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Cerence Inc (CRNC)
:CRNC

Cerence (CRNC) AI Stock Analysis

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Cerence

(NASDAQ:CRNC)

Rating:53Neutral
Price Target:
$10.00
▲(5.93%Upside)
Cerence's overall stock score reflects its financial challenges, with declining revenues and net losses, impacting its income statement and valuation. However, the strong performance in the latest earnings call, including exceeding revenue and EBITDA guidance and successful cost management, has provided a positive outlook. The technical analysis is neutral, showing mixed signals about future price movements.
Positive Factors
Financial Performance
Cerence posted a solid report and maintained the FY25 outlook, despite tariff uncertainty.
Innovations and Product Development
Generative AI launches are gaining traction with OEMs, positioning Cerence for potential long-term growth.
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 Challenges
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. SPDR S&P 500 ETF (SPY)

Cerence Business Overview & Revenue Model

Company DescriptionCerence Inc. (CRNC) is a leading provider of AI-powered solutions for the automotive industry. The company specializes in developing voice recognition and conversational AI technologies that enhance the in-car experience for drivers and passengers. Cerence's products include voice assistants, text-to-speech systems, and natural language understanding solutions, which are integrated into vehicles to provide seamless, safe, and connected driving experiences.
How the Company Makes MoneyCerence makes money primarily by licensing its software and AI technologies to automotive manufacturers and suppliers. The company generates revenue through long-term contracts with these clients, who integrate Cerence's voice and AI solutions into their vehicles. Cerence also offers cloud-based services and support for its technologies, which provides additional revenue streams. Key partnerships with major automotive brands and technology companies contribute significantly to Cerence's earnings, as these collaborations expand the reach and adoption of its innovative solutions in the global automotive market.

Cerence Key Performance Indicators (KPIs)

Any
Any
Gross Margin by Segment
Gross Margin by Segment
Shows the percentage of revenue that exceeds the cost of goods sold for each segment, revealing efficiency and pricing power across different parts of the business.
Chart InsightsCerence's gross margin trends reveal a notable recovery in Professional Services, with a recent uptick after previous volatility. The License segment remains robust, maintaining high margins despite macroeconomic pressures. Connected Services, however, shows a decline, reflecting challenges noted in the earnings call, such as headwinds in professional services revenue and exchange rate impacts. Despite these challenges, Cerence's strategic focus on AI solutions and new partnerships, as highlighted in the earnings call, suggests potential for future margin improvements and market expansion.
Data provided by:Main Street Data

Cerence Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q2-2025)
|
% Change Since: -5.60%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
The earnings call presented a strong quarter for Cerence, with revenue and EBITDA exceeding guidance, a marked improvement in free cash flow, and successful cost management. However, the company also faced challenges with professional services revenue, exchange rate impacts, and ongoing IP lawsuits. Despite these challenges, the positive highlights, such as new partnerships and successful product launches, suggest a favorable outlook for the company.
Q2-2025 Updates
Positive Updates
Exceeded Revenue and EBITDA Guidance
Cerence reported Q2 2025 revenue of $78 million, surpassing the guidance range of $74 million to $77 million. Adjusted EBITDA also exceeded expectations at $29.5 million.
Fourth Consecutive Quarter of Positive Free Cash Flow
The company generated a strong free cash flow of $13.1 million, marking the fourth consecutive quarter of positive free cash flow.
Increase in Connected Services Revenue
Connected Services revenue in Q2 was $12.6 million, reflecting a positive sign of increased demand for connected vehicles.
Successful Launch of Cerence XUI
Cerence launched its hybrid Agentic AI assistant platform, Cerence XUI, reaching significant milestones and showcasing it in multiple languages.
Strong Customer Interest and New Partnerships
The company reported continued customer interest in their offerings, with new partnerships and deals with top automakers like JLR and Renault.
Significant Cost Management Achievements
Non-GAAP operating expenses were reduced by 32% compared to the same quarter last year, highlighting successful cost management and restructuring efforts.
Negative Updates
Headwinds in Professional Services Revenue
There was a decrease in professional services revenue, which was down year-over-year by approximately $4.8 million.
Impact of Euro to Dollar Exchange Rate
Revenue was negatively impacted by the euro to dollar exchange rate, although this was neutral to profitability due to a corresponding reduction in operating expenses.
Ongoing Lawsuits and IP Protection Costs
Cerence is involved in ongoing lawsuits against Samsung, Microsoft, and Nuance for IP infringement, which could pose financial and operational risks.
No New Fixed License Revenue Expected
No material fixed license revenue is expected to be signed for the remainder of the fiscal year, potentially impacting future revenue streams.
Company Guidance
During Cerence's Q2 2025 earnings call, the company reported exceeding their high-end guidance with a revenue of $78 million and an adjusted EBITDA of $29.5 million. They also generated a robust free cash flow of $13.1 million, marking the fourth consecutive quarter of positive free cash flow. Consequently, Cerence raised its full-year guidance for both adjusted EBITDA and free cash flow. The company achieved a gross margin of 77%, surpassing the high-end of their guidance range, and ended the quarter with $122.8 million in cash and marketable securities. Despite facing macroeconomic challenges, including potential impacts from tariffs, Cerence remains optimistic, citing strong customer interest in their AI solutions and significant progress in expanding their market reach beyond automotive, as evidenced by a new partnership with Code Factory to introduce VoiceTopping. Additionally, Cerence is strategically investing in IP protection, with ongoing lawsuits against Samsung, Microsoft, and Nuance for patent and copyright infringements.

