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Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Revenue 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].

Core Viewpoint - Cerence (CRNC) reported quarterly earnings of $0.99 per share, significantly exceeding the Zacks Consensus Estimate of a loss of $0.01 per share, and improving from a loss of $0.03 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +10,000.00%, with the company previously expected to post a loss of $0.66 per share but instead reporting earnings of $0.06, resulting in a surprise of +109.09% [2] - Cerence's revenues for the quarter ended December 2025 were $115.08 million, surpassing the Zacks Consensus Estimate by 1.06%, and up from $50.9 million in the same quarter last year [3] - The company has consistently exceeded consensus revenue estimates over the last four quarters [3] Stock Performance and Outlook - Cerence shares have declined approximately 3.1% since the beginning of the year, while the S&P 500 has gained 1.1% [4] - The future performance of the stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4][5] - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $64.65 million, and for the current fiscal year, it is $0.69 on revenues of $317.63 million [8] Industry Context - The Computers - IT Services industry, to which Cerence belongs, is currently ranked in the top 40% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Financial Data and Key Metrics Changes - Cerence reported revenue of $115.1 million for Q1 2026, a 126% increase from $50.9 million in the prior year period [17] - Adjusted EBITDA was $44.6 million, representing a 39% margin compared to $1.4 million or 3% in the prior year [22] - The company generated record quarterly free cash flow of $35.6 million, marking a significant achievement [4][23] - GAAP net loss for the quarter was $5.2 million, an improvement from a net loss of $24.3 million in the same quarter last year [22] Business Line Data and Key Metrics Changes - Variable license revenue was $30.5 million, up 34% year-over-year, driven by steady customer utilization [18] - Fixed license revenue was $7.8 million, with expectations for it to be comparable to the prior year [18] - Connected services revenue was $14.5 million, up 6% year-over-year, with a potential increase of over 20% without prior year true-up [19] Market Data and Key Metrics Changes - Approximately 11.9 million cars produced included Cerence technology, flat from the prior year [23] - The number of connected cars shipped grew by 14% on a trailing 12-month basis [24] - 51% of worldwide auto production included Cerence technology, consistent with historical penetration [24] Company Strategy and Development Direction - Cerence's key priorities for 2026 include advancing technology through the xUI platform, maintaining cost diligence, and driving top-line growth [4][27] - The company showcased advancements in AI technology at CES, including the introduction of new AI agents and partnerships with major OEMs [5][7] - Cerence aims to expand its reach beyond automotive, with plans to operationalize strategies in new industries [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's technology and customer momentum, anticipating continued growth in revenue and profitability [15][26] - The company reaffirmed its full-year guidance for fiscal 2026, expecting revenue between $300 million and $320 million [26] - Management highlighted the importance of the patent license revenue from Samsung as a validation of their IP strategy [15] Other Important Information - The company resolved its patent litigation with Samsung, resulting in a one-time payment of $49.5 million recorded in Q1 [15][19] - Total non-GAAP operating expenses were $57.3 million, primarily driven by legal costs associated with the patent license outcome [21] Q&A Session Summary Question: Interest in the mobile work agent and its impact on ARPU - Management indicated strong demand for the mobile work agent, which can be implemented in existing vehicles, potentially increasing ARPU [30][32] Question: Impact of new signings on TTM billings and backlog - Management confirmed that new signings would be reflected in the five-year backlog and TTM billings, with revenue expected to ramp up as production starts [34][38] Question: Usage trends of existing in-car connected systems - Management noted that usage of newer systems is increasing, especially with added functionalities like Microsoft 365 integration [40] Question: Competitive process for new wins and future win rates - Management highlighted that technology capability and team confidence are key differentiators in winning contracts, with a strong win rate expected moving forward [54][56]

