Cerence Inc. Q3 FY2025 earnings call

Advancing AI Road Map

• Cerence xUI platform is a dynamic AI assistant platform with multimodality and emotion detection capabilities, on schedule with milestones achieved in Q3 including language availability and contextual reasoning. Partnerships with chip providers like Arm to enhance edge performance. Showcasing xUI at the International Auto Show in Munich in September.

Growing Business with Customers

• Signed deals with Volkswagen Group, JLR; new design wins with Daihatsu, Hyundai; program extensions with Great Wall Motors, GM; 6 major customer programs started production; partnership with LG for TV voice interaction.

Transformation and Cost Management

• Continued strong cash performance, cost savings, limited tariff impact in Q3, working with customers to optimize partnerships while maintaining strategic investment in R&D.

In Q3 2025, Cerence reported total revenue of $62.2 million. Variable license revenue was $34.2 million, up 48% year-over-year. Connected services revenue was $12.8 million, up 17% year-over-year. Professional services were $15.2 million, down 8% from prior year. Gross profit for the quarter was $45.9 million, yielding a gross margin of 74%. Adjusted EBITDA was $9 million. GAAP net loss for Q3 was $3 million compared to a net loss of $314 million for the same quarter last year. Shipped 12.4 million units this quarter, an increase from 12.1 million in prior year. Connected cars shipped grew by 12%. Pro forma royalties were $43.2 million, higher than last year. Adjusted total billings were $226 million, up 3.5% year-over-year.

Full Fiscal Year

• Raised revenue guidance to $244 million to $249 million.
• Adjusted EBITDA guidance raised to $42 million to $46 million.
• Free cash flow guidance increased to $38 million to $42 million.

Q4 2025

• Expected revenue $53 million to $58 million.
• Adjusted EBITDA $2 million to $6 million.
• GAAP net loss $18 million to $22 million.

• Tariff impacts remain fluid and may affect vehicle volumes and program timelines.
• Uncertainty in the automotive market with potential production declines and program pushouts.

Q: Congrats on the PPU progress. Can you expand on what drove the increases this quarter? Was that across both license and connected services?

A: Antonio Rodriquez said it was across all lines. Higher embedded license volume, true-ups in royalty reports, euro exchange rate benefit contributed. New Gen AI programs are too early to impact PPU.

Q: On the nonautomotive expansion, can you size revenue ramp?

A: Brian Krzanich said nonauto markets like TVs have lower PPU but higher volume. Efficiency gains through AI internally to fund growth without OpEx increase.

Q: Any discernible trends in connected product usage?

A: Brian Krzanich mentioned multimodal features, agnostic technology allowing OEMs to optimize, futureproofing, and people using features like natural discussion in vehicles.