Cerence (NasdaqGS:CRNC) Q1 2026 Earnings call February 04, 2026 04:30 PM ET Company ParticipantsAman Gupta - Executive Director of Private EquityBrian Krzanich - CEOKate Hickman - VP of Corporate Communications and Head of Investor RelationsTony Rodriquez - CFOConference Call ParticipantsItay Michaeli - Senior AnalystJeffrey Van Rhee - Senior Research AnalystOperatorGood day, and thank you for standing by. Welcome to the Cerence First Quarter 2026 earnings call. At this time, all participants are in listen- ...

Cerence FY Conference Summary Company Overview - **Company**: Cerence (NasdaqGS:CRNC) - **Industry**: Automotive technology, specifically focused on voice recognition and AI integration in vehicles - **Conference Date**: January 13, 2026 Key Points and Arguments Voice Technology Evolution - Transition from keyword-based voice commands to natural language processing enabled by large language models (LLMs) [1][2] - Current voice technology allows for multiple instructions in one sentence, enhancing user experience and safety [3][4] - Approximately 40% of cars are currently connected, with projections indicating 80%-95% connectivity by the end of the decade [5] Revenue Potential - Estimated annual revenue of $400-$500 per connected vehicle through various services [6] - 80% of car buyers express a desire for embedded AI in vehicles [7] - The company aims to enhance user experience through personalized infotainment and offline performance capabilities [8] Competitive Landscape - Cerence competes with Google by offering both embedded and cloud-based solutions, focusing on personalized experiences for OEMs [9][10] - The company is involved in various sectors beyond automotive, including wearables and smart TVs [11][16] Financial Performance - Q4 FY 2025 revenue was approximately $60 million with a gross margin of 73% [17] - Full fiscal year 2025 revenue reached $252 million, with an adjusted EBITDA of $48 million and free cash flow of $46 million [18] - Guidance for FY 2026 projects revenue between $300 million to $320 million, with expected adjusted EBITDA and free cash flow of around $60 million [19][20] Intellectual Property and Legal Matters - Cerence successfully negotiated a $49 million patent license with Samsung, avoiding court [21] - Ongoing IP disputes with Nuance and other companies, focusing on contract violations and potential infringements [24][25] Revenue Streams and Business Model - Revenue is generated from both embedded technology (paid upon vehicle production) and connected services (paid when the vehicle is sold) [27][30] - The connected services segment is the fastest-growing revenue stream, with double-digit growth reported [30] Market Outlook - Anticipated growth in connected vehicle technology from 30%-40% to over 90% by the end of the decade [39] - The company is focused on increasing the price per unit for new technology and expanding its software offerings [40][41] Customer Engagement and Personalization - Cerence aims to provide a human-like interaction experience in vehicles, utilizing facial recognition and personalized greetings [12][13] - The company is working on enhancing the user experience through unique features tailored to individual OEMs [10][12] Additional Important Information - The company has a significant backlog of contracts valued at approximately $1 billion over five years, providing visibility into future revenue [38] - Cerence is actively exploring monetization opportunities outside of automotive, including partnerships with companies like Sony and TCL [23][26] This summary encapsulates the core discussions and insights from the Cerence FY Conference, highlighting the company's strategic direction, financial performance, and market opportunities.

Core Insights - The article highlights the launch of Alloy Kore, a new foundational vehicle software platform by QNX, a division of BlackBerry Limited, and Vector, aimed at simplifying and accelerating the development of Software-Defined Vehicles (SDVs) [1] - Alloy Kore is designed to tackle the increasing complexity of modern automotive software architectures, providing a robust, scalable, and safety-certified software foundation for automakers [1] Group 1 - Alloy Kore enables automakers to shift their software engineering focus from infrastructure to innovation, allowing for faster and more confident development [1] - The platform addresses the growing demands of the automotive industry for advanced software solutions in vehicle technology [1] - The introduction of Alloy Kore reflects the industry's trend towards Software-Defined Vehicles, which require sophisticated software management [1]

Core Insights - HERE Technologies and Hyundai AutoEver have expanded their online navigation partnership, enhancing navigation services for Hyundai, Kia, and Genesis vehicles in North America and Australia [1][5][9] Group 1: Partnership and Collaboration - HERE Technologies is recognized as the leading mapping and location data company, having ranked No. 1 in the global location platform market for eight consecutive years [2] - The partnership allows Hyundai AutoEver to provide navigation map data for its infotainment platforms, significantly improving the map update cycle by more than fivefold [3][4] - This collaboration is built on a long-standing relationship focused on innovation and customer experience [10] Group 2: Technological Advancements - HERE's advanced mapping architecture and AI capabilities enable the creation of highly accurate digital maps by integrating data from over 44 million connected vehicles and various sources [7] - Hyundai AutoEver plans to evolve its navigation service into a streaming solution, incorporating features like lane-level guidance and ADAS integration [8] - The partnership aims to support future automated driving functions, enhancing driver convenience and experience in complex road environments [8] Group 3: Market Impact - The collaboration brings advanced connected vehicle services to over a million vehicles equipped with connected infotainment platforms [5] - The initiative aligns with the automotive industry's shift towards software-defined vehicles, enhancing in-car experiences through intelligent technologies [6][11] - The expansion into North America and Australia marks a significant milestone in redefining in-vehicle navigation [9]

