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1. Company Snapshot

1.a. Company Description

Cerence 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.

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1.b. Last Insights on CRNC

Cerence Inc.'s recent performance was driven by strong Q3 earnings, beating estimates with $0.09 per share, compared to a loss of $0.34 per share expected. The company's AI-powered user experiences continue to gain traction, particularly with Volkswagen, as they advance their partnership to deliver next-gen in-car conversations. Additionally, Cerence AI has filed a patent infringement lawsuit against Apple and developed a mobile work AI agent integrating Microsoft365 Copilot, enabling hands-free mobile work. These advancements showcase Cerence's commitment to innovation and IP protection. (Source: Q3 earnings report, company announcements)

1.c. Company Highlights

2. Cerence Inc. Delivers Strong Q4 2025 Results, Exceeds Guidance

Cerence Inc. reported a robust Q4 2025, with revenue reaching $60.6 million and adjusted EBITDA of $8.3 million, surpassing the company's guidance. The earnings release also highlighted a significant improvement in free cash flow, which stood at $9.7 million for the quarter and $46.8 million for the fiscal year. For the full year, revenue was $251.8 million, accompanied by an adjusted EBITDA of $48.1 million. Notably, the actual EPS came out at $0.06, a substantial beat relative to estimates of -$0.66. The company's financial performance was further bolstered by a reduction in debt by $87.5 million and a one-time payment of $49.5 million from Samsung as part of a cross-license agreement.

Publication Date: Dec -02

📋 Highlights
  • Q4 Financial Outperformance:: Revenue hit $60.6M and adjusted EBITDA reached $8.3M, surpassing guidance; free cash flow totaled $9.7M in Q4 and $46.8M for FY2025.
  • Debt Reduction & IP Monetization:: Paid down $87.5M in debt and secured a $49.5M one-time IP payment from Samsung (net $24M after costs).
  • XUI Platform Advancements:: Launched new languages, audio AI solutions, and secured key partnerships with Toyota, Ford, and an autonomous trucking company.
  • 2026 Guidance & Growth Projections:: Targets $300–320M revenue, $50–70M adjusted EBITDA, and $56–66M free cash flow, driven by core IP and recurring tech lines.

Operational Highlights and Progress

The company's XUI platform made significant strides, with advancements in new languages, core technology, and audio AI solutions. Cerence signed several key deals, including partnerships with major automotive companies like Toyota and Ford, as well as an autonomous trucking company. These operational highlights underscore the company's progress in its core business and its expansion into new areas. The five-year backlog stands at approximately $1 billion, and the company shipped 11.7 million units in Q4, with connected cars shipped growing 14% on a trailing twelve-month basis.

Guidance and Outlook for Fiscal Year 2026

For fiscal year 2026, Cerence expects revenue to range between $300-$320 million, with adjusted EBITDA projected at $50-$70 million and free cash flow anticipated between $56-$66 million. This guidance includes the patent license payment from Samsung and is expected to be driven by growth in the core technology business. The company is focusing on three key priorities: driving top-line growth, advancing XUI, and maintaining cost diligence. Cerence also anticipates 8% growth in its core business, driven by unit and content step-up.

Valuation and Competitive Landscape

Analyzing Cerence's valuation metrics, the current 'P/S Ratio' stands at 1.83, and the 'EV/EBITDA' is 49.62. These metrics indicate the market's expectations for the company's future growth. Analysts estimate next year's revenue growth at 27.8%, suggesting a positive outlook. The competitive landscape remains largely unchanged, with Google and Amazon as main competitors. Cerence is adapting to the evolving technological landscape, with a focus on large language model-based technology and agentic AI in its products.

Non-Automotive Initiatives and Future Demonstrations

In the non-automotive space, Cerence is prioritizing the kiosk market, having implemented a solution with a bank in South America. The company is also developing 'Vinnie,' a phone-answering chat service targeting dealerships and other sectors. Demonstrations of these products are slated for CES, indicating the company's push into new markets and its efforts to diversify its revenue streams.

