Financial Data and Key Metrics Changes - The company has seen a significant shift in its operational efficiency and profitability, with a focus on reducing costs and increasing cash flow [44][46][61] - The penetration rate of the company's technology is reported to be in over 50% of cars produced, with a goal to increase the price per unit (PPU) as more advanced technologies are adopted [20][21][58] Business Line Data and Key Metrics Changes - The company is transitioning to a multimodal AI interaction platform, Cerence XUI, expected to be completed by the end of the calendar year, with implementation in vehicles anticipated in early 2026 [61][62] - The company is also focusing on enhancing its technology stack within existing vehicles to increase revenue opportunities [21][61] Market Data and Key Metrics Changes - The adoption rates for AI and voice interaction technologies are similar across European and US manufacturers, with a notable demand for these features from consumers [29][30] - In China, the company faces challenges selling within the domestic market but performs well with Chinese manufacturers exporting to Europe and other regions [28][29] Company Strategy and Development Direction - The company aims to leverage its trusted relationships with OEMs and tier-one suppliers to enhance its competitive position against big tech companies [13][26] - There is a strategic focus on expanding into non-automotive sectors while maintaining profitability and cash flow [34][35] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the complexity of software integration within vehicles as a challenge for automakers, which may delay the adoption of new technologies [16][17] - The company is optimistic about the future, emphasizing the importance of AI advancements and the growing demand for connected vehicle technologies [19][22] Other Important Information - The company has established partnerships with key SOC providers like NVIDIA and ARM to enhance software performance and execution [26] - The company is exploring opportunities in non-automotive sectors, including transportation and consumer electronics, while ensuring high margins and profitability [33][34] Q&A Session Summary Question: What are the most important metrics to track for the company and the industry? - Key metrics include overall IHS volumes, penetration rates, connectivity rates, and adjusted cash flow, which provide visibility into future connected revenue [57][58][59] Question: How is the company addressing operational efficiencies? - The company has undertaken a successful restructuring to rationalize expenses, focusing on improving efficiency across all departments [44][45][46] Question: What is the company's approach to pricing discussions with automakers? - The company is engaged in discussions to help manufacturers reduce costs while also aiming to increase revenue through a broader adoption of its technology stack [50][52]

Core Insights - Cerence AI has announced a strategic partnership with Arm to enhance the performance of its embedded small language model, CaLLM Edge, by utilizing Arm's Kleidi software library [1][4] - The collaboration aims to address challenges faced by automakers in optimizing compute performance for AI capabilities, particularly for large language models [2][3] Company Overview - Cerence Inc. is a global leader in creating AI-powered user experiences in the automotive sector, with over 500 million cars equipped with its technology [5] - The company focuses on integrating voice and generative AI to enhance safety and connectivity for drivers and passengers [5] Partnership Details - The partnership will enable flexible distribution and parallelization of AI computation loads between CPUs and GPUs, improving speed and performance for CaLLM Edge [3] - Arm's technology is already utilized by 94% of global automakers, providing a foundational compute architecture for AI applications in vehicles [2] Technological Advancements - The Kleidi software library is designed to accelerate machine learning and optimize neural network operations on Arm-based devices, facilitating real-time language processing [2][3] - CaLLM Edge operates efficiently on Arm-based chipsets, demonstrating high performance despite limited compute power and intensive processing requirements [3] Future Outlook - Both companies express excitement about the partnership, aiming to set new standards for performance and efficiency in automotive edge computing [4] - The collaboration is expected to lead to innovative application-specific AI models in vehicles, enhancing the in-car user experience [4]

Core Insights - Cerence Inc. is a global leader in conversational AI-powered user experiences, focusing on the automotive and transportation sectors [3] - The company will participate in two investor conferences in May and June 2025, showcasing its commitment to engaging with investors [1][2] Company Overview - Cerence Inc. (NASDAQ: CRNC) specializes in creating intuitive, AI-powered experiences, leveraging voice technology, generative AI, and large language models [3] - The company has shipped over 500 million cars equipped with its technology, partnering with leading automakers and technology firms [3] - Cerence is headquartered in Burlington, Massachusetts, and operates globally with a dedicated team focused on AI innovation [3]

