Cerence (CRNC) AI Stock Analysis

Compare

1,602 Followers

CRNC Dividends

Top Page

Cerence

(NASDAQ:CRNC)

51Neutral

Cerence's overall stock score reflects a challenging financial position with declining revenues and losses. While technical indicators show mixed signals, the company's valuation is under pressure due to negative earnings. Recent positive earnings call and strategic board appointment add some optimism, but financial risks and market challenges persist.

Positive Factors

Financial Performance

Cerence delivered a 1Q beat and pointed to the high end of FY25 EBITDA and FCF guidance with 2Q guidance ahead of expectations.

Strategic Partnerships

The recent collaboration with NVIDIA can enhance CRNC software capabilities and offer a unique go-to-market with edge LLMs.

Technological Advancements

Cerence's xUI Gen1 platform opens new avenues for custom OEM branding and LLM choice.

Negative Factors

Financial Challenges

$87.5mn convertible note due in June 2025 poses a near-term financial challenge as management is exploring refinancing options.

Market Penetration

Lack of traction with OEMs in China.

Market Sentiment

Investor interest is anticipated to remain subdued with CRNC still down significantly YTD despite recent positive movements.

Cerence (CRNC) vs. S&P 500 (SPY)

Market Cap

$337.82M

Dividend YieldN/A

Average Volume (3M)1.10M

Price to Earnings (P/E)―

Beta (1Y)1.81

Revenue Growth-30.10%

EPS Growth-1892.67%

CountryUS

Employees1,400

SectorTechnology

Sector Strength46

IndustrySoftware - Application

Share Statistics

EPS (TTM)-15.22

Shares Outstanding43,198,994

10 Day Avg. Volume946,756

30 Day Avg. Volume1,101,604

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.69

Price to Cash Flow (P/CF)11.20

P/FCF Ratio8.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$12.10

Price Target Upside48.10% Upside

Rating ConsensusHold

Number of Analyst Covering6

Cerence Business Overview & Revenue Model

Company DescriptionCerence Inc. provides AI powered virtual assistants for the mobility/transportation market worldwide. The company offers edge software components; cloud-connected components and related toolkits and applications; and virtual assistant coexistence and professional services. It also provides conversational artificial intelligence-based solutions, including speech recognition, natural language understanding, speech signal enhancement, text-to-speech, and acoustic modeling technology. Cerence Inc. is headquartered in Burlington, Massachusetts.

How the Company Makes MoneyCerence makes money primarily through the licensing of its software and technology solutions to automotive manufacturers and Tier 1 suppliers. The company's revenue model is largely based on long-term contracts and partnerships with major carmakers, which integrate Cerence's voice recognition and AI technologies into their vehicles. Cerence generates income through upfront licensing fees, recurring royalties based on the number of units or cars sold with its technology, and professional services for customization and integration. Additionally, Cerence may also earn from subscription services and ongoing support and maintenance agreements as part of its offerings to enhance the functionality and performance of its solutions.

Cerence Financial Statement Overview

Summary

Cerence is facing significant financial challenges, characterized by declining revenues, persistent losses, and increasing financial leverage. While the company shows some ability to generate cash from operations, its profitability and equity position are weak, posing risks to financial stability and growth.

Income Statement

Negative

Cerence's income statement shows a concerning trend with declining revenues and increasing losses. The TTM (Trailing-Twelve-Months) revenue is significantly lower than previous years, and the company has been unable to generate a positive EBIT margin, indicating operational inefficiencies. The gross profit margin, although stable, is overshadowed by substantial EBIT and net income losses.

Balance Sheet

Neutral

The balance sheet highlights a weak financial position with a declining equity base and a high debt-to-equity ratio, indicating financial risk. The equity ratio has decreased over the years, suggesting less reliance on equity financing. Cerence's increasing liabilities relative to assets pose a risk, though the company maintains a reasonable level of cash and short-term investments.

Cash Flow

Neutral

Cerence's cash flow statement shows some resilience, with positive operating cash flows in the TTM period, despite negative free cash flow growth in prior years. The operating cash flow to net income ratio indicates that cash generation is better than accounting profits suggest, yet the overall cash flow situation reflects the company's struggle to generate consistent positive free cash flows.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
244.06M	331.50M	294.48M	327.89M	387.18M	329.65M
	Gross Profit
164.79M	244.27M	199.31M	230.72M	286.11M	221.79M
	EBIT
-398.80M	-579.94M	-27.20M	38.33M	60.59M	14.83M
	EBITDA
-638.33M	-561.43M	-5.58M	-160.42M	91.93M	29.74M
	Net Income Common Stockholders
-636.22M	-588.08M	-56.25M	-310.83M	45.89M	-20.63M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
108.53M	126.99M	110.36M	115.16M	158.86M	147.73M
	Total Assets
987.09M	702.36M	1.30B	1.32B	1.71B	1.69B
	Total Debt
291.69M	100.42M	289.33M	286.82M	288.12M	296.64M
	Net Debt
192.52M	-21.06M	188.18M	191.97M	159.69M	160.58M
	Total Liabilities
523.69M	561.26M	602.72M	605.54M	673.78M	729.69M
	Stockholders Equity
463.40M	141.10M	694.88M	712.95M	1.03B	957.76M
Cash Flow		Free Cash Flow
23.42M	12.20M	2.37M	-19.58M	62.34M	25.78M
	Operating Cash Flow
29.27M	17.20M	7.50M	-2.14M	74.39M	44.79M
	Investing Cash Flow
3.95M	4.38M	5.82M	-10.56M	-41.63M	-30.68M
	Financing Cash Flow
-26.73M	225.00K	-5.33M	-19.61M	-41.51M	121.55M

