Core Insights - Cerence Inc. has been awarded the Best Technology Award by HARMAN, highlighting its commitment to innovative AI solutions for enhancing in-car experiences [1][2][4] - The recognition reflects a long-term collaboration between Cerence AI and HARMAN, focusing on automotive technology innovations [2][4] - HARMAN's recent introduction of the "Luna" avatar, powered by Cerence AI's technology, showcases the integration of emotionally intelligent AI systems in vehicles [3] Company Overview - Cerence Inc. is a leader in creating AI-powered experiences in the automotive sector, with over 500 million cars equipped with its technology [5] - The company specializes in voice, generative AI, and large language models to enhance user experiences in transportation [5] - Cerence AI is headquartered in Burlington, Massachusetts, and operates globally, partnering with major automakers and technology firms [5]

Core Insights - Cerence Inc. has been awarded the Best Technology Award by HARMAN, highlighting its commitment to innovative AI solutions for enhancing in-car experiences [1][2][4] - The recognition is a result of a long-term collaboration between Cerence AI and HARMAN, focusing on innovations that shape the future of automotive technology [2][4] Company Overview - Cerence Inc. is a global leader in creating AI-powered experiences in the automotive and transportation sectors, with over 500 million cars equipped with its technology [5] - The company specializes in voice, generative AI, and large language models to provide safer and more enjoyable journeys for drivers and passengers [5] Recent Developments - At CES 2025, HARMAN introduced its "Luna" avatar, which is powered by Cerence AI's voice assistant, enhancing personalized interactions in vehicles [3] - Cerence AI's CaLLM™ Edge SLM has been integrated into HARMAN's Ready Upgrade, facilitating third-party app development for in-car applications while ensuring data security [3]

Group 1: Company Achievements - Cerence Inc. received the Best Contribution Award at the 2025 ECARX Partnership Conference, marking the second consecutive year of recognition for its contributions to ECARX and its OEM customers [1] - The partnership between Cerence AI and ECARX has been ongoing since ECARX's founding in 2017, focusing on automotive programs for various Geely brands, including Audio AI solutions and multilingual support [2] Group 2: Partnership Developments - The collaboration has recently expanded to include the deployment of Cerence's generative AI-powered solutions, enhancing the driving experience for smart drivers [3] - The ECARX Antora 1000 platform, utilized in the Hongqi 007/009 models, features advanced voice functionalities, including English speech recognition and text-to-speech capabilities in 17 languages, supporting Hongqi's global market expansion [3] Group 3: Company Overview - Cerence Inc. is a leader in creating AI-powered experiences in the automotive sector, with over 500 million cars shipped with its technology [5] - ECARX, founded in 2017 and listed on Nasdaq in 2022, has over 1,800 employees and its products are present in over 7.3 million vehicles worldwide [6][7]

Core Insights - Cerence Inc. has appointed Marion Harris, a former executive at Ford Motor Company, as an independent, non-executive director effective April 1, 2025 [1] - Harris brings over 25 years of experience in the automotive and financial services sectors, including his role as Chairman and CEO of Ford Motor Credit Company, where he led a successful digital transformation [2] - The addition of Harris to the Cerence AI Board is expected to provide strategic insights as the company continues to innovate in automotive and expand into the broader mobility market [3][4] Company Overview - Cerence Inc. is a global leader in creating AI-powered user experiences in the automotive and transportation sectors, with over 500 million cars equipped with its technology [5] - The company focuses on leveraging voice, generative AI, and large language models to enhance safety and connectivity for drivers and passengers [5] - Cerence is headquartered in Burlington, Massachusetts, and collaborates with leading automakers and technology companies to advance user experiences [5]

Core Insights - Cerence Inc. has launched Cerence xUI™, an AI assistant platform designed for in-vehicle user experiences, leveraging both edge and cloud technologies [1][5] - The platform aims to enhance user engagement by providing a conversational interface that can perform tasks, answer questions, and offer personalized suggestions based on user preferences [2][4] Group 1: Product Features - Cerence xUI utilizes the CaLLM™ family of language models, optimized in collaboration with NVIDIA and Microsoft, to deliver automotive-specific voice assistant capabilities [2][4] - The hybrid architecture of Cerence xUI allows deployment as a cloud-based add-on or as a fully integrated system, providing flexibility for automakers [3][5] - The platform supports streamlined interactions for complex queries and offers tailored conversational experiences suitable for in-car use [6] Group 2: Market Position and Strategy - Cerence AI has established strategic partnerships with global automakers to implement Cerence xUI in future vehicle models, enhancing the in-cabin experience [1][5] - The company emphasizes its role as a trusted partner for automakers, enabling them to integrate advanced AI features into both new and existing vehicles [5][8] - Cerence AI has shipped over 500 million cars with its technology, showcasing its significant presence in the automotive industry [8]

Industry Overview - The global virtual assistants market is experiencing significant growth, with a compound annual growth rate (CAGR) of 22.3% projected to reach a value of $23.57 billion by 2033 [1] Market Drivers - The integration of virtual assistants with smart home devices such as speakers, thermostats, and lighting systems is a key factor driving market growth [1]

