Cerence Inc. Price, Consensus and EPS Surprise

Cerence Inc. price-consensus-eps-surprise-chart

|

Cerence Inc. Quote

The Top Line in Detail

License

revenues of $51.4 million increased 11% year over year. Within License revenues, Variable License revenues were down 13%, while Fixed License revenues were up 54% on a year-over-year basis.

Connected Services

revenues of $25.6 million increased 1% from the year-ago quarter’s figure. Within Connected Services revenues, Legacy Connected Services revenues were up 1% and New Connected Services revenues were flat year over year.

Professional Services

revenues totaled $21.1 million, up 9% year over year.

In the quarter under review, Vietnam’s domestic car company — VinFast — leveraged Cerence to power conversational AI for its entire range of smart electric vehicles (EVs). The company also won a deal with a client specializing in the manufacturing of elevators to provide voice AI technology and connected services for building next-generation elevators.

The company reported that Repeatable software contribution (TTM) for the fiscal fourth quarter stood at 81%. Growth in billings per car (TTM over prior year TTM and excludes legacy contract) was 8%.

The percent of worldwide auto production with Cerence Technology (TTM) stood at 53%.

Operating Details

Non-GAAP gross margin expanded 230 basis points (bps) on a year-over-year basis to 78.1%.

Total operating expenses increased 27.9% year over year to $63.2 million, mainly due to research and development, sales and marketing along with general and administrative costs.

Operating margin on a non-GAAP basis contracted 490 bps on a year-over-year basis to 37.2%.

Balance Sheet & Cash Flow

As of Sep 30, 2021, cash, cash equivalents and marketable securities were $158.9 million compared with $149.9 million as of Jun 30, 2021.

The long-term debt, net of discounts and issuance costs amounted to $265.1 million as of Sep 30.

In the fiscal fourth quarter, cash provided by operating activities came in at $23.3 million compared with $24.1 million reported in the prior quarter. Free cash flow was $19.3 million compared with $21.2 million reported in the previous quarter.

In fiscal 2021, cash provided by operating activities came in at $74.4 million compared with $44.8 million reported in the prior fiscal year. Free cash flow was $62.3 million compared with $25.8 million reported in the previous fiscal year.

Guidance

For first-quarter fiscal 2022, Cerence expects revenues between $91 million and $96 million.

Non-GAAP earnings per share (EPS) for the fiscal first quarter is expected in the range of 47-53 cents. Non-GAAP operating margin is anticipated in the range of 32-34%.

The company expects IHS auto production to decline 21% in the fiscal first quarter. Adjusted EBITDA is projected in the range of $31-$35 million.

For fiscal 2022, the company expects revenues in the range of $400-$425 million. Adjusted EBITDA is forecast to be $144-$163 million for the fiscal year.

Non-GAAP EPS are expected in the range of $2.17-$2.51 per share. Non-GAAP operating margin is anticipated in the range of 33-36%.

Zacks Rank & Stocks to Consider

Currently, Cerence carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks worth consideration in the broader technology space includes

Arrow Electronics


ARW

,

Alphabet


GOOGL

and

Monolithic Power Systems


MPWR

.

While Arrow Electronics and Alphabet sport a Zacks Rank #1 (Strong Buy) at present, Monolithic carries a Zacks Rank #2 (Buy). You can see


the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics’ shares have gained 31.4% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 27.4%.

Alphabet’s shares have surged 66.9% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25.8%.

Monolithic’s shares have rallied 52.3% on a year-to-date basis. The long-term earnings growth rate for the company is currently projected at 25%.