Cerence Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.17

Price Trends

50DMA

9.87

Negative

100DMA

10.44

Negative

200DMA

6.78

Positive

Market Momentum

MACD

-0.58

Negative

RSI

48.55

Neutral

STOCH

63.95

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRNC, the sentiment is Positive. The current price of 8.17 is above the 20-day moving average (MA) of 7.72, below the 50-day MA of 9.87, and above the 200-day MA of 6.78, indicating a neutral trend. The MACD of -0.58 indicates Negative momentum. The RSI at 48.55 is Neutral, neither overbought nor oversold. The STOCH value of 63.95 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CRNC.

Cerence Risk Analysis

Cerence disclosed 39 risk factors in its most recent earnings report. Cerence reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Cerence Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MITK	68 Neutral	$353.35M	84.52	2.15%	―	5.28%	―
Sector *	59 Neutral	$9.97B	10.09	-6.54%	3.08%	7.41%	-11.60%
CRNC	51 Neutral	$337.82M	―	-149.38%	―	-30.10%	-1892.67%
EGHT	51 Neutral	$214.66M	―	-40.78%	―	-2.23%	19.48%
SMRT	50 Neutral	$155.59M	―	-10.65%	―	-26.16%	2.89%
DOMO	48 Neutral	$269.20M	―	48.46%	―	-0.61%	-1.61%
ONTF	48 Neutral	$194.70M	―	-24.82%	―	-9.55%	12.28%

* Technology Sector Average

Performance Comparison

CRNC

Cerence

8.93

-0.46

-4.90%

EGHT

8X8

1.75

-0.57

-24.57%

MITK

Mitek Systems

8.01

-4.40

-35.46%

DOMO

Domo

6.83

-0.79

-10.37%

ONTF

ON24

4.56

-2.10

-31.53%

SMRT

SmartRent

0.89

-1.43

-61.64%

Cerence Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -35.87% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Neutral

Cerence reported a positive first quarter with revenue and adjusted EBITDA surpassing expectations. The company demonstrated strong cash flow and strategic debt reduction. However, challenges remain, including a year-over-year revenue decline due to legacy contract issues and a net loss for the quarter. The company's market penetration in China continues to be a concern. Despite these challenges, Cerence's partnerships and future guidance provide a positive outlook.

Highlights

Exceeded Q1 Revenue and Adjusted EBITDA Guidance

Cerence reported Q1 2025 revenue of $50.9 million and adjusted EBITDA of $1.4 million, both exceeding the high end of their guidance.

Strong Free Cash Flow

The company reported strong free cash flow of $7.9 million for Q1 2025.

Debt Reduction

Cerence repurchased $27 million of convertible notes due in June 2025, reducing debt and positioning for long-term value.

Partnerships with AI Leaders

Cerence partnered with Nvidia and Microsoft to enhance AI capabilities, offering improved performance and cost efficiency.

Cost Management and Restructuring Benefits

Non-GAAP operating expenses were reduced by 23% year-over-year due to restructuring efforts, contributing to improved margins.

Revenue Guidance for Q2

The company issued Q2 2025 revenue guidance of $74 million to $77 million, indicating confidence in future growth.

Lowlights

Decline in Q1 Revenue Year-over-Year

Q1 revenue declined from $87.4 million year-over-year, primarily due to the decommissioning of a legacy connected services contract.

Net Loss in Q1

Cerence reported a net loss of $22.4 million for Q1 2025, compared to net income of $23.9 million in the same period last year.

Challenges in Chinese Market

The company's penetration in the Chinese domestic market remains limited, affecting overall market share growth.

Professional Services Revenue Decline

Professional services revenue was lower than anticipated, though it performed at a higher gross margin.

Company Guidance

During Cerence Inc.'s Q1 2025 earnings call, the company reported a top-line revenue of $50.9 million and an adjusted EBITDA of $1.4 million, both surpassing the high end of their guidance. They also achieved a strong free cash flow of $7.9 million. Cerence repurchased $27 million of convertible notes due in June 2025 and emphasized their commitment to extinguishing this debt through repurchases and financing, in line with shareholders' interests. Looking forward, Cerence provided guidance for Q2 2025, expecting revenue between $74 million and $77 million, with GAAP net income projected to be $1 million to $5 million and adjusted EBITDA between $18 million and $22 million. The company remains focused on its three key deliverables for 2025, which include launching Cerence XUI, expanding business with new design wins, and continuing transformation and cost management.

Cerence Corporate Events

Executive/Board Changes

Cerence Appoints Marion Harris to Board of Directors

Positive

Mar 20, 2025

On March 17, 2025, Cerence Inc. announced the appointment of Marion Harris, a former Ford executive, to its Board of Directors, effective April 1, 2025. Harris, with over 25 years of experience in automotive and financial services, is expected to bring strategic insights to Cerence AI as it continues to innovate in the automotive and mobility markets. His appointment is seen as a move to strengthen the company’s leadership with his deep expertise in digital transformation and customer satisfaction.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.