Core Insights - Cerence (CRNC) reported quarterly earnings of $0.53 per share, exceeding the Zacks Consensus Estimate of $0.34 per share, and showing a significant improvement from a loss of $0.09 per share a year ago, resulting in an earnings surprise of 55.88% [1] - The company achieved revenues of $78.01 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.62% and reflecting a year-over-year increase from $67.83 million [2] - Cerence shares have increased approximately 26.6% since the beginning of the year, contrasting with a decline of -4.7% in the S&P 500 [3] Earnings Outlook - The future performance of Cerence's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook, including current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is -$0.16 on revenues of $52.91 million, with a breakeven estimate on revenues of $240.88 million for the current fiscal year [7] Industry Context - The Computers - IT Services industry, to which Cerence belongs, is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, TaskUs (TASK), is expected to report quarterly earnings of $0.32 per share, reflecting a year-over-year increase of 6.7%, with revenues projected at $271.47 million, up 19.3% from the previous year [9][10]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $78 million, exceeding the high end of guidance, with an adjusted EBITDA of $29.5 million, marking a significant improvement from a net loss of $278 million in the same quarter last year [4][20][21] - Free cash flow for the quarter was $13.1 million, representing the fourth consecutive quarter of positive free cash flow [4][20] - The gross margin for the quarter was 77%, surpassing the guidance range of 74% to 76% [18][20] Business Line Data and Key Metrics Changes - Variable license revenue increased by $4.8 million or 19% year-over-year to $29.9 million, while fixed license revenue rose to $21.5 million from $10.4 million in the same quarter last year [21][22] - Connected services revenue decreased by $1 million or 7% year-over-year, but the decline was attributed to a revenue true-up in the previous year [21][22] - Professional services revenue was down approximately $4.8 million year-over-year, reflecting a trend towards more standardized solutions requiring less integration [22] Market Data and Key Metrics Changes - The penetration of global auto production for the trailing twelve months was 51%, with approximately 11.6 million cars equipped with Cerence technology shipped in Q2, flat year-over-year [25] - Worldwide car production increased by 1.3% year-over-year but decreased by 10.9% quarter-over-quarter, with a notable decline in production outside of China [26] - The average price per unit (PPU) increased to $4.87 from $4.51 year-over-year, driven by a higher attachment rate of connected services [27][28] Company Strategy and Development Direction - The company is focused on expanding its partnerships and diversifying its offerings beyond automotive, including a new solution for self-service kiosks in collaboration with CodeFactory [9][10] - Strategic investments are being made in IP protection, with ongoing lawsuits against Samsung, Microsoft, and Nuance to defend its intellectual property [10][64] - The company aims to enhance its hybrid agentic AI platform, Cerence XUI, with new features and capabilities, including multimodal functionalities [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite macro challenges in the automotive industry, noting strong customer interest and ongoing partnerships [5][6] - The impact of tariffs on business remains limited, with expectations of minimal effects in the upcoming quarters [6][7] - The company anticipates continued growth in connected vehicle demand and is optimistic about revenue and profitability in fiscal year 2026 and beyond [9][12] Other Important Information - The company has a five-year backlog of approximately $960 million, consistent with previous quarters [28] - Guidance for Q3 revenue is projected to be between $52 million and $56 million, with no material fixed license revenue expected [29][30] - Full-year revenue guidance remains unchanged at $236 million to $247 million, with expectations for improved profitability and free cash flow [30] Q&A Session Summary Question: Insights on billing metrics and connected cars - Management noted that overall volumes were in line with expectations, with an increase in connected car shipments indicating future revenue growth [36][37] Question: Drivers behind new connected revenue - The increase in new connected revenue is attributed to previous billings amortizing into revenue, with expectations for continued growth in Q3 and Q4 [38][39] Question: Impact of AI on connected services - AI