Q4 2025 Cerence Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the Cerence Q4 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To restore your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Kate Hickman. Please go ahead.

Operator: Good day, and thank you for standing by. Welcome to the Cerence Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To restore your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Kate Hickman. Please go ahead.

Kate Hickman: Hello, everyone, and welcome to Cerence's Q4 2025 conference call. I'm Kate Hickman, VP of Corporate Communications and Investor Relations. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Any statements that are not statements of historical fact, including statements related to our expectations, anticipations, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, objectives, targets, and plans, are forward-looking statements. Cerence makes no representations to update those statements after today. These statements are subject to risks and uncertainties, which may cause actual results to differ materially from such statements and expectations, as described in our SEC filings, including the Form 8K with the press release preceding today's call, our most recent Form 10Q, and our Form 10K filed on 25 November 2024. In addition, the company may refer to certain non-GAAP measures, key performance indicators, and pro forma financial information during this call.

Kate Hickman: Hello, everyone, and welcome to Cerence's Fourth Quarter 2025 Conference Call. I'm Kate Hickman, VP of Corporate Communications and Investor Relations. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Any statements that are not statements of historical fact, including statements related to our expectations, anticipations, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, objectives, targets, and plans, are forward-looking statements. Cerence makes no representations to update those statements after today. These statements are subject to risks and uncertainties, which may cause actual results to differ materially from such statements and expectations, as described in our SEC filings, including the Form 8K with the press release preceding today's call, our most recent Form 10Q, and our Form 10K filed on 25 November 2024. In addition, the company may refer to certain non-GAAP measures, key performance indicators, and pro forma financial information during this call.

These statements are subject to risks and uncertainties, which may cause actual results to differ materially from such statements and expectations as described in our SEC filings, including the Form 8-K, with the press release preceding. Today's call references our most recent Form 10-Q and our Form 10-K filed on November 25, 2024.

Kate Hickman: Please refer to today's press release for further details of the definitions, limitations, and uses of those measures, and reconciliations of non-GAAP measures to the closest GAAP equivalent. The press release is available in the investor section of our website. Joining me on today's call are Brian Krzanich, CEO, and Tony Rodriguez, CFO. Please note that slides with further context are available in the investor section of our website. Before handing the call over to Brian, I would like to mention that we will be participating in the Raymond James TMT and Consumer Conference on 8 December and the Needham Growth Conference on 13 January. In addition, Cerence will also be exhibiting at CES in Las Vegas from 6 to 9 January. Now, on to the call. Brian?

Please refer to today's press release for further details of the definitions, limitations, and uses of those measures, and reconciliations of non-GAAP measures to the closest GAAP equivalent. The press release is available in the investor section of our website. Joining me on today's call are Brian Krzanich, CEO, and Tony Rodriguez, CFO. Please note that slides with further context are available in the investor section of our website. Before handing the call over to Brian, I would like to mention that we will be participating in the Raymond James TMT and Consumer Conference on 8 December and the Needham Growth Conference on 13 January. In addition, Cerence will also be exhibiting at CES in Las Vegas from 6 to 9 January. Now, on to the call. Brian?

in addition, the company May refer to certain non-gaap measures key performance, indicators, and pro-forma financial information during this call

Please refer to today's press release for further details of the definitions, limitations, and uses of those measures, and reconciliations of non-GAAP measures to the closest GAAP equivalent.

The press release is available in the investor section of our website.

Joining me on today's call are Brian Krause, CEO, and Tony Rodriguez, CFO.

Please note that slides with further contacts are available in the investor section of our website.

Before handing the call over to Brian, I would like to mention that we will be participating in the Raymond James, TMT and consumer conference on December 8th and the nem growth conference on January 13th.

Brian Krzanich: Thank you, Kate. Good afternoon and welcome, everyone. I'm excited to speak with you today and reflect on my first full year as Cerence's CEO. It's been a great year for the Cerence team and our customers, and I couldn't be happier with the performance. Over the past year, we've strengthened the financial and operational foundation of the company and significantly increased positive cash flow generation, beating nearly every metric and putting us on solid ground for executing on our future growth plans. We've made significant progress with our XUI platform, including meeting all our technology milestones while driving strong customer interest and adoption. We paid down $87.5 million of our debt using cash on hand while maintaining our cash position for the future, and we secured our first successful outcome in our efforts to protect and monetize our intellectual property.

Brian Krzanich: Thank you, Kate. Good afternoon and welcome, everyone. I'm excited to speak with you today and reflect on my first full year as Cerence's CEO. It's been a great year for the Cerence team and our customers, and I couldn't be happier with the performance. Over the past year, we've strengthened the financial and operational foundation of the company and significantly increased positive cash flow generation, beating nearly every metric and putting us on solid ground for executing on our future growth plans. We've made significant progress with our XUI platform, including meeting all our technology milestones while driving strong customer interest and adoption. We paid down $87.5 million of our debt using cash on hand while maintaining our cash position for the future, and we secured our first successful outcome in our efforts to protect and monetize our intellectual property.

In addition, Sarah will also be exhibiting at CES in Las Vegas from January 6th to 9th. Now, on to the call, Brian.

Thank you, Kate.

Good afternoon and welcome, everyone. I'm excited to speak with you today and reflect on my first full year as Sharon's CEO.

It's been a great year for the Sence team and our customers, and I couldn't be happier with the performance.

Over the past year, we strengthened the financial and operational foundation of the company.

And significantly increased positive cash flow generation.

Leading nearly every metric and putting us on a solid ground working on with our xui platform, including meeting all our technology, Milestones while driving strong customer interest and adoption.

We paid down $87.5 million of our debt using cash on hand while maintaining our cash position for the future.

Brian Krzanich: As a result, we believe that Cerence has the right foundation for long-term sustainable growth in fiscal 2026 and beyond. All of this has led us to posting strong results for this quarter, again delivering above the high end of our guidance range with revenue of $60.6 million and adjusted EBITDA of $8.3 million. Importantly, we generated strong free cash flow of $9.7 million. For the full fiscal year, revenue was $251.8 million, adjusted EBITDA was $48.1 million, and free cash flow grew almost threefold year over year to $46.8 million. PPU increased to $5.05 for the trailing 12-month period, up 12% from the same period last year. Tony will provide further details on our results later in the call. As you've heard us discuss in recent quarters, we are deeply committed to monetizing our intellectual property and protecting it against infringers.

As a result, we believe that Cerence has the right foundation for long-term sustainable growth in fiscal 2026 and beyond. All of this has led us to posting strong results for this quarter, again delivering above the high end of our guidance range with revenue of $60.6 million and Adjusted EBITDA of $8.3 million. Importantly, we generated strong free cash flow of $9.7 million. For the full fiscal year, revenue was $251.8 million, Adjusted EBITDA was $48.1 million, and free cash flow grew almost threefold year over year to $46.8 million. PPU increased to $5.05 for the trailing 12-month period, up 12% from the same period last year. Tony will provide further details on our results later in the call. As you've heard us discuss in recent quarters, we are deeply committed to monetizing our intellectual property and protecting it against infringers.

And we secured our first successful outcome in our efforts to protect and monetize our intellectual property.

As a result, we believe that sarin has the right foundation for long-term sustainable growth in fiscal, 26 and Beyond

All of this has led us to posting strong results for this quarter.

Again, delivering above the high end of our guidance range with revenue of $60.6 million and adjusted EBITDA of $8.3 million.

And, importantly, we generated strong free cash flow of $9.7 million.

For the full fiscal year, revenue was $2,551.8 million adjusted. A beta was $48.1 million, and free cash flow grew almost threefold year-over-year to $46.8 million.

And PPU increased to $5.5 for the trailing 12-month period, up 12% from the same period last year. We will provide further details on results later in the call.

Brian Krzanich: Last month, we resolved our suit with Samsung, which, among other things, resulted in Samsung agreeing to pay Cerence a one-time lump sum payment of $49.5 million. This payment is pursuant to a confidential cross-license agreement with Samsung, which limits our ability to provide specifics. Nevertheless, we believe that it's an important milestone in our strategy, and a proof point for the broad applicability of our technology across different industries and verticals. I'd also like to share a bit more about our approach to IP monetization and how it fits into our long-term strategy. While we always prefer to enter licensing deals without resorting to litigation, we expect to take all necessary steps, including litigation, to ensure that we receive fair value for our foundational IP. This is why we currently have actions against Apple, TCL, and Sony, among others.

