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Cerence (CRNC)
NASDAQ:CRNC
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Cerence
(NASDAQ:CRNC)
44Neutral
Positive Factors
Debt Management
The $20MM Fixed Contract pull-in likely helps pay off the $60MM convertible due with cash on hand, the most shareholder friendly option.
Earnings
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.
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.
Sales Performance
Decline in royalties and units shipped, with 10.6mn cars supplied in 4Q24 down 14% y/y.
Cerence (CRNC) vs. S&P 500 (SPY)
Market Cap
$341.06M
Dividend YieldN/A
Average Volume (3M)1.43M
Price to Earnings (P/E)―
Beta (1Y)2.01
Revenue Growth-30.10%
EPS Growth-1892.67%
CountryUS
Employees1,400
SectorTechnology
Sector Strength44
IndustrySoftware - Application
Share Statistics
EPS (TTM)-15.22
Shares Outstanding43,198,994
10 Day Avg. Volume1,105,610
30 Day Avg. Volume1,426,479
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
$13.30Price Target Upside68.35% 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
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.35
Negative
Balance Sheet
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.45
Neutral
Cash Flow
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.50
Neutral
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| 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 | ||||
| 0.00 | 126.99M | 110.36M | 115.16M | 158.86M | 147.73M | Total Assets |
| 0.00 | 702.36M | 1.30B | 1.32B | 1.71B | 1.69B | Total Debt |
| 0.00 | 100.42M | 289.33M | 286.82M | 288.12M | 296.64M | Net Debt |
| 0.00 | -21.06M | 188.18M | 191.97M | 159.69M | 160.58M | Total Liabilities |
| 0.00 | 561.26M | 602.72M | 605.54M | 673.78M | 729.69M | Stockholders Equity |
| 997.18M | 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
Negative
7.90
Price Trends
11.76
Negative
9.85
Negative
6.42
Positive
Market Momentum
-0.88
Positive
30.44
Neutral
8.35
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRNC, the sentiment is Negative. The current price of 7.9 is below the 20-day moving average (MA) of 9.63, below the 50-day MA of 11.76, and above the 200-day MA of 6.42, indicating a neutral trend. The MACD of -0.88 indicates Positive momentum. The RSI at 30.44 is Neutral, neither overbought nor oversold. The STOCH value of 8.35 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative 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 (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $1.89T | 19.19 | 32.91% | 0.39% | 13.89% | 38.99% | |
75 Outperform | $164.39B | 25.26 | 47.28% | ― | 10.65% | 44.84% | |
75 Outperform | $2.68T | 37.33 | 119.18% | 0.03% | 114.20% | 146.26% | |
74 Outperform | $3.27T | 34.64 | 136.52% | 0.46% | 2.61% | -2.14% | |
73 Outperform | $14.03B | 29.59 | 20.22% | 1.25% | -3.75% | -4.27% | |
57 Neutral | $20.97B | 10.32 | -14.01% | 2.49% | 4.46% | -23.38% | |
44 Neutral | $341.06M | ― | -149.38% | ― | -30.10% | -1892.67% |
* Technology Sector Average
Performance Comparison
CRNC
Cerence
7.90
-7.46
-48.57%
ADBE
Adobe
383.53
-118.56
-23.61%
AAPL
Apple
222.13
52.90
31.26%
GOOGL
Alphabet Class A
154.64
-0.11
-0.07%
GGG
Graco
83.51
-7.61
-8.35%
NVDA
Nvidia
108.38
18.05
19.98%
Cerence Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: -37.99% | Next Earnings Date: May 8, 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.