcements are not expected to have a meaningful impact on Q2 results [43] Other Important Information - The company repurchased $27 million of convertible notes due in June 2025 as part of its debt management strategy [7] - The restructuring efforts have resulted in a significant reduction in operating expenses, down 23% year-over-year [22] Q&A Session Summary Question: What is the size of the first major customer program with Cerence XUI? - The first major customer program is with a European auto manufacturer, expected to involve several million units over the contract's life, with approximately one million units in the first year [47] Question: Can you provide insights on the competitive landscape for digital assistance? - The competitive landscape remains similar, with major players like Google and Amazon, as well as DIY solutions from OEMs. Cerence's agnostic approach allows for customization and flexibility [67][68] Question: What are the one-time items that contributed to better-than-expected results? - The $2 million royalty true-up and a $2.5 million international tax credit were significant contributors to improved profitability [86][88] Question: How quickly can the adoption of XUI ramp up? - Adoption rates depend on the contracts, which typically range from one to ten years, with most being two to three years [101] Question: What is the company's strategy regarding the remaining convertible notes? - The company plans to extinguish the remaining $60 million of convertible notes due in June through a combination of payoff and financing [39][127]

Group 1: Earnings Performance - Cerence reported a quarterly loss of $0.03 per share, significantly better than the Zacks Consensus Estimate of a loss of $0.27, representing an earnings surprise of 88.89% [1] - The company has surpassed consensus EPS estimates for four consecutive quarters [2] - Cerence's revenues for the quarter ended December 2024 were $50.9 million, exceeding the Zacks Consensus Estimate by 3.62%, but down from $138.34 million year-over-year [2] Group 2: Stock Performance and Outlook - Cerence shares have increased approximately 66.9% since the beginning of the year, outperforming the S&P 500's gain of 3.1% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.02 on revenues of $57.71 million, and $0.15 on revenues of $241.27 million for the current fiscal year [7] Group 3: Industry Context - The Computers - IT Services industry, to which Cerence belongs, is currently ranked in the top 18% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Cerence's stock performance [5]

Cerence Q1 FY25 Earnings Presentation Brian Krzanich, Chief Executive Officer Tony Rodriquez, Chief Financial Officer February 6, 2025 © 2025 Cerence Inc. Forward-Looking Statements Statements in this presentation regarding: Cerence's future performance, results and financial condition; expected growth and profitability; outlook; transformation plans and cost efficiency initiatives, including the estimated net annualized cost savings; strategy; opportunities; business, industry and market trends; strategy r ...