Last month, we resolved our suit with Samsung, which, among other things, resulted in Samsung agreeing to pay Cerence a one-time lump sum payment of $49.5 million. This payment is pursuant to a confidential cross-license agreement with Samsung, which limits our ability to provide specifics. Nevertheless, we believe that it's an important milestone in our strategy, and a proof point for the broad applicability of our technology across different industries and verticals. I'd also like to share a bit more about our approach to IP monetization and how it fits into our long-term strategy. While we always prefer to enter licensing deals without resorting to litigation, we expect to take all necessary steps, including litigation, to ensure that we receive fair value for our foundational IP. This is why we currently have actions against Apple, TCL, and Sony, among others.

As you've heard us discuss in recent quarters, we are deeply committed to monetizing our intellectual property and protecting it against infringers.

Last month, we resolved our suit with Samsung, which among other things, resulted in Samsung agreeing to pay Stearns a one-time, lump-sum payment.

Of 49.5 million.

This payment is pursuant to a confidential cross-licensing agreement with Samsung.

Which limits our ability to provide specifics.

Nevertheless.

We believe that it's an important milestone in our strategy.

And a proof point for the broad applicability of our technology across different industries and verticals.

I’d also like to share a bit more about our approach to IP monetization.

And how it fits into our long-term strategy.

While we always prefer to enter licensing deals without resorting to litigation.

We expect to take all necessary steps, including litigation.

To ensure that we receive fair value for a foundational IP.

And this is why we currently have actions against Apple.

TCL and Sony among others.

Brian Krzanich: We have a multi-year roadmap of potential future actions and are consistently evaluating if new lawsuits are warranted. We believe IP monetization will be a continuing, ongoing revenue stream in the future and will help to support our non-automotive business growth. The payment under the Samsung licensing agreement, as well as the expected costs related to our other active suits, are incorporated into our fiscal year 2026 guidance, which Tony will discuss. It's important to note that the process for these lawsuits is long, so as we move through fiscal 2026, we will keep you apprised of any important updates. Now, taking a moment to look back at Q4, we continued to make progress on our three key deliverables: advancing our AI roadmap, growing our business with new and existing customers, and continuing our transformation and cost management initiatives.

We have a multi-year roadmap of potential future actions and are consistently evaluating if new lawsuits are warranted. We believe IP monetization will be a continuing, ongoing revenue stream in the future and will help to support our non-automotive business growth. The payment under the Samsung licensing agreement, as well as the expected costs related to our other active suits, are incorporated into our fiscal year 2026 guidance, which Tony will discuss. It's important to note that the process for these lawsuits is long, so as we move through fiscal 2026, we will keep you apprised of any important updates. Now, taking a moment to look back at Q4, we continued to make progress on our three key deliverables: advancing our AI roadmap, growing our business with new and existing customers, and continuing our transformation and cost management initiatives.

and we have a multi-year roadmap of potential future actions and our consistent consistently, evaluating if new lawsuits are warranted,

We believe IP monetization will be a continuing, ongoing revenue stream in the future.

It will help to support our non-automotive business growth.

The payment under the Samsung licensing agreement, as well as the expected costs related to our other active suits, are incorporated into our fiscal year 2026 guidance.

Which Tony will discuss.

It's important to note that the process for these lawsuits is long.

So, as we move through the fiscal 2026, ...

You will keep you apprised of any important updates.

Now, taking a moment to look back at Q4.

We continued to make progress on our three key deliverables.

Advancing, our AI roadmap.

Growing our business with the new and existing customers.

And continuing our transformation and cost management initiatives.

Brian Krzanich: First, in terms of advancing our roadmap, we continued our development of Cerence XUI with the addition of several new languages and ongoing advancements of our core tech and audio AI solutions, which are the basis for the XUI experience. We also hosted another successful demo at IAA in Munich in September, where we showcased our flexible, agnostic approach, partnering with Cima.AI, as well as MediaTek, to bring advanced, low-power conversational AI to vehicles. We also furthered the advancement of our agentic AI strategy, partnering closely with Microsoft to roll out a mobile work agent that enables people who choose to work in the car to do so more safely and securely through voice-first access to Microsoft 365 Copilot, Teams, Outlook, and OneNote.

First, in terms of advancing our roadmap, we continued our development of Cerence XUI with the addition of several new languages and ongoing advancements of our core tech and audio AI solutions, which are the basis for the XUI experience. We also hosted another successful demo at IAA in Munich in September, where we showcased our flexible, agnostic approach, partnering with Cima.AI, as well as MediaTek, to bring advanced, low-power conversational AI to vehicles. We also furthered the advancement of our agentic AI strategy, partnering closely with Microsoft to roll out a mobile work agent that enables people who choose to work in the car to do so more safely and securely through voice-first access to Microsoft 365 Copilot, Teams, Outlook, and OneNote.

First in terms of advancing our roadmap, we continue our development of sarin's xui with the additional of several new languages and ongoing advancements of our core Tech and audio, AI Solutions.

Which are the basis for the XUI experience?

We also hosted another successful demo at IAA in Munich in September.

We showcased our flexible, agnostic approach, partnering with Seema AI as well as MediaTek to bring advanced low-power conversational AI to vehicles.

We also further the advancement of our agentic AI strategy.

Brian Krzanich: With XUI's automotive-grade agentic architecture, the mobile work agent can seamlessly and proactively orchestrate between Copilot and other domains like navigation to enable a cohesive and context-aware user experience. Through our partnership with Microsoft, we're turning the car into a trusted device, something that we believe our competitors cannot deliver. Looking forward to 2026, we're gearing up for our next big milestone, CES in Las Vegas, where we'll continue to showcase the latest innovations in Cerence XUI and our core tech. We'll also demonstrate new AI agents focused on vehicle service and dealerships, part of our strategy to expand to other areas of the automotive ecosystem to drive additional revenue opportunities. In terms of customer adoption, we continued development of our two previously mentioned XUI customer programs, JLR, and a brand within the Volkswagen Group. Both programs are on track and are expected to hit the road in 2026.

With XUI's automotive-grade agentic architecture, the mobile work agent can seamlessly and proactively orchestrate between Copilot and other domains like navigation to enable a cohesive and context-aware user experience. Through our partnership with Microsoft, we're turning the car into a trusted device, something that we believe our competitors cannot deliver. Looking forward to 2026, we're gearing up for our next big milestone, CES in Las Vegas, where we'll continue to showcase the latest innovations in Cerence XUI and our core tech. We'll also demonstrate new AI agents focused on vehicle service and dealerships, part of our strategy to expand to other areas of the automotive ecosystem to drive additional revenue opportunities. In terms of customer adoption, we continued development of our two previously mentioned XUI customer programs, JLR, and a brand within the Volkswagen Group. Both programs are on track and are expected to hit the road in 2026.

Partnering closely with Microsoft to roll out a mobile work agent that enables people who choose to work in the car to do so more safely and securely through voice-first access to Microsoft 365, Co-Pilot, Teams, Outlook, and OneNote.

With XUI automotive grade, agentic architecture.

The mobile work agent can seamlessly and proactively orchestrate between co-pilot and other domains like navigation.

To enable a cohesive.

Context of where user experience.

Through our partnership with Microsoft, we're turning the car into a trusted device—something that we believe our competitors cannot deliver.

Looking forward to 2026.

We're gearing up for our next big milestone.

CES in Las Vegas.

We'll continue to showcase the latest innovations in Sarin's XUI and our Cortech.

We'll also demonstrate new AI agents focused on vehicle service, and dealerships are part of our strategy to expand to other areas of the automotive ecosystem.

To drive additional Revenue opportunities.

In terms of customer adoption.

Junior and a brand within the Volkswagen Group.

Brian Krzanich: We also continue to build the XUI pipeline with additional POCs with large global automakers, including some North American OEMs, where we are working to regain market share. Thus far, we're seeing positive momentum in converting POC programs to deals. Our second key deliverable is continuing to grow our business with new and existing customers. In Q4, we signed several important deals, including with Toyota to bring our GenAI-powered solutions into their vehicles, with Ford to expand the presence of our audio AI across their lineup, and with an autonomous trucking company for our emergency vehicle detection solution. Other key wins in the quarter included BMW, Honda, and Great Wall Motor. We also saw nine programs start production in Q4, including BYD, Subaru, and Geely. Outside of automotive, we continue to operationalize our new strategy and distributor model, with a focus on three key areas.

We also continue to build the XUI pipeline with additional POCs with large global automakers, including some North American OEMs, where we are working to regain market share. Thus far, we're seeing positive momentum in converting POC programs to deals. Our second key deliverable is continuing to grow our business with new and existing customers. In Q4, we signed several important deals, including with Toyota to bring our GenAI-powered solutions into their vehicles, with Ford to expand the presence of our audio AI across their lineup, and with an autonomous trucking company for our emergency vehicle detection solution. Other key wins in the quarter included BMW, Honda, and Great Wall Motor. We also saw nine programs start production in Q4, including BYD, Subaru, and Geely. Outside of automotive, we continue to operationalize our new strategy and distributor model, with a focus on three key areas.