is integrated into both connected and non-connected vehicles, driving consumer demand and increasing PPU [42][43] Question: Macro impacts on pricing and volume - Management acknowledged requests from OEMs for price reductions due to cost pressures, but emphasized a collaborative approach to find win-win solutions [47][49] Question: Clarification on fiscal year guidance - The company remains confident in achieving its fiscal year guidance, with higher technology revenue offsetting headwinds in professional services [55][56] Question: Details on the lawsuit against Microsoft - The lawsuit is focused on protecting the company's intellectual property, with ongoing collaboration with Microsoft on technical projects [64][94]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $78 million, exceeding the high end of guidance which was $74 million to $77 million [4][17] - Adjusted EBITDA for the quarter was $29.5 million, surpassing the guidance range of $18 million to $22 million [4][20] - Free cash flow was $13.1 million, marking the fourth consecutive quarter of positive free cash flow [4][20] - Net income for Q2 was $21.7 million, a significant improvement from a net loss of $278 million in the same quarter last year [20][21] Business Line Data and Key Metrics Changes - Variable license revenue increased to $29.9 million, up 19% year-over-year [21] - Fixed license revenue was $21.5 million, compared to $10.4 million for Q2 last fiscal year [21] - Connected services revenue decreased to $12.6 million, down 7% from $13.6 million in the same quarter last year [21][22] - Professional services revenue declined by approximately $4.8 million year-over-year, attributed to increased standardization of solutions [22] Market Data and Key Metrics Changes - The penetration of global auto production for the trailing twelve months was 51%, with approximately 11.6 million cars using Cerence technology shipped in Q2 [25] - Worldwide IHS production increased by 1.3% year-over-year but decreased by 10.9% quarter-over-quarter [25] - The number of cars produced using connected services increased by 10% on a trailing twelve-month basis compared to the previous year [26] Company Strategy and Development Direction - The company is focused on technology innovation, expanding partnerships, and diversifying its business beyond automotive [5][9] - Cerence is strategically investing in IP protection, with ongoing lawsuits against Samsung, Microsoft, and Nuance for patent and copyright infringement [10][60] - The company is enhancing its hybrid agentic AI platform, Cerence XUI, with new multimodal capabilities and partnerships with major automakers [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing macro challenges in the automotive industry but expressed confidence in the company's positioning and customer support [5][6] - The impact of tariffs on business remains limited, with expectations of minimal effects for the fiscal year [6][7] - Management is optimistic about the future, citing strong customer interest in new technologies and solutions [13][33] Other Important Information - The company plans to repay $60.1 million of convertible notes due in June and maintain a cash balance above $70 million for the rest of the fiscal year [30] - The five-year backlog metric is approximately $960 million, consistent with previous quarters [28] Q&A Session Summary Question: Can you walk through the metrics and what is driving the changes? - Management indicated that overall volumes were in line with expectations, with an increase in connected car shipments expected to drive future revenue [35][36] Question: What is driving the sequential uptick in new connected revenue? - Management confirmed that the increase is due to previous billings amortizing into revenue, with expectations for continued growth in connected revenue [37][38] Question: How is AI impacting connected services and pricing? - AI is integrated into both connected and non-connected vehicles, driving consumer demand and increasing pricing per unit [41][42] Question: Where are macro impacts being felt? - Management noted some pricing pressure from OEMs and potential impacts on volume due to market conditions [46][48] Question: Can you elaborate on the unchanged fiscal year guidance? - The guidance remains unchanged due to higher technology revenue offsetting headwinds in professional services [52][53] Question: What is the goal of the lawsuit against Microsoft? - The lawsuit aims to protect the company's intellectual property related to foundational technologies [60][88] Question: How is the partnership with MediaTek enhancing offerings? - The partnership focuses on optimizing automotive SoCs for better performance and cost efficiency [56][57] Question: What are the non-automotive opportunities being explored? - The company is leveraging its technology for applications in kiosks and other verticals, aiming for cost-effective market entry through partnerships [102][103]

