Cerence(US:CRNC)2025-11-20 20:17Financial Performance - Cerence generated revenue of $251.8 million in fiscal year 2025, a decrease of 24% compared to $331.5 million in fiscal year 2024[30]. - The company recorded a net loss of $18.7 million for fiscal year 2025, a significant improvement from a net loss of $588.1 million in fiscal year 2024, reflecting a 97% change[30]. - Total revenues for fiscal year 2025 were $251.8 million, a decrease of $79.7 million, or 24.0%, from $331.5 million in fiscal year 2024[203]. - License revenue for fiscal year 2025 was $140.6 million, an increase of $15.9 million, or 12.7%, from $124.7 million in fiscal year 2024, representing 55.9% of total revenue[204]. - Connected services revenue for fiscal year 2025 was $53.4 million, a decrease of $80.1 million, or 60.0%, from $133.4 million in fiscal year 2024, accounting for 21.2% of total revenue[205]. - Professional services revenue for fiscal year 2025 was $57.8 million, a decrease of $15.5 million, or 21.2%, from $73.3 million in fiscal year 2024, representing 23.0% of total revenue[206]. - Total gross profit for fiscal year 2025 was $183.1 million, a decrease of $61.1 million, or 25.0%, from $244.3 million in fiscal year 2024[212]. - Operating margin improved by 174.0 percentage points from negative 174.9% to negative 0.9%[192]. - Cash from operating activities increased by $44.0 million, or 255.7%, from $17.2 million to $61.2 million[192]. Market Presence and Partnerships - Cerence's solutions have been shipped in over 525 million automobiles to date, including over 25 million new vehicles in fiscal year 2025 alone[29]. - Approximately 52% of all cars shipped during the fiscal year ended September 30, 2025, included Cerence technologies, indicating strong market penetration[29]. - The company has signed several strategic, long-term partnership agreements with global automakers to deploy its Cerence xUI platform for future in-cabin experiences[41]. - Approximately 50% of the company's revenue in fiscal year 2025 came from major OEMs, including BMW, Mercedes-Benz, and Toyota, while the other 50% came from tier 1 suppliers like HARMAN and Bosch[52]. - Revenue distribution in fiscal year 2025 was approximately 16% from the Americas, 42% from Europe, and 42% from Asia, showcasing a geographically diverse revenue base[53]. Research and Development - Research and development expenses were approximately $123.3 million for fiscal year 2023, $121.6 million for fiscal year 2024, and $97.8 million for fiscal year 2025, indicating a focus on continued investment in AI-powered solutions[50][51]. - The company employs around 700 research and development personnel globally, emphasizing its commitment to innovation and technical expertise[50]. - The company holds 832 patents and patent applications as of September 30, 2025, providing meaningful protection for its products and technologies[65]. Strategic Plans and Restructuring - The company has implemented restructuring plans in 2024 and 2025 aimed at reducing operating expenses and positioning for profitable growth, with the 2025 Plan expected to be substantially complete by the end of Q1 fiscal year 2026[58][59]. - The company has implemented the 2025 Plan to streamline operations, which may lead to higher restructuring charges and operational disruptions[73]. - The implementation of the 2024 Plan was substantially complete by the end of the first quarter of fiscal year 2025[201]. Risks and Challenges - Supply chain disruptions, inflation, and higher interest rates have adversely affected business operations and results[71]. - The company faces intense competition in the automotive voice assistance market, with competitors including SoundHound and iFlyTek, but believes it has competitive advantages in scale and technology[47][68]. - The company faces risks related to the loss of major customers, which could materially affect business and financial condition[80]. - Pricing pressures from major OEMs could negatively impact sales and profit margins, with potential fixed price commitments for long-term contracts[76]. - Cybersecurity incidents could lead to significant reputational and financial harm, including loss of revenue and increased remediation costs[91]. - The company has faced challenges in maintaining customer relationships due to potential data privacy breaches, which could inhibit growth[89]. - The company is subject to risks related to intellectual property claims, which could result in costly litigation and affect its competitive position[120]. Financial Obligations and Debt - As of September 30, 2025, the company had $210 million of 1.50% convertible senior notes due July 1, 2028 outstanding[128]. - The company issued an aggregate principal amount of $175 million in 3.00% convertible senior notes due June 1, 2025[128]. - The company may incur additional indebtedness to meet future financing needs, which could negatively impact its financial condition[129]. - The company may not have sufficient cash flow to service its debt obligations, which could lead to defaults[130]. - Holders of the 2028 Notes have the right to require the company to repurchase their notes at a price equal to 100% of the principal amount plus accrued interest upon a fundamental change[132]. - The company may face challenges in obtaining additional financing on favorable terms, which could restrict its operational flexibility[133]. Shareholder Information - Cerence has not paid any dividends since its formation, with future dividend payments subject to board discretion and capital needs[173]. - As of November 7, 2025, there were 415 holders of record for Cerence's common stock, reflecting the company's shareholder base[172]. - The cumulative total shareholder return for Cerence's common stock was $25.05 as of September 30, 2025, compared to $100 on October 1, 2020[178]. Cybersecurity and Data Privacy - The company has implemented a cybersecurity risk management program, with no identified incidents materially affecting operations or financial condition[161][160]. - The company faces significant costs related to enhancing information security measures against cyber threats, with no assurance that these measures will prevent data breaches[93]. - Compliance with global privacy and data security requirements may lead to additional costs and liabilities, impacting the company's ability to collect and process data globally[94]. - The European General Data Protection Regulation (GDPR) imposes stringent data protection obligations, increasing potential penalties for non-compliance[95]. - The company is subject to evolving data protection laws in various jurisdictions, including the U.S., EU, UK, and others, which may require substantial operational adjustments and costs[101].