Both programs are on track and are expected to hit the road in 2026.

We also continue to build the XUI pipeline with additional PCs with large global automakers, including some North American OEMs where we are working to regain market share.

Thus far, we're seeing positive momentum and converting PC programs to deals.

Our second key deliverable is continuing to grow our business with new and existing customers.

In Q4.

We signed several important deals.

Including with Toyota to bring our Gen AI-powered solutions into their vehicles with Ford.

To expand the presence of our audio AI across their lineup.

And with an autonomous trucking company.

For our emergency vehicle detection solution,

Other key wins in the quarter included BMW, Honda, and Great Wall Motor.

We also saw nine programs start production in Q4.

Including byd.

Subaru. Anjali

Outside of automotive, we continue to operationalize our new strategy and distributor model.

Brian Krzanich: First, expand our work with partners like Microsoft and NVIDIA. Second, continue to double down on our work with distributors to grow in areas like voice-powered kiosks and logistics. Lastly, as mentioned, continue our IP monetization efforts. As a reminder, we believe the impact of our work to expand beyond automotive will be seen in our revenue and profitability in late fiscal year 2026 and beyond, and this is reflected in the fiscal 2026 guidance. Our third key deliverable is continuing our transformation and cost management initiatives. As you can see from our continued strong cash performance, we have driven real benefits from our work and are delivering it to the bottom line for our shareholders. Continuing our attention to cost, in Q4, we initiated a restructuring plan with respect to certain foreign operations intended to further reduce operating expenses and position Cerence for profitable, sustainable future growth.

First, expand our work with partners like Microsoft and NVIDIA. Second, continue to double down on our work with distributors to grow in areas like voice-powered kiosks and logistics. Lastly, as mentioned, continue our IP monetization efforts. As a reminder, we believe the impact of our work to expand beyond automotive will be seen in our revenue and profitability in late fiscal year 2026 and beyond, and this is reflected in the fiscal 2026 guidance. Our third key deliverable is continuing our transformation and cost management initiatives. As you can see from our continued strong cash performance, we have driven real benefits from our work and are delivering it to the bottom line for our shareholders. Continuing our attention to cost, in Q4, we initiated a restructuring plan with respect to certain foreign operations intended to further reduce operating expenses and position Cerence for profitable, sustainable future growth.

With a focus on 3 key areas.

First, expand our work with partners, like Microsoft and NVIDIA.

Second, we continue to double down on our work with distributors to grow in areas like voice-powered kiosks and logistics.

And lastly, as mentioned

Continue our IP monetization efforts.

As a reminder, we believe the impact of our work to expand Beyond Automotive.

will be seen in our revenue and profitability.

In late fiscal year 2026 and beyond.

And this is reflected in the fiscal 2026 guidance.

Our third key deliverable is continuing our transformation and cost management initiatives.

As you can see from our continued strong cash performance.

We have driven real benefits from our work, and we are delivering it to the bottom line for our shareholders.

Continuing our attention to cost in Q4.

Brian Krzanich: We expect to incur the majority of the restructuring expenses related to this plan and to complete its implementation in Q1. For the remainder of fiscal 2026, we will remain diligent and maintain our attention to cost management. In conclusion, we are incredibly proud of what our team has accomplished this quarter and in fiscal year 2025 as a whole. As we look to fiscal year 2026 and beyond, there are several key vectors for our ongoing growth. First, increasing adoption of Cerence XUI and driving greater penetration of our stack and existing programs, delivering increased PPU. Second, increasing the number of connected vehicles shipped, resulting in expansion of our connected services business. Third, growth in our non-automotive business towards the end of the year. This includes our IP monetization efforts, which we believe will continue to yield benefits and provide an ongoing revenue stream.

We expect to incur the majority of the restructuring expenses related to this plan and to complete its implementation in Q1. For the remainder of fiscal 2026, we will remain diligent and maintain our attention to cost management. In conclusion, we are incredibly proud of what our team has accomplished this quarter and in fiscal year 2025 as a whole. As we look to fiscal year 2026 and beyond, there are several key vectors for our ongoing growth. First, increasing adoption of Cerence XUI and driving greater penetration of our stack and existing programs, delivering increased PPU. Second, increasing the number of connected vehicles shipped, resulting in expansion of our connected services business. Third, growth in our non-automotive business towards the end of the year. This includes our IP monetization efforts, which we believe will continue to yield benefits and provide an ongoing revenue stream.

We initiated a restructuring plan with respect to certain foreign operations intended to further reduce operating cost expenses and position stands for profitable, sustainable future growth.

We expect to incur the majority of the restructuring expenses related to this plan and to complete its implementation in Q1.

For the remainder of this fiscal 2026.

We will remain diligent and maintain our attention to cost management.

In conclusion, we are incredibly proud of what our team has accomplished this quarter and in fiscal year 2025 as a whole.

As we look to fiscal year 2026 and beyond,

There are several key vectors for our ongoing growth.

First, increasing adoption of Sarin's XUI and Driver is driving greater penetration of our stack, and existing programs are delivering increased PPU.

Second.

Increasing the number of connected vehicles shipped, resulting in an expansion of our connected services business.

And third.

Growth in our non-automotive business towards the end of the year.

Brian Krzanich: As a reminder, with most cases taking multiple years to reach resolution, this is a long-term strategy. We look forward to building on the strong foundation set in fiscal 2025 for long-term, sustainable growth in fiscal 2026 and beyond. While Tony will walk you through the details, we expect fiscal year 2026 revenue to be in the range of $300 to 320 million, marking a 23% year-over-year increase at the midpoint. This reflects the patent license payment from our Samsung cross-license, as well as anticipated 8% growth in our core technology business, which excludes professional services. We expect professional services to shrink as our newer technology requires less time and engineering to deliver, and OEMs and tier ones continue to grow their internal capabilities. We expect adjusted EBITDA of $50 to 70 million, and free cash flow of $56 to 66 million.

This includes our IP monetization efforts, which we believe will continue to yield benefits and provide an ongoing revenue stream.

As a reminder, with most cases taking multiple years to reach resolution, this is a long-term strategy. We look forward to building on the strong foundation set in fiscal 2025 for long-term, sustainable growth in fiscal 2026 and beyond. While Tony will walk you through the details, we expect fiscal year 2026 revenue to be in the range of $300 - 320 million, marking a 23% year-over-year increase at the midpoint. This reflects the patent license payment from our Samsung cross-license, as well as anticipated 8% growth in our core technology business, which excludes professional services. We expect professional services to shrink as our newer technology requires less time and engineering to deliver, and OEMs and tier ones continue to grow their internal capabilities. We expect Adjusted EBITDA of $50 - 70 million, and free cash flow of $56 - 66 million.

As a reminder, with most cases taking multiple years to reach resolution.

This is a long-term strategy.

We look forward to building on the strong foundation set in fiscal 2025.

For long-term, sustainable growth, and fiscal 2026 and beyond.

Now, while Tony will walk you through the details.

we expect fiscal year 2026 Revenue to be in the range of 300 to 320 million marking a 23% year-over-year increase at the midpoint

This reflects the patent license payment from our Samsung cross-license, as well as anticipated 8% growth in our core technology business.

Which excludes Professional Services.

And we expect Professional Services to shrink.

As our newer technology requires less time and engineering to deliver.

Tier 1 will continue to grow their internal capabilities.

And we expect adjusted EBITDA of $50 million to $70 million.

And free cash flow.

Of 56 to 66 million.

Brian Krzanich: We're motivated by all we've achieved in the last year and believe we have an exciting path ahead of us as we transition into a new phase of growth for Cerence AI. I'll now turn it over to Tony to take you through the details. Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your time and continued interest in our company. Today, I will walk you through our Q4 and full-year results, highlight the key drivers behind our performance, and provide guidance for the upcoming quarter and full fiscal year 2026. We ended fiscal 2025 on a strong note, delivering results that exceeded expectations and reinforcing the momentum we've been building all year. As Brian mentioned, Q4 total revenue was $60.6 million, surpassing our projected range of $53 to $58 million.

We're motivated by all we've achieved in the last year and believe we have an exciting path ahead of us as we transition into a new phase of growth for Cerence AI. I'll now turn it over to Tony to take you through the details.

We're motivated by all we've achieved in the last year.

And I believe we have an exciting path ahead of us as we transition into a new phase of growth for Cerence's AI.

Tony Rodriguez: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your time and continued interest in our company. Today, I will walk you through our Q4 and full-year results, highlight the key drivers behind our performance, and provide guidance for the upcoming quarter and full fiscal year 2026. We ended fiscal 2025 on a strong note, delivering results that exceeded expectations and reinforcing the momentum we've been building all year. As Brian mentioned, Q4 total revenue was $60.6 million, surpassing our projected range of $53 - $58 million.