Financial Data and Key Metrics Changes - The company reported Q2 revenue of $78 million, exceeding the high end of guidance which was $74 million to $77 million [17] - Adjusted EBITDA for Q2 was $29.5 million, surpassing the guidance range of $18 million to $22 million [21] - Free cash flow for the quarter was $13.1 million, marking the fourth consecutive quarter of positive free cash flow [4] - Net income for Q2 was $21.7 million, a significant improvement from a net loss of $278 million in the same quarter last year [21][22] - Gross margin for the quarter was 77%, exceeding the guidance range of 74% to 76% [19] Business Line Data and Key Metrics Changes - Variable license revenue was $29.9 million, up 19% year-over-year [22] - Fixed license revenue for Q2 was $21.5 million, compared to $10.4 million in the same quarter last year [22] - Connected services revenue decreased to $12.6 million, down 7% from $13.6 million year-over-year [22] - Professional services revenue was down approximately $4.8 million year-over-year, reflecting a trend towards more standardized solutions [23] Market Data and Key Metrics Changes - The penetration of global auto production for the trailing twelve months was 51%, with approximately 11.6 million cars using Cerence technology shipped in Q2 [25] - Worldwide car production increased by 1.3% year-over-year but decreased by 10.9% quarter-over-quarter [26] - The number of cars produced using connected services increased by 10% on a trailing twelve-month basis compared to the previous year [27] Company Strategy and Development Direction - The company is focused on expanding partnerships and diversifying its offerings beyond automotive, including a new solution for self-service kiosks [9][10] - Strategic investments are being made in IP protection, with ongoing lawsuits against Samsung, Microsoft, and Nuance [10][62] - The company aims to enhance its hybrid agentic AI platform, Cerence XUI, with new features and capabilities [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite macro challenges in the automotive industry [5] - The impact of tariffs on business remains limited, with ongoing cooperation with customers to optimize partnerships [6] - Future revenue growth is anticipated from new verticals and increased demand for connected vehicles [9][27] Other Important Information - The company plans to use cash on hand to repay $60.1 million of convertible notes due in June, maintaining a cash balance above $70 million for the rest of the fiscal year [31] - The five-year backlog metric is approximately $960 million, consistent with previous quarters [29] Q&A Session Summary Question: Can you walk through the metrics and what is driving the changes? - Management noted that overall volumes were in line with expectations, with an increase in connected car rates indicating future revenue potential [37][38] Question: What is driving the sequential increase in new connected revenue? - The increase is attributed to previous billings amortizing into revenue, with expectations for continued growth in Q3 and Q4 [39][40] Question: How is AI impacting connected services and pricing? - AI is integrated into both connected and non-connected vehicles, driving consumer demand and increasing pricing per unit [42][44] Question: Where are macro impacts being felt? - Management indicated that pricing pressures from OEMs are emerging, but they are working to provide value through cost-saving measures [47][49] Question: Can you elaborate on the lawsuit against Microsoft? - The lawsuit is focused on protecting intellectual property, with ongoing collaboration with Microsoft on technical projects despite the legal issues [92][94] Question: What are the non-automotive opportunities being explored? - The company is leveraging its technology for applications in kiosks and other verticals, aiming for cost-effective growth through partnerships [106][107]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 001-39030 CERENCE INC. (Exact name of registrant as specified in its charter) Delaware 83-4177087 (State or oth ...

Cerence Q2 FY25 Earnings Presentation May 7, 2025 Brian Krzanich, Chief Executive Officer Tony Rodriquez, Chief Financial Officer © 2025 Cerence Inc. Q2 FY25 Financial Details © 2025 Cerence Inc. 3 Cerence Q2FY25 Results Forward-Looking Statements Statements in this presentation regarding: Cerence's future performance, results and financial condition; expected growth and profitability; outlook and momentum; transformation plans and cost efficiency initiatives; strategy; opportunities; business, industry and ...

Exhibit 99.1 Cerence Announces Second Quarter Fiscal 2025 Results; Revenue and Profitability Exceed High End of Guidance "I'm incredibly proud of what our team has accomplished. We surpassed the high end of our revenue and adjusted EBITDA guidance and posted our fourth consecutive quarter of positive free cash flow, demonstrating the high value we provide to the world's leading automakers as they work through the ongoing macro uncertainties and complexities facing the industry today," said Brian Krzanich, C ...