Core Viewpoint - Cerence (CRNC) has shown significant stock performance, returning 75.1% year to date, outperforming the broader technology sector and the IT services industry [1] Financial Performance - In the first quarter of fiscal 2025, Cerence reported a non-GAAP loss of 3 cents per share, exceeding the Zacks Consensus Estimate by 88.89% [2] - Revenues for the same quarter were $50.9 million, surpassing the Zacks Consensus Estimate by 3.62%, although this represents a 63.2% decline year over year [2] Market Position and Technology - Cerence's technology was utilized in 51% of auto production in the first quarter of fiscal 2025, with approximately 11 million cars shipped, reflecting a 2.6% sequential increase but a 10.5% year-over-year decrease [3] - The company powers over 500 million cars globally, indicating strong market reach and leadership in automotive AI [4] Growth Prospects - For fiscal 2025, Cerence anticipates revenues between $236 million and $247 million, with adjusted EBITDA expected between $15 million and $26 million [7] - The second quarter of fiscal 2025 is projected to generate revenues between $74 million and $77 million, including an estimated $20 million from fixed contracts [7] - The Zacks Consensus Estimate for second-quarter fiscal 2025 revenues is $76.57 million, indicating a 12.89% growth compared to the previous year [8] Clientele and Partnerships - Cerence has expanded its automotive clientele, achieving 10 customer wins and launching six Gen AI programs in fiscal 2024 [11] - The company set a record with 22 platform launches in 2024 and has secured a multi-year agreement with JLR for next-generation in-car experiences [12] - Collaborations with NVIDIA and Microsoft enhance Cerence's technological capabilities, integrating advanced AI solutions into vehicles [13][14] Valuation and Market Sentiment - Despite strong growth prospects, Cerence shares are considered overvalued, indicated by a Value Score of D, and are trading above the 50-day and 200-day moving averages, suggesting a bearish trend [15][16] - The company faces intense competition in the automotive voice assistance domain, which may impact its future prospects [17]

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $50.9 million, exceeding the high end of guidance of $47 million to $50 million [20] - Adjusted EBITDA was $1.4 million, significantly better than the anticipated loss of $6.6 million to $9 million [23] - Gross margin for the quarter was 65%, surpassing the guidance of 60% [21] - The net loss for Q1 was $22.4 million, compared to a net income of $23.9 million in the same quarter of the previous year [24] - Cash and marketable securities at the end of the quarter were $110.5 million, down $19.9 million from the previous fiscal year [25] Business Line Data and Key Metrics Changes - License revenue increased to $22.7 million, up 9.1% year-over-year [27] - Connected services revenue rose to $13.7 million, a 34% increase from $10.2 million in the same quarter last year [27] - Professional services revenue decreased year-over-year but performed at a higher gross margin than anticipated [21][28] Market Data and Key Metrics Changes - The penetration of global auto production declined by 2% to 51% [31] - Approximately 11 million cars were shipped with Cerence technology in Q1, a 2.6% increase quarter-over-quarter but a 10.5% decrease year-over-year [32] - Worldwide car production declined by 1.2% compared to the same quarter last year [32] Company Strategy and Development Direction - The company aims to return to profitability in fiscal year 2025, focusing on cost management and operational efficiency [6][17] - Key deliverables for 2025 include launching the next-gen product Cerence XUI, growing business with new and existing customers, and continuing transformation efforts [11][15][16] - Partnerships with leading AI companies like Nvidia and Microsoft are expected to enhance product performance and cost efficiency [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year cash flow expectations and projected revenue guidance for Q2 between $74 million and $77 million [17][35] - The company is optimistic about its ability to navigate challenges in the automotive industry, including cost pressures and geopolitical factors [11] - Management noted that the recent tariff announcements are not expected to have a meaningful impact on Q2 results [43] Other Important Information - The company repurchased $27 million of convertible notes due in June 2025 as part of its debt management strategy [7] - The restructuring efforts have resulted in a significant reduction in operating expenses, down 23% year-over-year [22] Q&A Session Summary Question: What is the size of the first major customer program with Cerence XUI? - The first major customer program is with a European auto manufacturer, expected to involve several million units over the contract's life, with approximately one million units in the first year [47] Question: Can you provide insights on the competitive landscape for digital assistance? - The competitive landscape remains similar, with major players like Google and Amazon, as well as DIY solutions from OEMs. Cerence's agnostic approach allows for customization and flexibility [67][68] Question: What are the one-time items that contributed to better-than-expected results? - The $2 million royalty true-up and a $2.5 million international tax credit were significant contributors to improved profitability [86][88] Question: How quickly can the adoption of XUI ramp up? - Adoption rates depend on the contracts, which typically range from one to ten years, with most being two to three years [101] Question: What is the company's strategy regarding the remaining convertible notes? - The company plans to extinguish the remaining $60 million of convertible notes due in June through a combination of payoff and financing [39][127]

Group 1: Earnings Performance - Cerence reported a quarterly loss of $0.03 per share, significantly better than the Zacks Consensus Estimate of a loss of $0.27, representing an earnings surprise of 88.89% [1] - The company has surpassed consensus EPS estimates for four consecutive quarters [2] - Cerence's revenues for the quarter ended December 2024 were $50.9 million, exceeding the Zacks Consensus Estimate by 3.62%, but down from $138.34 million year-over-year [2] Group 2: Stock Performance and Outlook - Cerence shares have increased approximately 66.9% since the beginning of the year, outperforming the S&P 500's gain of 3.1% [3] - The company's future stock performance will largely depend on management's commentary during the earnings call and the earnings outlook [4][6] - The current consensus EPS estimate for the upcoming quarter is $0.02 on revenues of $57.71 million, and $0.15 on revenues of $241.27 million for the current fiscal year [7] Group 3: Industry Context - The Computers - IT Services industry, to which Cerence belongs, is currently ranked in the top 18% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Cerence's stock performance [5]

Cerence Q1 FY25 Earnings Presentation Brian Krzanich, Chief Executive Officer Tony Rodriquez, Chief Financial Officer February 6, 2025 © 2025 Cerence Inc. Forward-Looking Statements Statements in this presentation regarding: Cerence's future performance, results and financial condition; expected growth and profitability; outlook; transformation plans and cost efficiency initiatives, including the estimated net annualized cost savings; strategy; opportunities; business, industry and market trends; strategy r ...