I'll now turn it over to Tony to take you through the details.

Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your time and continued interest in our company.

Today, I will walk you through our Q4 and full-year results.

Highlight the key drivers behind our performance and provide guidance for the upcoming quarter in full fiscal year 2026.

We ended fiscal 25. On a strong note, delivering results that exceeded expectations and reinforcing the momentum. We've been building all year

As Brian mentioned, Q4 total revenue was $60.6 billion.

Brian Krzanich: For the full fiscal year, revenue reached $251.8 million, exceeding our earlier expectations. This performance reflects broad-based strength across our business, discipline execution, and continued progress in driving profitable growth during the year. Variable license revenue for the quarter was $31.6 million, up 25% year-over-year, fueled by strong customer utilization, solid in-period shipments, and a tailwind from favorable euro exchange rates. We had no material fixed license deals in the quarter or Q4 of last year. Importantly, we believe this continued shift toward recurring, scalable, usage-based models strengthens our revenue quality and visibility. For the full year, total license revenue grew 13%, a healthy expansion considering that we had lower fixed license contracts in the current year by about $8 million. Q4 connected service revenue came in at $14.2 million, up 17% year-over-year, reflecting a continued expansion of our connected install base.

For the full fiscal year, revenue reached $251.8 million, exceeding our earlier expectations. This performance reflects broad-based strength across our business, discipline execution, and continued progress in driving profitable growth during the year. Variable license revenue for the quarter was $31.6 million, up 25% year-over-year, fueled by strong customer utilization, solid in-period shipments, and a tailwind from favorable euro exchange rates. We had no material fixed license deals in the quarter or Q4 of last year. Importantly, we believe this continued shift toward recurring, scalable, usage-based models strengthens our revenue quality and visibility. For the full year, total license revenue grew 13%, a healthy expansion considering that we had lower fixed license contracts in the current year by about $8 million. Q4 connected service revenue came in at $14.2 million, up 17% year-over-year, reflecting a continued expansion of our connected install base.

surpassing our projected range of 53 to 58 million.

For the full fiscal year, revenue reached $251.8 million, exceeding our earlier expectations.

This performance reflects broad-based strength across our business, discipline, execution, and continued progress in driving profitable growth during the year.

Variable license revenue for the quarter was $31.6 billion, a 25% year-over-year increase.

By strong customer utilization. Solid in period shipments.

And a tailwind from favorable euro exchange rates.

We had no material fixed license deals in the quarter or Q4 of last year.

Importantly, we believe this continued shift toward recurring, scalable, usage-based models strengthens our revenue quality and visibility.

For the full year, total licensed revenue grew 13%.

A healthy expansion, considering that we had lower fixed licensed contracts in the current year by about $8 million.

Q4 connected service revenue came in at $14.2 million.

Million, up 17% year-over-year, reflecting a continued expansion of our connected install base.

Brian Krzanich: For the year, connected services revenue was $53.4 million, which compares to $133.4 million in fiscal 2024, though that prior year figure was an anomaly as it included a one-time $86.6 million non-cash benefit from a decommissioned legacy contract. Excluding that, connected services actually grew 14% year-over-year, which we believe shows a steady demand and growing recurring scale. Professional services revenue for Q4 was $14.2 million, down 18% year-over-year as we continue to standardize our product offerings, streamline custom projects, and gain efficiency in implementations. Also, under applicable accounting rules, certain professional service revenue is deferred when it is included as a component of licensing pricing. For the full year, professional services declined 21% year-over-year, but was directionally consistent with our focus on higher gross margins.

For the year, connected services revenue was $53.4 million, which compares to $133.4 million in fiscal 2024, though that prior year figure was an anomaly as it included a one-time $86.6 million non-cash benefit from a decommissioned legacy contract. Excluding that, connected services actually grew 14% year-over-year, which we believe shows a steady demand and growing recurring scale. Professional services revenue for Q4 was $14.2 million, down 18% year-over-year as we continue to standardize our product offerings, streamline custom projects, and gain efficiency in implementations. Also, under applicable accounting rules, certain professional service revenue is deferred when it is included as a component of licensing pricing. For the full year, professional services declined 21% year-over-year, but was directionally consistent with our focus on higher gross margins.

For the year, Connected Services revenue was $53.4 million, which compares to $133.4 million in fiscal 2024.

Though that prior year figure was an anomaly, as it included a one-time $86.6 million non-cash benefit from a decommissioned legacy contract.

Excluding that, connected services actually grew 14% year-over-year.

Which we believe shows steady demand and growing recurring revenue with scale.

Professional services revenue for Q4 was $14.2 million, down 18% year-over-year, as we continue to standardize our product offerings, streamline custom projects, and gain efficiency in implementations.

Also under applicable accounting rules at certain Professional Service revenue is deferred when it is included as a component of Licensing pricing.

For the full year, Professional Services declined 21% year-over-year, but was directionally consistent with our focus on higher gross margins.

Brian Krzanich: Gross profit for the quarter was $44 million, yielding a 73% gross margin, up from 64% in Q4 of last year, which we believe provides a clear demonstration of the improved mix towards technology revenue. Operating discipline remains a major focus. Q4 non-GAAP operating expenses were $38.3 million, down 3% year-over-year, reflecting strong cost control while continuing to invest in innovation and growth. For the full year, non-GAAP operating expenses were $146.1 million, down $28.5 million, or 16% from last year, highlighting the expected sustained benefit of our cost realignment initiatives. These efficiencies translated into robust bottom-line performance. Q4 adjusted EBITDA was $8.3 million, well above our $2 to $6 million guidance range. For the full year, adjusted EBITDA reached $48.1 million, doubling our initial expectations when the year began. That is a powerful statement of execution, discipline, and scalability.

Gross profit for the quarter was $44 million, yielding a 73% gross margin, up from 64% in Q4 of last year, which we believe provides a clear demonstration of the improved mix towards technology revenue. Operating discipline remains a major focus. Q4 non-GAAP operating expenses were $38.3 million, down 3% year-over-year, reflecting strong cost control while continuing to invest in innovation and growth. For the full year, non-GAAP operating expenses were $146.1 million, down $28.5 million, or 16% from last year, highlighting the expected sustained benefit of our cost realignment initiatives. These efficiencies translated into robust bottom-line performance. Q4 Adjusted EBITDA was $8.3 million, well above our $2 - $6 million guidance range. For the full year, Adjusted EBITDA reached $48.1 million, doubling our initial expectations when the year began. That is a powerful statement of execution, discipline, and scalability.

Gross profit for the quarter was $44 million, yielding a 73% gross margin, up from 64% in Q4 of last year.

Which we believe provides a clear demonstration of the improved mix towards technology revenue.

Operating discipline remains a major focus.

Q4 non-GAAP operating expenses were $38.3 million, down 3% year-over-year, reflecting strong cost control while continuing to invest in innovation and growth.

For the full year, non-GAAP operating expenses were $146.1 million, down $28.5 million, or 16%, from last year.

Highlighting the expected sustained benefit of our cost realignment initiatives.

These efficiencies translated into robust bottom-line performance.

Q4 adjusted EVA was $8.3 million, well above our $2 million to $6 million guidance range.

Expectations. When the year began.

That is a powerful statement of execution, discipline, and scalability.

Brian Krzanich: Our GAAP net loss for Q4 narrowed to $13.4 million from $20.4 million for the same quarter last year. For the full fiscal year, GAAP net loss was $18.7 million. We also made significant progress on our balance sheet. During fiscal 2025, we reduced total debt by $87.5 million using cash on hand, and we ended the year with $87 million in total cash and marketable securities. We generated $9.7 million in positive free cash flow in Q4, our sixth consecutive quarter of positive free cash flow, and $46.8 million for the full fiscal year. We are confident in our liquidity position, and believe that we will be able to continue funding strategic initiatives from operating cash generation. From a metric standpoint, we shipped approximately 11.7 million units for the quarter, an increase from 10.6 million in the prior year fourth quarter.

Our GAAP net loss for Q4 narrowed to $13.4 million from $20.4 million for the same quarter last year. For the full fiscal year, GAAP net loss was $18.7 million. We also made significant progress on our balance sheet. During fiscal 2025, we reduced total debt by $87.5 million using cash on hand, and we ended the year with $87 million in total cash and marketable securities. We generated $9.7 million in positive free cash flow in Q4, our sixth consecutive quarter of positive free cash flow, and $46.8 million for the full fiscal year. We are confident in our liquidity position, and believe that we will be able to continue funding strategic initiatives from operating cash generation. From a metric standpoint, we shipped approximately 11.7 million units for the quarter, an increase from 10.6 million in the prior year fourth quarter.