Cerence Financial Statement Overview

Summary
Cerence is facing financial challenges with declining revenues and persistent net losses. Despite a strong gross profit margin, high leverage and negative net profit margins indicate financial instability. Improvements in cash flow are noted, but these are overshadowed by ongoing profitability issues.
Income Statement
42
Neutral
Cerence has experienced a decline in revenue from $331.5M in 2024 to $254.3M in TTM 2025, indicating a negative revenue growth trend. The gross profit margin for TTM 2025 is 70.2%, showing strong product profitability. However, the net profit margin is significantly negative at -132.3%, highlighting substantial losses. The EBIT and EBITDA margins are also negative, reflecting operational challenges and high operational costs.
Balance Sheet
55
Neutral
The debt-to-equity ratio is 1.85, indicating high leverage which could pose a risk if earnings do not improve. The return on equity (ROE) is negative, consistent with current losses. However, the equity ratio stands at 22.4%, suggesting a reasonable level of equity financing compared to total assets.
Cash Flow
48
Neutral
Free cash flow has grown from $12M in 2024 to $37.3M in TTM 2025, indicating improvement in cash generation. The operating cash flow to net income ratio is positive, showing better cash conversion relative to net losses. However, the free cash flow to net income ratio is negative, reflecting ongoing profitability issues.
BreakdownTTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income Statement
Total Revenue254.25M331.50M294.48M327.89M387.18M329.65M
Gross Profit178.58M244.27M199.31M230.72M286.11M221.79M
EBITDA-360.45M-561.43M-5.58M-160.42M91.93M29.74M
Net Income-336.59M-588.08M-56.25M-310.83M45.89M-20.63M
Balance Sheet
Total Assets665.55M702.36M1.30B1.32B1.71B1.69B
Cash, Cash Equivalents and Short-Term Investments122.78M126.99M110.36M115.16M158.86M147.73M
Total Debt276.16M295.24M289.33M286.82M288.12M296.64M
Total Liabilities516.28M561.26M602.72M605.54M673.78M729.69M
Stockholders Equity149.27M141.10M694.88M712.95M1.03B957.76M
Cash Flow
Free Cash Flow37.34M12.20M2.37M-19.58M62.34M25.78M
Operating Cash Flow43.69M17.20M7.50M-2.14M74.39M44.79M
Investing Cash Flow3.21M4.38M5.82M-10.56M-41.63M-30.68M
Financing Cash Flow-27.48M225.00K-5.33M-19.61M-41.51M121.55M

Cerence Technical Analysis

Technical Analysis Sentiment
Positive
Last Price9.44
Price Trends
50DMA
9.06
Positive
100DMA
9.77
Negative
200DMA
8.18
Positive
Market Momentum
MACD
0.08
Negative
RSI
52.78
Neutral
STOCH
67.59
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 9.44 is above the 20-day moving average (MA) of 9.21, above the 50-day MA of 9.06, and above the 200-day MA of 8.18, indicating a bullish trend. The MACD of 0.08 indicates Negative momentum. The RSI at 52.78 is Neutral, neither overbought nor oversold. The STOCH value of 67.59 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 40 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 (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$448.81M34.836.11%7.76%
63
Neutral
$251.27M-24.28%-1.87%61.90%
63
Neutral
$33.22B5.99-11.76%1.91%5.54%-19.87%
58
Neutral
$175.08M-22.66%-25.43%-135.09%
58
Neutral
$231.91M-24.47%-8.39%7.79%
53
Neutral
$408.36M-109.88%-27.06%-18.85%
53
Neutral
$559.67M48.46%-0.81%9.83%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CRNC
Cerence
9.44
6.60
232.39%
EGHT
8X8
1.86
-0.36
-16.22%
MITK
Mitek Systems
9.85
-1.26
-11.34%
DOMO
Domo
13.91
6.31
83.03%
ONTF
ON24
5.46
-0.41
-6.98%
SMRT
SmartRent
0.93
-1.43
-60.59%

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
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Jun 25, 2025