3. NewsRoom

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Cerence AI to Participate in Raymond James TMT and Consumer Conference

Dec -01

Source: globenewswire.com

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Why Cerence Stock Soared Today

Nov -20

Source: fool.com

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Cerence Inc. (CRNC) Q4 2025 Earnings Call Transcript

Nov -20

Source: seekingalpha.com

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Cerence (CRNC) Q4 Earnings and Revenues Surpass Estimates

Nov -19

Source: zacks.com

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Cerence Stock Skyrockets After Q4 Earnings: Here's Why

Nov -19

Source: benzinga.com

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Cerence Beats Upper End of Guidance, Delivering Strong Fourth Quarter and Fiscal Year 2025 Results; Projects 8% Growth in Core Technology Business in FY26

Nov -19

Source: globenewswire.com

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Cerence to Announce Fiscal Fourth Quarter Results on November 19, 2025

Nov -05

Source: globenewswire.com

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SOUN vs. CRNC: Which Voice AI Stock Is the Better Buy Right Now?

Oct -21

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (23.48%)

6. Segments

License

Expected Growth: 27.15%

Cerence Inc.'s license growth of 27.15% is driven by increasing demand for AI-powered conversational AI platforms, expansion into new markets, and strategic partnerships. Additionally, the growing adoption of voice-activated technologies in the automotive and IoT industries, as well as the need for enhanced customer experience, are contributing to this growth.

Connected Services

Expected Growth: 13.53%

Cerence's Connected Services segment growth is driven by increasing demand for cloud-based voice assistants, rising adoption of electric and autonomous vehicles, and growing need for personalized in-car experiences. Additionally, strategic partnerships and collaborations with major OEMs and technology companies are fueling growth, as well as the company's continued innovation in AI-powered conversational AI and natural language processing.

Professional Services

Expected Growth: 26.37%

Cerence Inc.'s Professional Services segment growth of 26.37% is driven by increasing demand for AI-powered conversational AI solutions, expansion into new markets, and strategic partnerships. Additionally, the company's focus on innovation, customer satisfaction, and cost optimization have contributed to this growth.

7. Detailed Products

Cerence Drive

An AI-powered automotive software platform that enables OEMs to create personalized, intuitive, and immersive in-car experiences.

Cerence ARK

A cloud-based platform that enables the development, deployment, and management of conversational AI experiences across various industries.

Cerence Studio

A suite of tools and services that enables the development, testing, and deployment of conversational AI experiences.

Cerence Voice AI

A conversational AI technology that enables devices and applications to understand and respond to voice commands.

Cerence Mobility

A suite of solutions that enables the development of connected and autonomous vehicles.

8. Cerence Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Cerence Inc. faces moderate threat from substitutes due to the presence of alternative speech recognition technologies.

Bargaining Power Of Customers

Cerence Inc. has a diverse customer base, which reduces the bargaining power of individual customers.

Bargaining Power Of Suppliers

Cerence Inc. relies on a few key suppliers for its technology and components, giving them moderate bargaining power.

Threat Of New Entrants

The speech recognition technology market is highly competitive, and new entrants can easily disrupt the market with innovative solutions.

Intensity Of Rivalry

The speech recognition technology market is highly competitive, with many established players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 29.40%
Debt Cost 3.95%
Equity Weight 70.60%
Equity Cost 16.77%
WACC 13.00%
Leverage 41.64%

11. Quality Control: Cerence Inc. passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Vacasa

A-Score: 4.4/10

Value: 7.5

Growth: 3.6

Quality: 3.5

Yield: 0.0

Momentum: 10.0

Volatility: 1.7

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Expensify

A-Score: 3.7/10

Value: 8.5

Growth: 2.7

Quality: 3.8

Yield: 0.0

Momentum: 5.0

Volatility: 2.3

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Cerence

A-Score: 3.7/10

Value: 7.0

Growth: 1.1

Quality: 3.8

Yield: 0.0

Momentum: 10.0

Volatility: 0.3

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Sprout Social

A-Score: 3.5/10

Value: 6.7

Growth: 6.0

Quality: 4.6

Yield: 0.0

Momentum: 0.0

Volatility: 3.7

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Digital Turbine

A-Score: 3.4/10

Value: 6.0

Growth: 3.4

Quality: 1.6

Yield: 0.0

Momentum: 9.0

Volatility: 0.3

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Upland Software

A-Score: 3.0/10

Value: 7.6

Growth: 3.1

Quality: 2.2

Yield: 0.0

Momentum: 4.0

Volatility: 1.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

13.01$

Current Price

13.01$

Potential

-0.00%

Expected Cash-Flows