Revenue Performance - Total revenue for the three months ended December 31, 2024, decreased by $87.4 million, or 63.2%, to $50.9 million from $138.3 million in the same period of 2023[135]. - License revenue increased by $1.9 million, or 9.1%, to $22.7 million, representing 44.6% of total revenues, up from 15.1% in the prior year[145]. - Connected services revenue decreased by $83.1 million, or 85.8%, to $13.7 million from $96.8 million[144]. - Professional services revenue decreased by $6.2 million, or 30.1%, to $14.5 million from $20.7 million[144]. - Connected services revenue for Q1 FY2025 was $13.7 million, a decrease of $83.1 million, or 85.8%, from $96.8 million in Q1 FY2024, primarily due to contract terminations[146]. - Professional services revenue for Q1 FY2025 was $14.5 million, a decrease of $6.2 million, or 30.1%, from $20.7 million in Q1 FY2024, driven by contract fulfillment timing[147]. - Total gross profit for Q1 FY2025 was $33.1 million, a decrease of $78.9 million, or 70.5%, from $112.0 million in Q1 FY2024, primarily due to declines in connected services revenue[150]. Operating Performance - Operating margin decreased by 75.6 percentage points to negative 33.3% from 42.3%[135]. - Cash provided by operating activities was $9.3 million, a net change of $12.1 million from cash used in operating activities of $2.8 million[135]. - Total cost of revenues for Q1 FY2025 was $17.8 million, a decrease of $8.5 million, or 32.3%, from $26.3 million in Q1 FY2024[149]. - R&D expenses for Q1 FY2025 were $20.9 million, a decrease of $12.4 million, or 37.3%, from $33.3 million in Q1 FY2024[158]. - Sales and marketing expenses for Q1 FY2025 were $4.8 million, a decrease of $1.3 million, or 21.5%, from $6.1 million in Q1 FY2024[159]. - General and administrative expenses for Q1 FY2025 were $12.8 million, flat compared to $12.8 million in Q1 FY2024[160]. - Restructuring and other costs for Q1 FY2025 were $11.1 million, a significant increase from $0.7 million in Q1 FY2024, primarily due to personnel elimination charges[164][165]. Future Outlook - The company expects revenue to continue to be impacted by production delays and slowdowns in the global automotive industry due to macroeconomic conditions[143]. - A restructuring plan was announced in August 2024 to reduce operating expenses and position the company for profitable future growth[143]. - The implementation of the restructuring plan was substantially complete by the end of the first quarter of fiscal year 2025[143]. - The company has existing relationships with nearly all major OEMs or their tier 1 suppliers, providing some visibility into future revenue despite potential delays[130]. Tax and Cash Position - The provision for income taxes for the three months ended December 31, 2024 was $5.7 million, a decrease of 83.5% from $34.3 million in the same period of 2023[169]. - The effective income tax rate for the three months ended December 31, 2024 was negative 30.5%, compared to 59.0% for the same period in 2023[169]. - As of December 31, 2024, the company had $110.5 million in cash, cash equivalents, and marketable securities, with net working capital of $91.0 million[170]. - The total material cash requirements for future periods amount to $298.3 million, with $67.2 million due in 2025[174]. Debt and Financing Activities - The company issued $190.0 million in aggregate principal amount of 2028 Notes, with initial net proceeds of $193.2 million after transaction costs[175]. - The 2025 Modified Notes have a carrying amount of $135.4 million as of December 31, 2024, net of unamortized costs[179]. - Net cash provided by operating activities for the three months ended December 31, 2024 was $9.3 million, a significant increase of 428.7% from a net cash used of $2.8 million in the same period of 2023[193]. - The company repurchased $27.4 million aggregate principal amount of its 2025 Notes for $27.0 million in cash, resulting in a gain on extinguishment of debt of $0.3 million[186]. - Total interest expense related to the Notes for the three months ended December 31, 2024 was $2.97 million, compared to $2.91 million in 2023[187]. - The company terminated its Credit Agreement on December 31, 2024, with no revolving loans outstanding at that time[190]. - Net cash used in financing activities for Q4 2024 was $27.1 million, a significant increase of $27.0 million from $0.1 million in Q4 2023, driven by a $70.5 million decrease in income before non-cash charges[196]. - The company experienced a $88.8 million increase in deferred revenue, contributing positively to cash flow changes in financing activities[196]. Market Risks - The company is exposed to market risks from foreign currency exchange rates and interest rates, which could impact operating results and cash flows[200]. - The primary foreign currency exposure includes transactions in Canadian dollar, Chinese yuan, Euro, and Japanese yen[202]. - The company utilizes foreign currency forward contracts to hedge against foreign currency exchange risks associated with forecasted payments[203]. - The aggregate notional amount of outstanding foreign currency forward contracts was $43.2 million at December 31, 2024, with a potential unrealized loss of $3.7 million from a 10% unfavorable exchange rate movement[203]. - Cash and cash equivalents totaled approximately $104.1 million at December 31, 2024, with a potential increase of $0.6 million in interest income from a 1% rise in interest rates[204]. Accounting and Estimates - Critical accounting estimates significantly affecting financial condition include revenue recognition and allowance for credit losses[198]. - Recent accounting standards may impact future results of operations, as detailed in the company's annual report[199].

