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]

Revenue Performance - Total revenue for the three months ended March 31, 2025, increased by $10.2 million, or 15.0%, to $78.0 million from $67.8 million[136]. - Total revenue for the six months ended March 31, 2025, decreased by $77.3 million, or 37.5%, to $128.9 million from $206.2 million[136]. - License revenue for the three months ended March 31, 2025, was $51.5 million, compared to $35.5 million in the same period last year[137]. - Connected services revenue for the three months ended March 31, 2025, was $12.6 million, a slight decrease from $13.6 million in the same period last year[137]. - Professional services revenue for the three months ended March 31, 2025, was $13.9 million, down from $18.7 million in the same period last year[137]. - Total revenues for the three months ended March 31, 2025 were $78.0 million, an increase of $10.2 million, or 15.0%, from $67.8 million for the same period in 2024[145]. - License revenue for the three months ended March 31, 2025 was $51.5 million, an increase of $16.0 million, or 44.8%, from $35.5 million for the same period in 2024[146]. - Connected services revenue for the three months ended March 31, 2025 was $12.6 million, a decrease of $1.0 million, or 7.0%, from $13.6 million for the same period in 2024[147]. - Professional services revenue for the three months ended March 31, 2025 was $13.9 million, a decrease of $4.8 million, or 25.7%, from $18.7 million for the same period in 2024[148]. - Total revenues for the six months ended March 31, 2025 were $128.9 million, a decrease of $77.3 million, or 37.5%, from $206.2 million for the same period in 2024[150]. - License revenue for the six months ended March 31, 2025 was $74.2 million, an increase of $17.8 million, or 31.7%, from $56.4 million for the same period in 2024[151]. - Connected services revenue for the six months ended March 31, 2025 was $26.4 million, a decrease of $84.0 million, or 76.1%, from $110.4 million for the same period in 2024[152]. Operating Performance - Operating margin for the three months ended March 31, 2025, improved by 412.0 percentage points to positive 22.2% from negative 389.8%[136]. - Operating margin for the six months ended March 31, 2025, increased by 100.1 percentage points to positive 0.3% from negative 99.8%[136]. - Total cost of revenues for the three months ended March 31, 2025 was $17.8 million, a decrease of $3.1 million, or 14.6%, from $20.9 million for the same period in 2024[155]. - Total gross profit for the three months ended March 31, 2025 was $60.2 million, an increase of $13.3 million, or 28.2%, from $46.9 million for the same period in 2024[156]. - Total gross profit for the six months ended March 31, 2025 was $93.3 million, a decrease of $65.6 million, or 41.3%, from $158.9 million for the same period in 2024[165]. - License gross profit increased by $16.6 million, or 31.2%, for the six months ended March 31, 2025 compared to the same period in 2024, primarily due to increases in license revenues[167]. - Connected services gross profit decreased by $82.7 million, or 84.6%, from $97.8 million for the six months ended March 31, 2024 to $15.1 million for the same period in 2025[169]. Cash Flow and Financing - Cash provided by operating activities for the three months ended March 31, 2025, was $15.5 million, a net change of $14.4 million from $1.0 million in the same period last year[136]. - Net cash provided by operating activities for the six months ended March 31, 2025 was $24.7 million, a significant increase of 1495.8% from net cash used in operating activities of $1.8 million for the same period in 2024[224]. - Net cash used in financing activities for the six months ended March 31, 2025 was $27.2 million, a change of $27.7 million from cash provided by financing activities of $0.5 million in the same period in 2024[226]. - As of March 31, 2025, the company had $122.8 million in cash, cash equivalents, and marketable securities[203]. - The company issued $190.0 million in aggregate principal amount of 2028 Notes, with initial net proceeds of $193.2 million after transaction costs[207]. - The 2028 Notes accrue interest at a rate of 1.50% per year and will mature on July 1, 2028[208]. - The company repurchased $87.5 million in aggregate principal amount of the 2025 Notes in connection with the offering of the 2028 Notes[210]. - The total interest expense related to the Notes for the three months ended March 31, 2025 was $2.7 million, a decrease from $2.9 million in the same period of 2024[219]. - The interest expense recognized related to the Notes for the six months ended March 31, 2025 was $5.7 million, compared to $5.8 million for the same period in 2024[219]. - The company incurred transaction costs of $2.4 million related to the issuance of the 2028 Notes, which are being amortized as interest expense over the term of the 2028 Notes[213]. - The company recorded a gain on extinguishment of debt of $0.3 million after repurchasing $27.4 million aggregate principal amount of the 2025 Notes for $27.0 million in cash[218]. Expenses and Restructuring - A restructuring plan was announced in August 2024 to reduce operating expenses and position the company for profitable future growth, with implementation substantially complete by the end of Q1 fiscal year 2025[144]. - R&D expenses for the six months ended March 31, 2025 were $44.2 million, a decrease of $21.0 million, or 32.2%, from $65.2 million for the same period in 2024[175]. - Sales and marketing expenses for the six months ended March 31, 2025 were $9.7 million, a decrease of $2.0 million, or 17.1%, from $11.7 million for the same period in 2024[178]. - General and administrative expenses for the six months ended March 31, 2025 were $24.0 million, a decrease of $5.5 million, or 18.7%, from $29.5 million for the same period in 2024[180]. - Restructuring and other costs for the three months ended March 31, 2025 were $2.8 million, including a $1.6 million charge related to personnel elimination[187]. - Restructuring costs as a percentage of total operating expenses increased by 13.6 percentage points from 1.4% for the six months ended March 31, 2024 to 15.0% for the six months ended March 31, 2025[198]. - Restructuring and other costs, net increased by 164.3% from $5.3 million for the six months ended March 31, 2024 to $13.9 million for the six months ended March 31, 2025[193]. Impairments and Taxation - Goodwill impairment was recorded at $252.1 million for the three months ended March 31, 2024, indicating significant financial challenges faced by the company[186]. - For the three months ended March 31, 2024, restructuring and other costs, net amounted to $4.6 million, including a $4.4 million severance charge[189]. - Goodwill impairment for the three months ended March 31, 2024 was $252.1 million, with a fair value estimate of approximately $463.4 million[190]. - The effective income tax rate for the three months ended March 31, 2025 was negative 34.9%, compared to negative 4.4% for the same period in 2024[201]. Market and Economic Conditions - The company expects revenue to be impacted by production delays and slowdowns in the global automotive industry, as well as macroeconomic conditions such as high interest rates[144]. - The aggregate notional amount of outstanding foreign currency forward contracts was $31.0 million at March 31, 2025[234]. - A 10% unfavorable exchange rate movement in the portfolio of foreign currency contracts would have resulted in unrealized losses of $2.6 million at March 31, 2025[234]. - Assuming a 1% increase in interest rates, interest income on highly liquid investments would increase by $0.6 million per annum based on March 31, 2025 reported balances[235].

