Cerence (CRNC) 28th Annual Needham Growth Conference Virtual summary

Industry trends and technology evolution

• Voice technology is transitioning due to large language models (LLMs), enabling natural, conversational commands without keywords.

• LLMs allow for multi-instruction, context-aware interactions, improving safety and user experience in vehicles.

• By 2030, 80%-95% of cars are expected to be connected, unlocking new real-time and AI-driven services.

• Embedded AI and small language models are increasingly important for offline and personalized infotainment.

• OEMs seek unique, branded experiences to counter declining brand loyalty, leveraging voice and AI personalization.

Product capabilities and market position

• Supports a wide range of languages and dialects, with expertise in automotive-specific data and use cases.

• Expanding beyond automotive into wearables, TVs, and self-service kiosks, leveraging cross-industry partnerships.

• Audio technology enables advanced in-cabin features, such as isolating voices by seat and filtering noise.

• Holds a strong presence in 52% of vehicles, with proactive, human-like, and personalized interaction as a vision.

• Demonstrated integration with Microsoft Office 365, showing flexibility in partnerships despite IP disputes.

Financial performance and outlook

• Fiscal 2025 revenue reached $252 million with 73% gross margin, $48 million EBITDA, and $46 million free cash flow.

• Q4 2025 saw $60 million revenue, $8 million adjusted EBITDA, and $12 million cash flow from operations.

• Fiscal 2026 guidance is $300-$320 million revenue, $60 million adjusted EBITDA, and $60 million free cash flow.

• IP monetization, such as a $49 million Samsung patent license, supplements core technology growth.

• Core technology revenue is growing high single digits, with total business growth at 23% including IP deals.