Our gap and loss for Q4 narrowed to $13.4 million from $20.4 million for the same quarter last year.

For the full fiscal year, Gap's net loss was $18.7 million.

We also made significant progress on a balance sheet.

During fiscal 2025, we reduced total debt by $87.5 billion using cash on hand, and we ended the year with $87 million in total cash and marketable securities.

We generated $9.7 million in positive free cash flow in Q4, our sixth consecutive quarter of positive free cash flow.

And $46.8 billion for the full fiscal year.

We are confident in our liquidity position and believe that we will be able to continue funding strategic initiatives from operating cash generation.

Brian Krzanich: We also grew the number of our connected cars shipped by 14% on a trailing 12-month basis, underscoring the continued momentum in vehicle connectivity. On a trailing 12-month basis, 52% of worldwide auto production included Cerence technology, remaining in line with our historical penetration. Adjusted total billings were $236 million, an increase of 8.4% year-over-year. Our five-year backlog metric is currently approximately $1 billion, up slightly from where it was two quarters ago. As a reminder, our five-year backlog may not be indicative of future actual revenue. As previously discussed, when we look at total licenses shipped, pro forma royalties is an operating measure we use representing the total value of variable licenses shipped in a quarter, including shipments from prior fixed licenses where revenue was previously recognized upon contract signing. We refer to shipments where revenue was recognized in a prior period as fixed license consumption.

We also grew the number of our connected cars shipped by 14% on a trailing 12-month basis, underscoring the continued momentum in vehicle connectivity. On a trailing 12-month basis, 52% of worldwide auto production included Cerence technology, remaining in line with our historical penetration. Adjusted total billings were $236 million, an increase of 8.4% year-over-year. Our five-year backlog metric is currently approximately $1 billion, up slightly from where it was two quarters ago. As a reminder, our five-year backlog may not be indicative of future actual revenue. As previously discussed, when we look at total licenses shipped, pro forma royalties is an operating measure we use representing the total value of variable licenses shipped in a quarter, including shipments from prior fixed licenses where revenue was previously recognized upon contract signing. We refer to shipments where revenue was recognized in a prior period as fixed license consumption.

From a metric standpoint, we shipped approximately 11.7 million units for the quarter, an increase from 10.6 million in the prior year, fourth quarter.

We also grew the number of our connected cars shipped by 14% on a trailing 12-month basis.

Underscoring the continued momentum in vehicle connectivity.

Also, on a trailing 12-month basis, 52% of worldwide auto production included Sarin technology.

Remaining in line with our historical penetration.

Adjusted total billings were $236 million, an increase of 8.4% year-over-year.

Is currently approximately $1 billion, slightly from where it was 2 quarters ago.

As a reminder, over the past 5 years, backlog may not be indicative of future actual revenue.

As previously discussed.

When we look at total life and shipped, ProForm royalties is an operating measure. We use it to represent the total value of variable licenses shipped in a quarter, including shipments from prior fixed licenses, or revenue was previously recognized upon contract signing.

We refer to shipments where revenue was recognized in Pryor in the prior period as fixed license consumption.

Brian Krzanich: Our pro forma royalties were $39.6 million, which were down slightly as compared to $41.9 million in Q4 of last year. Consumption of our previous fixed license contract totaled $8.5 million this quarter, better than the same quarter last year by about 49%, and in line with expectations given the lower level of fixed contracts than in historical periods. This drops more of the pro forma royalties into revenue in the current period as compared to a year ago. Our PPU metric increased to $5.05 for the trailing 12-month period, up 12% from $4.50 for the same period last year, reflecting continued implementation of our improving pricing strategy, and an increase in the adoption of connected solutions. Looking ahead, we believe 2026 is shaping up to be an exciting year of growth and profitability. Again, as Brian mentioned, we expect total revenue in the range of $300 to $320 million.

Our pro forma royalties were $39.6 million, which were down slightly as compared to $41.9 million in Q4 of last year. Consumption of our previous fixed license contract totaled $8.5 million this quarter, better than the same quarter last year by about 49%, and in line with expectations given the lower level of fixed contracts than in historical periods. This drops more of the pro forma royalties into revenue in the current period as compared to a year ago. Our PPU metric increased to $5.05 for the trailing 12-month period, up 12% from $4.50 for the same period last year, reflecting continued implementation of our improving pricing strategy, and an increase in the adoption of connected solutions. Looking ahead, we believe 2026 is shaping up to be an exciting year of growth and profitability. Again, as Brian mentioned, we expect total revenue in the range of $300 - $320 million.

Our pro forma royalties were $39.6 billion, which were down slightly compared to $41.9 million in Q4 of last year.

Consumption of our previous fixed license contract totaled $8.5 million this quarter.

better than the same quarter last year by about 49% and in line with expectations, given the lower level of fixed contracts than in historical periods.

This drops more of the pro forma royalties into revenue in the current period as compared to a year ago.

Our PPU metric, increased to 5 dollars in 5 cents for the trailing 12 month, period.

Of 12% from $4.50 for the same period last year.

Reflecting the continued implementation of our improving pricing strategy and an increase in the adoption of connected solutions.

Looking ahead, we believe 2026 is shaping up to be an exciting year of growth and profitability.

Brian Krzanich: At the midpoint, this represents a 23% year-over-year increase. This includes a $49.5 million patent license payment, which we expect to account for as revenue finalized in Q1, a year-over-year comparable $22 million in expected new fixed license contracts, while absorbing modest headwinds from the anticipated continuing reduction of professional services revenue. At the midpoint, we anticipate high single-digit growth in our technology run rates across both variable license and connected services, underscoring durable demand and expanding recurring contribution. Operating expenses are expected to remain largely stable, with an increase primarily related to legal costs tied to IP licensing. For the full year 2026, we expect adjusted EBITDA of $50 to 70 million, free cash flow of $56 to 66 million, and gross margins between 79% and 80%.

At the midpoint, this represents a 23% year-over-year increase. This includes a $49.5 million patent license payment, which we expect to account for as revenue finalized in Q1, a year-over-year comparable $22 million in expected new fixed license contracts, while absorbing modest headwinds from the anticipated continuing reduction of professional services revenue. At the midpoint, we anticipate high single-digit growth in our technology run rates across both variable license and connected services, underscoring durable demand and expanding recurring contribution. Operating expenses are expected to remain largely stable, with an increase primarily related to legal costs tied to IP licensing. For the full year 2026, we expect Adjusted EBITDA of $50 - 70 million, free cash flow of $56 - 66 million, and gross margins between 79% and 80%.

again, as Brian mentioned, we expect total revenue in the range of 300 to 320 million,

At the midpoint, this represents a 23% year-over-year increase.

This includes a 49.5 million.

Patent license payment, which we expect to account for his revenue finalized in Q1.

A year-over-year comparable of $22 million in expected new fixed license contracts.

While absorbing modest headwinds from the anticipated continuing reduction of Professional Services revenue.

At the midpoint, we anticipate high single-digit growth in our technology run rates across both variable license and connected services.

Underscoring durable demand and expanding recurring contribution.

Operating expenses are expected to remain largely stable, with increases primarily related to legal costs tied to IP licensing.

For the full year 2026, we expect to adjust the dividend of $50 million to $70 million.

Free cash flow of $56 million to $66 million.

And gross margins between $79,000 and $80,000.

Brian Krzanich: For Q1 2026, we expect revenue between $110 and $120 million, again including the $49.5 million patent license payment, which we expect to account for as revenue, and roughly $8 million in expected fixed license contracts. Adjusted EBITDA is expected to be between $30 and $40 million. To summarize, fiscal year 2025 was a year of strong execution, improving profitability, and sustained momentum. We exceeded our targets, strengthened our balance sheet, and positioned the company for a year of accelerating growth in fiscal 2026. Our 2026 outlook reflects not just higher revenue and margin expansion, but also the realization of the value of our strong foundational IP portfolio, and continued growth from our recurring technology lines. We're confident in the resilience of our business, built to drive ongoing innovation, customer success, and long-term shareholder value. Thank you again for your confidence and continued support.

For Q1 2026, we expect revenue between $110 and $120 million, again including the $49.5 million patent license payment, which we expect to account for as revenue, and roughly $8 million in expected fixed license contracts. Adjusted EBITDA is expected to be between $30 and $40 million. To summarize, fiscal year 2025 was a year of strong execution, improving profitability, and sustained momentum. We exceeded our targets, strengthened our balance sheet, and positioned the company for a year of accelerating growth in fiscal 2026. Our 2026 outlook reflects not just higher revenue and margin expansion, but also the realization of the value of our strong foundational IP portfolio, and continued growth from our recurring technology lines. We're confident in the resilience of our business, built to drive ongoing innovation, customer success, and long-term shareholder value. Thank you again for your confidence and continued support.