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 ...

Core Viewpoint - Cerence Inc. reported strong financial results for Q2 FY2025, exceeding revenue and adjusted EBITDA guidance, and achieving its fourth consecutive quarter of positive free cash flow, indicating robust performance amid industry challenges [4][6]. Financial Performance - GAAP revenue for Q2 FY2025 was $78.0 million, up from $67.8 million in Q2 FY2024, representing a year-over-year increase of approximately 1.8% [2][27]. - GAAP gross margin improved to 77.1% in Q2 FY2025 from 69.2% in Q2 FY2024 [2][32]. - GAAP net income for Q2 FY2025 was $21.7 million, a significant recovery from a net loss of $278.0 million in Q2 FY2024 [2][27]. - Adjusted EBITDA for Q2 FY2025 was $29.5 million, compared to a loss of $0.3 million in Q2 FY2024 [2][32]. Key Performance Indicators - Cerence's technology was present in 51% of worldwide auto production over the trailing twelve months [5]. - The number of Cerence connected cars shipped increased by 10% year-over-year [5]. - Adjusted Total Billings remained unchanged year-over-year [5][7]. Future Outlook - For Q3 FY2025, revenue is projected to be between $52 million and $56 million, with gross margins expected to be between 66% and 68% [8][9]. - The full-year revenue guidance remains unchanged, but the net loss is now projected to be between $35 million and $29 million, with adjusted EBITDA expected to range from $28 million to $34 million [9]. Company Overview - Cerence Inc. is a leader in AI-powered user experiences in the automotive sector, with over 500 million cars shipped with its technology [25]. - The company focuses on enhancing user experiences through innovations like Cerence xUI, which supports automakers in developing next-generation infotainment platforms [4].

Core Viewpoint - Cerence Inc. has filed a lawsuit against Microsoft and Nuance Communications for copyright infringement and breach of contract, focusing on its text-to-speech technology, which is crucial for its product offerings in automotive and other sectors [1][2][3]. Company Overview - Cerence Inc. is a global leader in AI-powered user experiences, particularly in the automotive and transportation industries, with over 500 million cars equipped with its technology [4]. - The company emphasizes its commitment to protecting its intellectual property rights and plans to defend its innovations vigorously [3][4]. Legal Context - The lawsuit aims to safeguard Cerence's significant investments in its intellectual property portfolio, particularly its text-to-speech technology, which is foundational to its operations [2][3]. - The action against Microsoft and Nuance is seen as necessary to uphold the company's culture of innovation and protect its market position as it expands beyond automotive applications [3].

BURLINGTON, Mass., May 05, 2025 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC) (“Cerence AI”), a global leader pioneering conversational AI-powered user experiences, today announced an expanded collaboration with its long-time partner and distributor, Code Factory, to introduce VoiceTopping, a new solution that will bring conversational AI to self-service kiosks in a variety of industries. The announcement marks an important step as Cerence AI begins its strategic expansion into new markets, bringing the p ...

Core Insights - Cerence Inc. will showcase its Cerence xUI™ platform, an AI assistant that operates across edge and cloud, for the first time at Auto Shanghai 2025 in collaboration with Great Wall Motor and TCL [1][2] 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 [3][5] - The company focuses on integrating voice, generative AI, and large language models to enhance user experiences in vehicles [3] Product Features - Cerence xUI includes multi-modal capabilities with CaLLM Edge™, enhancing in-car interactions beyond traditional infotainment [4] - The platform utilizes the CaLLM™ family of language models and integrates real-time and contextual data to create engaging conversational interfaces [4] - Features include dual- and multi-seat interaction, allowing synchronized voice-controlled operations between front and rear seats [4] - Smart home integration enables users to control home systems directly from the vehicle [4] Partnerships - The collaboration with Great Wall Motor aims to bring AI innovation to their vehicles as they expand globally [2] - The partnership with TCL focuses on combining intelligent cockpit technologies with Cerence's automotive expertise to revolutionize mobility [2]