Cerence(US:CRNC)2026-02-05 00:25Revenue Performance - Total revenue for the three months ended December 31, 2025, was $115.1 million, an increase of $64.2 million, or 126.1%, from $50.9 million in the same period of 2024[127]. - License revenue increased by 286.2% to $87.8 million, representing 76.3% of total revenue, primarily driven by an IP license agreement with Samsung, contributing $49.5 million of one-time revenue[136]. - Connected services revenue increased by 6.0% to $14.5 million, accounting for 12.6% of total revenue[136]. - Professional services revenue decreased by 11.6% to $12.8 million, representing 11.1% of total revenue[136]. - License revenue for Q4 2025 was $87.8 million, up 286.2% from $22.7 million in Q4 2024, primarily due to a $49.5 million one-time revenue from the Samsung IP license agreement[137]. - Connected services revenue increased by 6.0% to $14.5 million in Q4 2025 from $13.7 million in Q4 2024, but its percentage of total revenue decreased by 14.3 percentage points to 12.6%[138]. - Professional services revenue decreased by 11.6% to $12.8 million in Q4 2025 from $14.5 million in Q4 2024, with its share of total revenue dropping by 17.3 percentage points to 11.1%[139]. - Total gross profit rose by 200.4% to $99.4 million in Q4 2025, up from $33.1 million in Q4 2024, driven mainly by the Samsung patent license revenue[141]. - License gross profit increased by 312.7% to $86.4 million in Q4 2025 compared to $20.9 million in Q4 2024, primarily due to the Samsung patent license revenue[143]. - Connected services gross profit rose by 30.1% to $9.6 million in Q4 2025 from $7.4 million in Q4 2024, attributed to higher volumes and lower costs[145]. Operating Expenses and Margins - Operating margin improved by 58.7 percentage points to positive 25.5% from negative 33.3%[127]. - Research and development expenses increased to $24.7 million from $20.9 million, reflecting ongoing investment in technology[128]. - General and administrative expenses surged by 150.8% to $32.0 million in Q4 2025 from $12.8 million in Q4 2024, largely due to a $20.8 million increase in legal professional services related to the Samsung IP license agreement[150]. - R&D expenses increased by 18.4% to $24.7 million in Q4 2025 from $20.9 million in Q4 2024, representing 35.3% of total operating expenses, down from 41.7%[148]. Cash Flow and Financing - Cash provided by operating activities was $37.9 million, an increase of $28.6 million, or 309.5%, from $9.3 million[127]. - Net cash provided by operating activities was $37.9 million in Q4 2025, a 309.5% increase from $9.3 million in Q4 2024[184]. - Net cash used in financing activities was $27.7 million in Q4 2025, a slight increase of 2.1% from $27.1 million in Q4 2024[183]. - The company issued $190.0 million in 1.50% Convertible Senior Notes due 2028, with net proceeds of $193.2 million after transaction costs[165]. - During Q4 2025, the company repurchased $30.0 million of its 2028 Notes for $28.0 million in cash, resulting in a gain on extinguishment of debt of $1.1 million[168]. - Interest expense related to the Notes decreased to $1.7 million in Q4 2025 from $3.0 million in Q4 2024[177]. - Net cash used in investing activities for Q4 2025 was $1.8 million, a 335.7% decrease from $0.8 million provided in Q4 2024[185]. Taxation and Other Income - Provision for income taxes increased to $35.3 million in Q4 2025 from $5.7 million in Q4 2024, a change of 522.5%[159]. - Effective income tax rate rose to 117.4% in Q4 2025 compared to -30.5% in Q4 2024[159]. - Total other income (expense), net improved to $0.8 million in Q4 2025 from a $1.7 million expense in Q4 2024, driven by a gain on debt repurchase of the Notes[158]. Future Outlook and Risks - The company plans to streamline operations and focus on cost management due to challenges in the global automotive industry[135]. - The implementation of the 2025 Plan was substantially completed during the three months ended December 31, 2025, aimed at reducing operating expenses and enhancing profitability[135]. - Total material cash requirements for future periods amount to $205.6 million, with $5.9 million due in 2026[163]. - The company is exposed to market risks from changes in foreign currency exchange rates and interest rates, which could affect operating results[190]. - A 10% unfavorable exchange rate movement in foreign currency contracts would have resulted in unrealized losses of $1.0 million[194]. - Assuming a 1% increase in interest rates, interest income on highly liquid investments would increase by $0.3 million per annum[195]. - The aggregate notional amount of outstanding foreign currency forward contracts was $9.5 million at December 31, 2025[194]. - Fluctuations in deferred revenue are not a reliable indicator of future performance, and the company does not expect changes in deferred revenue to affect its obligations[184].