110 and 120 million.

Again, including the $49.5 million patent license payment, which we expect to account for as revenue.

And roughly $8 million in expected fixed license contracts.

Adjusted debitage is expected to be between $30 million and $40 million.

To summarize.

Fiscal Year 2025 was a year of strong execution.

Improving profitability and sustained momentum.

We exceeded our targets, strengthened our balance sheet, and positioned the company for a year of accelerating growth in fiscal 2026.

Our 2026 outlook reflects not just higher revenue and margin expansion, but also the realization of the value of our strong foundational IP portfolio and continued growth from our recurring technology lines.

We're confident in the resilience of our business, built to drive ongoing innovation, customer success, and long-term shareholder value.

Brian Krzanich: With that, I will now turn it back to Brian to close our remarks. Thanks, Tony. In closing, we are pleased with our results this quarter, and incredibly proud of what our team accomplished in fiscal year 2025. For fiscal year 2026, we're focused on three key priorities: driving top-line growth, advancing XUI, and maintaining cost diligence. We believe we have an exciting path ahead, and we look forward to sharing more on our Q1 progress and next quarter's call. We'll now open it up for questions. Thank you. As a reminder, if you would like to ask a question, please press star 11 on your telephone. If you would like to remove yourself from the queue, press star 11 again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster.

With that, I will now turn it back to Brian to close our remarks.

Thank you again for your confidence and continued support.

Brian Krzanich: Thanks, Tony. In closing, we are pleased with our results this quarter, and incredibly proud of what our team accomplished in fiscal year 2025. For fiscal year 2026, we're focused on three key priorities: driving top-line growth, advancing XUI, and maintaining cost diligence. We believe we have an exciting path ahead, and we look forward to sharing more on our Q1 progress and next quarter's call. We'll now open it up for questions.

With that, I will now turn it back to Brian to close our remarks.

Thanks, Tony. In closing, we are pleased with our results this quarter and incredibly proud of what our team accomplished in fiscal year 2025.

Our fiscal year 2026, we are focused on three key priorities.

Driving Topline growth. Advancing xui.

And maintaining cost diligence.

We believe we have an exciting path ahead and we look forward to sharing more on our q1 progress and next quarter's call.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one one on your telephone. If you would like to remove yourself from the queue, press star one one again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster.

I will now open it up for questions.

Thank you. As a reminder, if you would like to ask a question, please press *1 1 1 on your telephone. If you would like to remove yourself from the queue, press *1 again.

We also ask that you please wait for your name and company to be announced before proceeding with your questions.

Brian Krzanich: The first question that we have today is coming from the line of Jeff Van Rhee of Craig-Hallum Capital Group. Your line is open. Great, thanks for taking the questions, guys. A couple—maybe you start with the IP side. Congrats on the win there. Just to be clear, was that flowing through at a pure profit? I’d probably get back into it, but I want to avoid any possible mistake. What is the assumption for 2026 in terms of legal expense? Hey, Tony. Hey, Tony. Thanks for the question. Yeah, a couple of things on that IP side. Yes, we expect that to flow through revenue, so that at a gross amount of $49.5 million.

The first question that we have today is coming from the line of Jeff Van Rhee of Craig-Hallum Capital Group. Your line is open.

1 moment while we compile the Q&A roster.

Jeff Van Rhee: Great, thanks for taking the questions, guys. A couple—maybe you start with the IP side. Congrats on the win there. Just to be clear, was that flowing through at a pure profit? I’d probably get back into it, but I want to avoid any possible mistake. What is the assumption for 2026 in terms of legal expense?

The first question that we have today is coming from the line of Jeff Van Heath of Craig-Hill Capital Group. Your line is open.

Tony Rodriguez: Hey, Tony.

Great. Thanks for taking the questions, guys. Um, a couple. Maybe you can start with the IP side. Congrats on the win there. Uh, just to be clear, was that flowing through at a pure profit? And then, I'm probably looking back into it, but I want to avoid any possible mistakes. What is the assumption for 2026 in terms of legal expense?

Jeff Van Rhee: Hey, Tony.

Tony Rodriguez: Thanks for the question. Yeah, a couple of things on that IP side. Yes, we expect that to flow through revenue, so that at a gross amount of $49.5 million.

Brian Krzanich: This first one that really we closed in our ongoing process to monetize our IP outside of automotive, we did this on a contingent basis with the attorneys, so those costs will be recorded in Q1 as well. I'll give you some numbers in there. It was actually, I think, in our 8K as well. It was an international customer, so there was also some withholding tax within Korea. At the end of the day, that payment will flow through down to the bottom line, again, anticipating that that would be in revenue in Q1. The net amount would be minus roughly $24 million of legal cost and a bit of withholding tax as well. Okay. Yep. That's helpful. That was the second question. Yeah. I—was the ongoing legal. Yep. Yeah. Yeah.

This first one that really we closed in our ongoing process to monetize our IP outside of automotive, we did this on a contingent basis with the attorneys, so those costs will be recorded in Q1 as well. I'll give you some numbers in there. It was actually, I think, in our 8K as well. It was an international customer, so there was also some withholding tax within Korea. At the end of the day, that payment will flow through down to the bottom line, again, anticipating that that would be in revenue in Q1. The net amount would be minus roughly $24 million of legal cost and a bit of withholding tax as well.

Hi. Hey, uh, it's Tony. Um, hey, Tony. Thanks for the question. Uh, yeah, a couple things on on that IP site. So, yes, um, you know, we expect that to float through Revenue. So that at a growth, the gross amount of 49.5 million. Uh, this this first 1 that really, we closed in our ongoing process to monetize, you know, our it outside of Automotive. Um, we we did this on a contingent basis with the attorneys. So those those costs will be recorded in in q1 as well. Uh, and I'll give you some some numbers in. There was actually I think in our AK as well. But, um,

So, and, you know, it it was the International customer. So there was also some withholding, uh, tax within Korea. So, um, so at the end of the day, that that payment will flow through down to the bottom line. Uh, again anticipating that that would be in Revenue in q1. Um, and the net amount would be minus um,

Jeff Van Rhee: Okay. Yep. That's helpful. That was the second question.

Uh, roughly, uh, 24 called 24 million of, um, of legal cost, and a, and a bit of withholding tax as well.

Yeah. I—was the ongoing legal.

Okay, yep.

Tony Rodriguez: Yep. Yeah. Yeah.

And I was the ongoing legal. Yep.

Brian Krzanich: The way we're looking at this now is that we have an option of how we pursue these, right? We believe that we will utilize our external legal costs to do it on more of an hourly basis to get a higher return on these type of events. Accordingly, we're looking at the mid-range of guidance, about $78 million of additional legal costs this year. That's in our guidance, yes. Yeah. Very helpful. You talked about the ramp in interest in XUI and some ramping in the proof of concepts, the POCs. Can you just put a little finer point on that? Any quantification, any scope you can put around the degree of increase in interest for that? We have about—this is Brian, Jeff.

The way we're looking at this now is that we have an option of how we pursue these, right? We believe that we will utilize our external legal costs to do it on more of an hourly basis to get a higher return on these type of events. Accordingly, we're looking at the mid-range of guidance, about $78 million of additional legal costs this year. That's in our guidance, yes.

Yeah, yeah yeah. And so the way we're looking at this now is that you know, we we have an option of of how we pursue these, right? And and uh we believe that that we will um will utilize our external legal costs to do it. 1 more of an hourly basis to get a higher return, kind of on these on these type of events and accordingly. We're looking at the kind of mid-range of guidance about, you know, some 8 million of additional legal cost this year.

Jeff Van Rhee: Yeah. Very helpful. You talked about the ramp in interest in XUI and some ramping in the proof of concepts, the POCs. Can you just put a little finer point on that? Any quantification, any scope you can put around the degree of increase in interest for that?

That nsnr guidance. Yes.

Brian Krzanich: We have about—this is Brian, Jeff.

Yeah, um, very helpful and then, um, you you talked about the ramp in interest, uh, in xui and, and some ramping in the proof of Concepts, the PC's. Can you just put a little finer point on that. Any quantification, um, any scope you can put around the, the sort of the, the, the the degree of increase in interest for that.

Brian Krzanich: We have about half a dozen POCs going on with different OEMs in various levels of the XUI platform. It's kind of a continuum XUI that has a variety of options and capabilities. That's kind of the number of companies that we're working with or partners that are looking at XUI right now. You saw we also announced several more Chat Pro and Cerence Assistance add-ons this quarter and implementations. Great. Just two last, if I could sneak them in. One on the connected, nice sequential pickup there. If I recall, there are several ways you can take that revenue. I could be mistaken there, but is there anything in there that is pull forward, true up, or what I would call sort of one of the unusual ways of taking connected, or is that a clean number?

