Cerence (CRNC) investor relations material

Executive summary

• Q3 FY25 revenue was $62.2M, surpassing the high end of guidance but down from $70.5M year-over-year; adjusted EBITDA was $9.0M, and net loss improved to $(2.7)M from $(313.5)M last year, which included a $357M goodwill impairment.

• Free cash flow reached $16.1M, marking the fifth consecutive positive quarter; cash and marketable securities rose to $73.7M.

• Full-year revenue guidance raised to $244M–$249M, with adjusted EBITDA guidance at $42M–$46M and free cash flow at $38M–$42M.

• Strategic focus remains on advancing the AI roadmap, expanding business with new and existing customers, and ongoing transformation and cost management.

• Operating margin improved to negative 1.5% from negative 503.1% year-over-year, reflecting the absence of large impairment charges.

Financial highlights

• Variable license revenue was $34.2M, up 48% year-over-year, while no fixed license revenue was recognized in Q3 FY25 compared to $20M last year.

• Connected services revenue grew 17% year-over-year to $12.8M; professional services revenue was $15.2M, down 8% due to a lower mix of custom work.

• Gross margin improved to 73.7%–74% from 71.5%–72% year-over-year, reflecting a higher mix of technology revenue.

• Adjusted total billings TTM reached $226M, up 3.5% year-over-year.

• Cash provided by operating activities was $23.7M for Q3 FY25, up from $12.9M in the prior year quarter.

Outlook and guidance

• Q4 FY25 revenue expected between $53M–$58M, with gross margin of 68%–69% and adjusted EBITDA of $2M–$6M.

• FY25 revenue guidance raised to $244M–$249M; adjusted EBITDA to $42M–$46M; free cash flow to $38M–$42M.

• Net loss for FY25 projected at $(28)M to $(24)M.

• Management expects revenue to be impacted by global automotive industry dynamics, including production delays, pricing pressure, and macroeconomic uncertainty.

• Liquidity is considered sufficient for the next 12 months, with $73.7M–$79.1M in cash and marketable securities at quarter-end.