Financial Data and Key Metrics Changes - Cerence reported revenue of $115.1 million for Q1 2026, a 126% increase from $50.9 million in the prior year period [17] - Adjusted EBITDA was $44.6 million, representing a 39% margin compared to $1.4 million or 3% in the prior year [22] - The company generated record quarterly free cash flow of $35.6 million, marking a significant achievement [4][23] - GAAP net loss for the quarter was $5.2 million, an improvement from a net loss of $24.3 million in the same quarter last year [22] Business Line Data and Key Metrics Changes - Variable license revenue was $30.5 million, up 34% year-over-year, driven by steady customer utilization [18] - Fixed license revenue was $7.8 million, with expectations for it to be comparable to the prior year for the full fiscal year [18] - Connected services revenue was $14.5 million, up 6% year-over-year, with a potential increase of over 20% without prior year true-up [19] Market Data and Key Metrics Changes - Approximately 11.9 million cars produced included Cerence technology, flat from the prior year [24] - The number of connected cars shipped grew by 14% on a trailing 12-month basis [24] - 51% of worldwide auto production included Cerence technology, consistent with historical penetration [24] Company Strategy and Development Direction - Cerence's three key priorities for 2026 include advancing technology through xUI, maintaining cost diligence, and driving top-line growth [4] - The company showcased advancements in xUI at CES, including new AI agents and partnerships with Microsoft [5][6] - Cerence aims to expand its reach beyond automotive, with plans to operationalize strategies in new industries [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's technology and customer momentum, anticipating continued growth in fiscal 2026 [15][27] - The resolution of the patent suit with Samsung, resulting in a one-time payment of $49.5 million, was highlighted as a significant milestone [15] - For Q2, Cerence expects revenue between $58 million and $62 million, reaffirming full-year guidance of $300 million to $320 million [26] Other Important Information - The company completed a restructuring plan to reduce operating expenses and improve profitability [9] - Total non-GAAP operating expenses increased to $57.3 million, primarily due to legal costs associated with the patent license outcome [21] Q&A Session Summary Question: Interest in the mobile work agent and its impact on ARPU - Management indicated strong interest in the mobile work agent, which can be implemented in existing vehicles, potentially increasing ARPU [30][32] Question: Impact of new signings on TTM billings and backlog - Management confirmed that new signings will be reflected in the five-year backlog and TTM billings, with revenue expected to ramp up as production starts [34][38] Question: Usage trends of existing in-car connected systems - Management noted that usage of newer systems is increasing, especially with added functionalities like Microsoft 365 integration [40] Question: Competitive process for new wins and future win rates - Management highlighted that technology capability and team confidence are key differentiators in winning contracts, with a strong pipeline of interest from both Western and Chinese OEMs [44][55]

Financial Data and Key Metrics Changes - The company reported revenue of $115.1 million for Q1 2026, a significant increase of 126% from $50.9 million in the prior year period [16] - Adjusted EBITDA for the quarter was $44.6 million, representing a margin of 39%, compared to $1.4 million or 3% in the prior year [20] - The company generated record quarterly free cash flow of $35.6 million, marking a strong performance in cash generation [4][22] - GAAP net loss for the quarter was $5.2 million, an improvement from a net loss of $24.3 million in the same quarter last year [21] Business Line Data and Key Metrics Changes - Variable license revenue was $30.5 million, up 34% year-over-year, driven by steady customer utilization and adoption across core programs [17] - Fixed license revenue was $7.8 million, with a timing difference affecting year-over-year comparisons [17] - Connected services revenue was $14.5 million, up 6% year-over-year, with a potential increase of over 20% when excluding a prior year true-up benefit [18] Market Data and Key Metrics Changes - Approximately 11.9 million cars produced in the quarter included Cerence technology, flat compared to the prior year [22] - The number of connected cars shipped grew by 14% on a trailing 12-month basis, indicating strong momentum in vehicle connectivity [23] - 51% of worldwide auto production included Cerence technology, consistent with historical penetration rates [23] Company Strategy and Development Direction - The company has three key priorities for 2026: advancing business through leading technology, maintaining cost diligence, and driving top-line growth [4] - The introduction of new AI agents expands the company's reach beyond in-vehicle experiences into broader areas of the automotive ecosystem [8] - The company aims to increase adoption of Cerence XUI and drive greater penetration of its stack in existing programs, which is expected to deliver increased per unit pricing (PPU) [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's technology and customer momentum, indicating a solid foundation for long-term sustainable growth [14][25] - The company reaffirmed its full-year guidance for fiscal 2026, expecting revenue between $300 million and $320 million and adjusted EBITDA between $50 million and $70 million [25] - Management highlighted the positive reception of new products and the potential for growth in non-automotive businesses, with expected revenue impacts starting in late fiscal year 2026 [13] Other Important Information - The company recorded $49.5 million in patent license revenue from the resolution of litigation with Samsung, marking a significant milestone in its IP monetization strategy [14][18] - The company repurchased $30 million in principal value of its 2028 convertible notes, demonstrating a commitment to deleveraging its balance sheet [22] Q&A Session Summary Question: Interest in the mobile work agent and its impact on ARPU - Management indicated strong demand for the mobile work agent, which can be implemented in existing vehicles, potentially increasing ARPU [28][30] Question: Impact of new signings on TTM billings and backlog - Management confirmed that new signings would contribute to TTM billings and backlog, with revenue recognition starting as vehicles are produced and sold [32][36] Question: Trends in usage of existing in-car connected systems - Management noted that usage of connected systems has improved with newer technology, particularly with the introduction of LLMs [37] Question: Competitive process for new wins and future win rates - Management highlighted that technology capability and team confidence are key differentiators in winning contracts, with a strong pipeline of interest from both Western and Chinese OEMs [41][53]