We have about half a dozen POCs going on with different OEMs in various levels of the XUI platform. It's kind of a continuum XUI that has a variety of options and capabilities. That's kind of the number of companies that we're working with or partners that are looking at XUI right now. You saw we also announced several more Chat Pro and Cerence Assistance add-ons this quarter and implementations.

So, we have about, this is Brian. Just, uh, we have about half a dozen PCSs going on with different OEMs in.

Race levels of the XUI platform, whether it's kind of a Continuum XUI that.

Has a variety of options and capabilities. Um, and so, um, that's kind of the number of companies that we're working with, or partners that, uh, are looking at xui right now. And then you saw, we also announced

Jeff Van Rhee: Great. Just two last, if I could sneak them in. One on the connected, nice sequential pickup there. If I recall, there are several ways you can take that revenue. I could be mistaken there, but is there anything in there that is pull forward, true up, or what I would call sort of one of the unusual ways of taking connected, or is that a clean number?

Um, um, several more chat Pro and serums assistance add-ons this quarter and implementation.

Uh, great just 2 last if I could sneak them in 1 on the connected, um, you know, nice sequential, uh, pickup there, any, I, I, if I recall, there are several ways, you can take that Revenue, I could be mistaken there. But is there anything in there that is, pulled forward true up, or what I would call sort of an 1 of the, an unusual way of taking connected, or is that a clean number?

Brian Krzanich: No, there's really only one way that I know of, and maybe Tony has more, but it is always over the life of the contract. There's no pull forwards or unique accounting that's being done here. We take a look at the total value of the contract, and we look at the lifetime. They're anywhere from one to 10 years. There are some that are as long as 10 years. The average we've said in the past has been about three. Stays that way still. We would break that revenue then out over that three-year period. Yeah, definitely is clean. I think you're right.

Brian Krzanich: No, there's really only one way that I know of, and maybe Tony has more, but it is always over the life of the contract. There's no pull forwards or unique accounting that's being done here. We take a look at the total value of the contract, and we look at the lifetime. They're anywhere from one to 10 years. There are some that are as long as 10 years. The average we've said in the past has been about three. Stays that way still. We would break that revenue then out over that three-year period.

No, there's really only one way as I know of, and maybe Tony has more, but it is always over the life of the contract. There are no pull-forwards or unique accounting that’s being done here. If we take a look at the total value of the contract, you look at the lifetime, which can be anywhere from 1 to 10 years. There are some that are also under ten years. The average, as we've said in the past, has been about 3. So, that’s that way.

Tony Rodriguez: Yeah, definitely is clean. I think you're right.

Brian Krzanich: You follow us enough to know that in the case of where we get a billing where we continue to monitor activity within the connected side, and if we believe that we work with our OEM and there was any potential underreporting, if we get catch-up billings within connected, we will relate to past services, we will recognize some of that. This quarter was really none of that. Okay. Great. Congrats on that. That's not unique about connected. Those true-ups are just volume related, right? Sometimes it takes a while for us to get all of the volumes correct between the OEMs and ourselves. Correct. Yeah. No, totally understood. Maybe last then, just on the—you talked about sort of the non-automotive opportunities ramping in the out year.

You follow us enough to know that in the case of where we get a billing where we continue to monitor activity within the connected side, and if we believe that we work with our OEM and there was any potential underreporting, if we get catch-up billings within connected, we will relate to past services, we will recognize some of that. This quarter was really none of that.

Jeff Van Rhee: Okay. Great. Congrats on that.

Excel. Um and so we would break that Revenue then out over that 3 year period. Um yeah and so yeah definitely is clean um that I think you're right. You follow us enough to know that you know in the case of where we get a billing um where we you know we continue to monitor activity within the connected side and if we believe that we work with our OEM and there was any but the potential Under reporting if we get catch-up Billings uh within connected we will you know that relate to past Services we will recognize some of that but um this this quarter was was really none of that.

Brian Krzanich: That's not unique about connected. Those true-ups are just volume related, right? Sometimes it takes a while for us to get all of the volumes correct between the OEMs and ourselves. Correct.

Okay, great. And that Congress on that.

Jeff Van Rhee: Yeah. No, totally understood. Maybe last then, just on the—you talked about sort of the non-automotive opportunities ramping in the out year.

Brian Krzanich: Maybe just spend a second there and sort of help us rank order top one, two, three opportunities in the non-automotive bucket. Sure. Again, I put our IP monetization in that bucket as well, right? We set in here, we have other suits going on, and we have a multi-year, large list of opportunities in that space. Really, you have to take a look at that. Those are mostly us getting paid for our technology in non-automotive space. In fact, it's all that, right? Including the Samsung one, is non-automotive revenue. I do want to clarify that. That is using our technology in a non-automotive space that we are getting paid for and should have been paid for. We'd always prefer to just do a standard license, but we'll defend it in other words.

Maybe just spend a second there and sort of help us rank order top 1, 2, 3 opportunities in the non-automotive bucket.

Brian Krzanich: Sure. Again, I put our IP monetization in that bucket as well, right? We set in here, we have other suits going on, and we have a multi-year, large list of opportunities in that space. Really, you have to take a look at that. Those are mostly us getting paid for our technology in non-automotive space. In fact, it's all that, right? Including the Samsung one, is non-automotive revenue. I do want to clarify that. That is using our technology in a non-automotive space that we are getting paid for and should have been paid for. We'd always prefer to just do a standard license, but we'll defend it in other words.

That's not that's not unique about connected. Those true-ups are just it's volume related, right? And sometimes it takes a while for us to get all of the volumes correct between the oems and ourselves correct? Yeah. No. Totally understood. And and and maybe last then just on the um, you, you talked about sort of the non non-automotive opportunities, uh, ramping in the out-year. Maybe just spend a second there and so to help us rank order top, 1, 2 3, uh, opportunities in the non-automotive bucket.

Sure. Um, you know, I I again, I put our IP monetization in that bucket as well. Right. We we set in here, we have other suits going on, and, um, you know, we have a multi-year large list of, um,

uh,

Opportunities in that space; and really, you have to take a look at that. Those are mostly us getting paid for our technology in the non-automotive space. In fact, it's all about, right? That, including the Samsung, is non-automotive revenue. So I do want to clarify that that is.

Brian Krzanich: The other spaces for the non-automotive, I'd tell you the first one is the kiosk space. We actually did an implementation this last quarter in South America with a bank implementing voice into the kiosks. We have several other POCs going on with kiosks and various types of applications moving forward. I'd say that's the first priority, or the first opportunity that's coming due. We've talked about it in the past, what we call VINI, which is our phone answering chat service that can be implemented. We're targeting, again, spaces that we know. We're looking at dealerships and automotive space. Basically, you can answer phones, make appointments, do things for the—just support your CRM or your service space. There's also other applications with OEMs in that space as well, answering a lot of their calls since we already ingest all of the owner's manuals.

The other spaces for the non-automotive, I'd tell you the first one is the kiosk space. We actually did an implementation this last quarter in South America with a bank implementing voice into the kiosks. We have several other POCs going on with kiosks and various types of applications moving forward. I'd say that's the first priority, or the first opportunity that's coming due. We've talked about it in the past, what we call VINI, which is our phone answering chat service that can be implemented. We're targeting, again, spaces that we know. We're looking at dealerships and automotive space. Basically, you can answer phones, make appointments, do things for the—just support your CRM or your service space. There's also other applications with OEMs in that space as well, answering a lot of their calls since we already ingest all of the owner's manuals.

Using our technology in a non-automotive space that we are getting paid for and should have been paid for. We'd always prefer to just do a standard license, but we'll defend it. In other words, the other spaces, um, for, for the non-automotive, um, I tell you the first 1 is the, uh, kiosk space. We actually did an implementation this last quarter in South America, with a bank uh, in implementing voice into the kiosk. We have several other PC's going on um with kiosks and various types of applications. Um uh moving forward.

So I'd say that's the first priority um or the first uh opportunity that's uh coming due. Um then we have uh we've talked about it in the past uh what we called Vinnie which is our um uh phone answering chat service that can be implemented. We're targeting again spaces that we know. So we're looking at dealerships and um Automotive space uh basically you can answer phones rough, you know, uh make appointments uh do things for the

Like to support your CRM or your service based.