Financial Performance - GAAP revenue for Q1 FY2025 was $50.9 million, a decrease of 63.2% from $138.3 million in Q1 FY2024[2] - GAAP gross margin dropped to 65.0% in Q1 FY2025 from 81.0% in Q1 FY2024[2] - GAAP net loss for Q1 FY2025 was $24.3 million, compared to a net income of $23.9 million in Q1 FY2024, resulting in a net loss margin of -47.7%[2] - Adjusted EBITDA for Q1 FY2025 was $1.4 million, down from $70.4 million in Q1 FY2024, with an adjusted EBITDA margin of 2.7%[2] - Total revenues for Q1 2024 were $50,896 thousand, a decrease of 63.2% compared to $138,335 thousand in Q1 2023[27] - Net loss for Q1 2024 was $24,288 thousand, compared to a net income of $23,857 thousand in Q1 2023, representing a significant shift in performance[27] - GAAP gross margin for Q1 2024 was 65.0%, down from 81.0% in Q1 2023[30] - Non-GAAP operating loss for Q1 2024 was $509 thousand, a decline from an operating income of $68,313 thousand in Q1 2023[30] Future Projections - The company expects Q2 FY2025 revenue to be between $74 million and $77 million, including $20 million from projected Fixed License revenue[4] - Gross margins for Q2 FY2025 are projected to be between 74% and 76%[4] - GAAP revenue for Q2 2025 is projected between $74,000 and $77,000, with FY2025 expected to be between $236,000 and $247,000[34] - Non-GAAP gross profit for Q2 2025 is estimated to be between $55,400 and $59,400, while FY2025 is projected between $160,900 and $171,900[34] - GAAP net income for Q2 2025 is expected to range from $1,200 to $5,200, with a loss projected for FY2025 between $(39,600) and $(28,600)[35] - Non-GAAP net income for Q2 2025 is anticipated to be between $13,000 and $17,000, with FY2025 expected to range from $(6,600) to $4,400[35] - Adjusted EBITDA for Q2 2025 is projected between $17,800 and $21,800, while FY2025 is expected to be between $15,300 and $26,300[34] - GAAP operating margin for Q2 2025 is estimated to be between 10% and 14%, while the non-GAAP operating margin is expected to range from 21% to 26%[34] - Free Cash Flow for FY2025 is projected to be between $20,000 and $30,000[35] - Non-GAAP net income (loss) per share - diluted is expected to be between $0.28 and $0.36 for Q2 2025[35] - GAAP net cash provided by operating activities for FY2025 is projected to be between $34,000 and $40,000[35] - Stock-based compensation for Q2 2025 is estimated at $7,000, with FY2025 expected to be $22,500[34] Operational Highlights - The percentage of worldwide auto production utilizing Cerence technology reached 51%[3] - There was a 5% year-over-year increase in the number of Cerence connected cars shipped[3] - The company achieved six design wins and two wins for generative AI solutions in the quarter[2] - Cerence's transformation and cost reduction initiatives are positively impacting the business, positioning it for sustainable growth[2] Cash and Assets - Cash and cash equivalents at the end of Q1 2024 were $104,103 thousand, down from $121,485 thousand at the end of Q4 2023[29] - Total current assets decreased to $200,072 thousand in Q1 2024 from $265,509 thousand in Q4 2023[28] - Total liabilities decreased to $496,826 thousand in Q1 2024 from $561,261 thousand in Q4 2023[28] - Free cash flow for Q1 2024 was $7,894 thousand, compared to a negative free cash flow of $(3,746) thousand in Q1 2023[32] - The company reported a significant increase in accounts receivable, with a net amount of $47,671 thousand in Q1 2024 compared to $62,755 thousand in Q4 2023[28]

BURLINGTON, Mass., Feb. 06, 2025 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC) (“Cerence AI”), a global industry leader in AI for transportation, today reported its first quarter fiscal year 2025 results for the quarter ended December 31, 2024. ResultsSummary(1,2)(in millions, except per share data) Three Months Ended December 31, 2024 2023 GAAP revenue $50.9 $<td s ...

BURLINGTON, Mass., Jan. 21, 2025 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC) (“Cerence AI”), a global industry leader in AI for transportation, will announce its first quarter financial results for the quarter ended December 31, 2024, on Thursday, February 6, 2025, at 4:05pm Eastern Time / 1:05pm Pacific Time. The company will host a live conference call and webcast, with supplementary slides, to discuss the results on the same day at 5:00pm Eastern Time / 2:00pm Pacific Time. Interested investors and a ...