Core Insights - TomTom has partnered with CARIAD, the automotive software company of the Volkswagen Group, to integrate its advanced Orbis Maps into CARIAD's automated driving systems [1][4] Group 1: Partnership and Collaboration - CARIAD will utilize TomTom's Orbis Maps as a core component for enhancing the understanding of surroundings in automated driving systems [2] - This collaboration highlights TomTom's ability to meet the evolving needs of the Volkswagen Group, reinforcing its leadership in the future of driving [4] Group 2: Technology and Capabilities - TomTom's Orbis Maps will provide highly accurate, up-to-date location information, complementing onboard sensors and systems to enhance safety-critical automated driving functionalities [2] - The AI-native, real-time mapmaking platform of TomTom allows for detailed lane geometry and behavioral data, ensuring minute-level updates across all road classes [3] - TomTom's multi-source approach combines high-precision car sensor data, survey vehicles, and aerial data, delivering unmatched coverage across 235+ countries and territories [3]

Core Insights - Neonode Inc. has appointed Marec Gasiun as Executive Vice President of Sales & Marketing, effective January 1, 2026, to enhance its commercial strategy and execution [1][5] Group 1: Leadership Appointment - Marec Gasiun brings extensive global commercial leadership experience from the automotive, technology, and telecommunications sectors, previously serving as Vice President of Business Development at SeeReal Technologies [2] - Gasiun has also held significant roles, including Vice President of Global Technology Partnerships at Telia Company and Head of Business Development for Google's automotive software business [2][3] Group 2: Strategic Importance - The appointment is seen as pivotal for the company, especially as legacy touch technologies decline, positioning Neonode's MultiSensing computer vision and AI technology for significant advancements in 2026 [3] - The recruitment aims to consolidate all commercial activities into a focused team, enhancing execution and leveraging Gasiun's experience to accelerate growth [5] Group 3: Recent Achievements - In December 2025, Neonode converted a commercial vehicle design win into a production license agreement, marking a transition from validation to real-world adoption of its MultiSensing driver monitoring technology [4] - This milestone is expected to accelerate the company's automotive momentum through new design wins and strategic partnerships [4]

Core Insights - Matador AI has been awarded the status of Official Preferred Partner by Nissan USA in the newly established AI Lead Nurturing category, recognizing its advanced lead-nurturing resources [2][10] - The partnership aims to enhance lead follow-up, increase showroom appointments, and improve customer conversion rates for Nissan retailers [2][3] Company Overview - Matador AI, founded in 2019, specializes in AI and automation solutions tailored for the automotive industry, focusing on conversational AI for dealerships [9][6] - The company employs over 100 people and serves more than 1,000 dealerships across North America, including a diverse range of domestic and import brands [6][9] Product and Performance - Matador AI's platform is designed to fully automate sales and service conversations, helping dealers engage with customers effectively and manage appointments [4][5] - Clients of Matador AI typically experience a 25% increase in overall pipeline conversion after implementing the platform [5] - The platform integrates with leading automotive CRMs and DMSs, providing a user-friendly dashboard for managing dealership operations [5][9] Industry Impact - The recognition from Nissan USA highlights the growing importance of AI in modern retailing, emphasizing that AI is becoming essential rather than optional for automotive dealerships [3][4] - Matador AI's solutions are built to address real dealer challenges, offering customized models that reflect the unique processes of each dealership [5][9]

Core Insights - BlackBerry is undergoing a significant transformation, positioning itself as a software company with a strong focus on automotive software solutions [2][3] - The company has a dominant position in foundational software for vehicles, particularly through its QNX platform, which is critical for the software-defined vehicle market [2][3] Revenue and Market Position - Approximately 50% of BlackBerry's revenue is derived from QNX, which is primarily focused on the automotive sector [3] - QNX is currently powering over 255 million vehicles globally, indicating a substantial market presence [3] - The company has established a strong competitive moat by focusing on safety-critical, highly reliable, and certified products, particularly in areas such as digital cockpit and Advanced Driver-Assistance Systems (ADAS) [3]

Core Insights - CarGurus aims to double its total addressable market by introducing AI-powered products beyond its current automotive shopping platform [1][2] - The company is expanding its addressable market to include $3.5 billion spent by U.S. dealers on marketplaces and an additional $4 billion on software and data products [2] Product Development - CarGurus has launched PriceVantage, a machine learning-based pricing solution for dealers that utilizes real-time consumer demand data [3][4] - PriceVantage helps dealers enhance pricing strategies, improve turn times, and increase profitability by providing data-driven recommendations [4] Performance Metrics - Early beta results for PriceVantage show that engaged dealers experienced a 5X improvement in turn-time compared to competitors, with price-drop recommendations leading to a 68% median increase in daily vehicle detail page views [5] - 77% of the recommendations from PriceVantage met or exceeded predicted sales velocity outcomes [5] Consumer-Focused Innovations - CarGurus introduced CG Discover, a generative AI-powered shopping assistant that personalizes vehicle recommendations based on consumer needs, with traffic to this tool tripling quarter over quarter [6] - Another tool, Dealership Mode, provides real-time support to consumers at dealerships, enhancing their experience by offering vehicle pricing, ratings, and financing calculators [6][7] Market Opportunity - Research indicates that 80% of consumers are open to using AI in their car-buying journey, highlighting significant growth potential for CarGurus' AI initiatives [6]

Core Insights - KPIT Technologies has increased its stake in N-Dream from 26% to nearly 90%, enhancing its position in the automotive software market [1][2] - N-Dream, known for its AirConsole platform, aims to expand its offerings beyond gaming into broader in-cabin digital experiences [2][3] - The acquisition will allow N-Dream to operate independently while leveraging KPIT's resources to innovate in in-cabin software [3][4] Company Developments - N-Dream's founder emphasized the growth of the platform, which is now utilized by leading car manufacturers globally [2] - The leadership team at N-Dream will remain intact post-acquisition, ensuring continuity in operations and innovation [4][5] - KPIT recently launched a new software engineering center in Sfax, Tunisia, indicating its commitment to expanding its technological capabilities [5]