Brian Krzanich: Those would be the first two that I'd tell you that are near term, and the products are ready. In fact, those will be at CES in demonstration mode. You'll be able to come see those at our booth in CES. Thanks so much. Appreciate it. Thank you. One moment for the next question. Our next question will come from the line of Mark Delaney of Goldman Sachs. Your line is open. Good afternoon, everyone. This is Will Ong from Mark Delaney, and thank you for taking our questions. My first one is for the 8% growth in the core business in fiscal 2026 that you expect. How does that break out between units and content step-up? Hey, Will. Thanks for the question. Again, a couple of things to think about as in that 8%.

Those would be the first two that I'd tell you that are near term, and the products are ready. In fact, those will be at CES in demonstration mode. You'll be able to come see those at our booth in CES.

Operator: Thanks so much. Appreciate it. Thank you. One moment for the next question. Our next question will come from the line of Mark Delaney of Goldman Sachs. Your line is open.

Um, there's also other applications in um with oems in that space as well. Uh answering a lot of their calls since we already ingest. All of the um uh owners manual. So those would be the first, like, 2 that I tell you that are are near-term and the products are already in fact, um, those will be at CES in demonstration, uh, mode. So you'll be able to come see those at our booth and see you

Thanks so much. Appreciate it.

Thank you. One moment for the next question.

Our next question will come from the line of Mark Delaney.

Will Ong: Good afternoon, everyone. This is Will Ong from Mark Delaney, and thank you for taking our questions. My first one is for the 8% growth in the core business in fiscal 2026 that you expect. How does that break out between units and content step-up?

Of Goldman Sachs, your line is open.

Tony Rodriguez: Hey, Will. Thanks for the question. Again, a couple of things to think about as in that 8%.

Uh, good afternoon everyone. Uh, this is Will on for Mark, Delaney and thank you for taking our questions. Uh, so my first 1 is for the 8% growth in the core business and fiscal. 26, that you expect, how does that break out between units and content Step Up?

Brian Krzanich: When we think about that 8% core technology, we're thinking that's that core license revenue and core connected, right? As we think about the latter, they're connected. We think about the additional billing. Billings for connected has been growing over the last year and a half, two years. That gets amortized over the subscription period, right? We're seeing those increased billings continue to amortize and grow that number. We expect that growth related to increased billings in 2026, and then the amortization of the previous billings that are in deferred revenue. We've been growing deferred revenue and then amortizing that. That's roughly the 8% or 9% in the connected side. Similarly, a similar percentage in license, though it's a little bit different.

When we think about that 8% core technology, we're thinking that's that core license revenue and core connected, right? As we think about the latter, they're connected. We think about the additional billing. Billings for connected has been growing over the last year and a half, two years. That gets amortized over the subscription period, right? We're seeing those increased billings continue to amortize and grow that number. We expect that growth related to increased billings in 2026, and then the amortization of the previous billings that are in deferred revenue. We've been growing deferred revenue and then amortizing that. That's roughly the 8% or 9% in the connected side. Similarly, a similar % in license, though it's a little bit different.

Brian Krzanich: As we've discussed in the past, we've continued to decrease the fixed license revenue over the last two years or so. What that means is more of the variable licenses actually drop down into revenue in period. Because of those decreased fixed licenses over the last couple of years, what we're seeing is that overall pro forma revenue will likely be fairly flat, but more of it will be in-period revenue for those shipments. That's about half of that growth, and then the other half would be coming from additional price and volume out of the licenses. Thank you for the color there. No, that was helpful. Thank you. Just one follow-up question, can the company share an update on the competitive landscape, especially with new AI systems coming to vehicles, as illustrated that you saw with General Motors and Gemini?

As we've discussed in the past, we've continued to decrease the fixed license revenue over the last two years or so. What that means is more of the variable licenses actually drop down into revenue in period. Because of those decreased fixed licenses over the last couple of years, what we're seeing is that overall pro forma revenue will likely be fairly flat, but more of it will be in-period revenue for those shipments. That's about half of that growth, and then the other half would be coming from additional price and volume out of the licenses.

The 8 or 9% in the connected side and similarly, a similar percentage in um license though it's a little bit different as as we've discussed in the past. You know, we've continued to decrease the fixed license Revenue over the over the last 2 years or so. And what that means is more of the, um, variable license is actually dropped down into Revenue in Period. So um, because of those, those um, um, decreased fixed license over the last couple of years. What we're seeing is that um, overall performer Revenue will likely be fairly flat but more of it will be. Um, um,

Will Ong: Thank you for the color there. No, that was helpful. Thank you. Just one follow-up question, can the company share an update on the competitive landscape, especially with new AI systems coming to vehicles, as illustrated that you saw with General Motors and Gemini?

In the period, revenue from those shipments accounts for about half of that growth, and then the other half would be coming from additional price and volume out of the licenses.

All right, thank you for the color there, and just.

Brian Krzanich: Can you just give us an update on what you're seeing across the competitive landscape? Thank you. Yeah, I'd say the competitive landscape hasn't necessarily changed dramatically from the standpoint of who our competitors are, right? We're not seeing anything new or unique. What we would say is that more and more of the technology is becoming large language model-based, and you're seeing more and more agentic AI in the products. That's driving the competition more than, I'd say, new players or new additions. It's the same ones. I tell you, we've talked about them in the past. Google's there, Amazon's there. Those are the big two that we're usually competing against. Thank you. Thank you. At this time, if you would like to ask a question, please press star 11 on your telephone.

Can you just give us an update on what you're seeing across the competitive landscape? Thank you.

Brian Krzanich: Yeah, I'd say the competitive landscape hasn't necessarily changed dramatically from the standpoint of who our competitors are, right? We're not seeing anything new or unique. What we would say is that more and more of the technology is becoming large language model-based, and you're seeing more and more agentic AI in the products. That's driving the competition more than, I'd say, new players or new additions. It's the same ones. I tell you, we've talked about them in the past. Google's there, Amazon's there. Those are the big two that we're usually competing against.

No, that was, that was, that was helpful. Thank you. And just 1 followup 1 follow up question but um, so can the company share an update on the competitive landscape? Uh, especially with new AI assistance, come into Vehicles as Illustrated that uh, that you saw with GM and Gemini. So you just give us a update on what you're seeing across the competitive landscape. Thank you.

Yeah I'd say you know the competitive landscape hasn't necessarily changed dramatically um from the standpoint of who our competitors are right. Um you know there aren't uh we're not seeing anything new or unique what we would say is that um,

you know, uh,

More and more of the UM technology is becoming large language model-based.

Will Ong: Thank you.

And, um, and you're seeing more and more agentic AI in the products, uh, and that's driving, um, you know, the competition more than, I'd say, new players or or new additions. So it's the, it's the same ones. And, and I tell you, you know, it's we've talked about them in the past. Uh, Google is there. Amazon's there, those are the, the 2 that we're usually competing against.

Operator: Thank you. At this time, if you would like to ask a question, please press star one one on your telephone.

Thank you.

Thank you at this time. If you would like to ask a question, please press star, 1 1 1 on your telephone,

Brian Krzanich: I'm not showing any more questions in the queue, so I would like to turn the call back over to Brian for closing remarks. Please go ahead. Yes. Thank you. I would just like to thank everybody. Those were great questions, and I appreciate everybody's time. We're really excited about the results we had for both Q4 2025 and full year 2025. We're feeling like we really have set the foundation for growth as we go into 2026. We look forward to talking with you guys at the end of the first quarter here, showing you great results again, and laying out more and more of our strategy for 2026 as we move forward. Thank you very much for the call today, and we look forward to talking to you again later on. Thank you all for participating in today's conference call.

I'm not showing any more questions in the queue, so I would like to turn the call back over to Brian for closing remarks. Please go ahead.

Brian Krzanich: Yes. Thank you. I would just like to thank everybody. Those were great questions, and I appreciate everybody's time. We're really excited about the results we had for both Q4 2025 and full year 2025. We're feeling like we really have set the foundation for growth as we go into 2026. We look forward to talking with you guys at the end of the first quarter here, showing you great results again, and laying out more and more of our strategy for 2026 as we move forward. Thank you very much for the call today, and we look forward to talking to you again later on.

And I'm not showing any more questions in the queue. So, I would like to turn the call back over to Brian for closing remarks. Please go ahead.

Yes, thank you. So, um, again, I would just like to thank everybody. Those were great questions, and I appreciate everybody's time. Um, we're really excited about the results we had for both Q4 2025 and the full year 2025, and we're feeling like we really set the foundation for growth.

Operator: Thank you all for participating in today's conference call. You may now disconnect.

As we go into 2026, um, and we look forward to talking with you guys at the end of the first quarter here, uh, and um, you know, showing you great results again and laying out more and more of our, uh, strategy for 2026 as we move forward. So, thank you very much for the call today. Uh, and we look forward to talking to you again. Um,

Later on.

Brian Krzanich: You may now disconnect.

Thank you all for participating in today's conference call. You may now disconnect