Financial Performance - Cerence reported Q1 FY26 revenue of $115.1 million, a significant increase from $50.9 million in Q1 FY25, including a $49.5 million patent license payment[5] - The company achieved a GAAP gross margin of 86.3%, up from 65.0% in the previous year[5] - Adjusted EBITDA for Q1 FY26 was $44.6 million, compared to $1.4 million in Q1 FY25, exceeding guidance[5] - Free cash flow reached a record $35.6 million, reflecting disciplined execution and profitability[4] - Cerence reported total revenues of $115,076,000 for the three months ended December 31, 2025, a significant increase from $50,896,000 in the same period of 2024, representing a year-over-year growth of 126.5%[38] - The gross profit for the same period was $99,350,000, resulting in a gross margin of 86.3%, compared to a gross margin of 65.0% in the prior year[51] - The company experienced a net loss of $5,239,000 for the quarter, an improvement from a net loss of $24,288,000 in the previous year[38] - Adjusted EBITDA for the quarter was $44,634,000, a substantial increase from $1,382,000 in the same quarter of the previous year[51] - Free cash flow for the quarter was reported at $35,645,000, compared to $7,894,000 in the prior year, indicating a strong improvement in cash generation[51] Future Guidance - The company expects Q2 FY26 revenue to be between $58 million and $62 million, with projected gross margins of 71% to 72%[8] - Full-year fiscal 2026 revenue guidance is reaffirmed at $300 million to $320 million, with net income projected between $(8) million and $12 million[9] - GAAP revenue for Q2 2026 is projected to be between $58,000 and $62,000, with FY2026 expected to range from $300,000 to $320,000[55] - GAAP gross profit for Q2 2026 is estimated between $40,920 and $44,920, while FY2026 is projected to be between $236,205 and $256,205[55] - GAAP gross margin is expected to be 71% to 72% for Q2 2026 and 79% to 80% for FY2026[55] - Adjusted EBITDA for Q2 2026 is forecasted to be between $2,000 and $6,000, with FY2026 expected to range from $50,000 to $70,000[55] - GAAP net (loss) income for Q2 2026 is projected to be between $(581) and $3,581, while FY2026 is expected to range from $(8,117) to $11,883[55] - Free cash flow is anticipated to be between $55,500 and $65,500 for FY2026[55] - Basic GAAP net income per share for Q2 2026 is expected to range from $(0.01) to $0.08, while FY2026 is projected to be between $(0.18) and $0.26[55] - Diluted GAAP net income per share for Q2 2026 is forecasted to be between $(0.01) and $0.08, with FY2026 expected to range from $(0.18) to $0.25[55] Operational Highlights - Cerence's technology is now present in 51% of worldwide auto production, with a 14% increase in connected cars shipped year-over-year[6] - Five significant customer programs for Cerence xUI are in progress, with the first xUI-powered cars expected to be on the road in 2026[4] - Strong customer feedback was received at CES 2026, showcasing next-generation, LLM-powered experiences and new AI agents[3] - The number of connected cars shipped with Cerence technology exceeded 525 million, showcasing the company's extensive market penetration[33] - Total operating expenses for the quarter were $70,039,000, compared to $50,005,000 in the same quarter of the previous year, indicating increased investment in operations[51] - Total operating expenses for Q2 2026 are projected to be $49,972, with non-GAAP total operating expenses expected to be $42,620[55] Financial Management - The company is focused on cost discipline and debt reduction to support long-term sustainable growth[4] - Cerence's total liabilities decreased to $451,602,000 from $479,915,000, reflecting improved financial management[41] - Research and development expenses increased to $24,701,000, up from $20,869,000 in the same quarter of the previous year, reflecting the company's commitment to innovation[38] - The company reported cash and cash equivalents of $92,130,000 at the end of the quarter, an increase from $84,017,000 at the beginning of the period[41] - Capital expenditures are anticipated to be between $(5,500) and $(1,500) for FY2026[55]

Cerence Q1 February 4, 2026 Brian Krzanich, Chief Executive Officer Tony Rodriquez, Chief Financial Officer Forward-Looking Statements Statements in this presentation as well as oral statements made by Cerence management from time to time, regarding: Cerence's future performance, results and financial condition; expected growth, profitability and cash flow; outlook and momentum; transformation plans and cost efficiency initiatives; strategy; opportunities; business, industry and market trends; plans and exp ...