Cerence Q1 2026 Cerence Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Cerence Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Cerence Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during this session, you will need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker, Kate Hickman, Vice President of Corporate Communications and Investor Relations. Please go ahead.
Operator: Good day, and thank you for standing by. Welcome to the Cerence Q1 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during this session, you will need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's call is being recorded. I would now like to hand the conference over to your speaker, Kate Hickman, Vice President of Corporate Communications and Investor Relations. Please go ahead.
Speaker #1: Good day and thank you for standing by . Welcome to the first quarter 2026 Earnings Call . At this time , all participants are in a listen only mode .
Speaker #1: After the speakers presentation , we'll open up for questions . So ask a question . During the session , you will need to press star one on one on your telephone .
Speaker #1: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again.
Speaker #1: Please be advised that today's call is being recorded. I would like to hand the conference over to your speaker, Kate Hickman, Vice President of Corporate Communications and Investor Relations.
Kate Hickman: Hello, everyone, and welcome to Cerence's Q1 2026 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 facts, including statements related to our expectations, anticipations, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, priorities, 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 8-K with the press release preceding today's call, our most recent Form 10-Q, and our Form 10-K filed on 20 November 2025.
Kate Hickman: Hello, everyone, and welcome to Cerence's Q1 2026 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 facts, including statements related to our expectations, anticipations, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, priorities, 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 8-K with the press release preceding today's call, our most recent Form 10-Q, and our Form 10-K filed on 20 November 2025.
Speaker #1: Please go ahead .
Speaker #2: Hello , and everyone , Cerence Inc. First Quarter 2026 conference call . I'm Kate Hickman , VP of Corporate Communications and Investor Relations .
Speaker #2: we Before 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 , , priorities , objectives , targets and plans are forward looking statements makes no representations to .
Speaker #2: Update those statements after today . statements These are subject to risks and uncertainties which may cause actual results to differ materially statements and expectations from such as described in our SEC filings , including the form 8-K with the press release preceding today's call .
Kate Hickman: 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 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 38th Annual Roth Conference, taking place March 20 to 24. Now onto the call. Brian?
Kate Hickman: 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 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 38th Annual Roth Conference, taking place March 20 to 24. Now onto the call. Brian?
Speaker #2: Our most recent form 10-q and our form 10-K , filed on November 20th , 2025 , in addition , the company may certain non-GAAP measures refer to key performance indicators and pro forma financial information .
Speaker #2: During this call . Please refer to today's press release for further details of the definitions , limitations , and of those uses measures and reconciliations of non-GAAP measures to the closest GAAP equivalent .
Speaker #2: The release is available in the press or our section of the website. Joining me on today's call are Brian Krzanich, CEO, and CFO. Please note that slides with further context are available in the investor section of our website.
Speaker #2: Before handing over to Brian , I would like to mention that we will be participating in the 38th annual Roth Conference , taking place March 20th to 24th .
Brian Krzanich: Thank you, Kate, and good afternoon, and welcome, everyone. I'm excited to speak with you today following another strong quarter of performance for Cerence. We are pleased with our results this quarter, with revenue of $115.1 million and adjusted EBITDA above the high end of guidance at $44.6 million. Importantly, we generated record quarterly free cash flow of $35.6 million, demonstrating continued profitability. Now, Tony will provide further details on our Q1 results later in the call. As I mentioned on last quarter's call, we have three key priorities for 2026. They are advancing our business through leading technology, including our next-gen platform, xUI, maintaining cost diligence, and driving top-line growth. First, we made important progress in driving our business through continued innovation, especially as we geared up for the CES in early January.
Brian Krzanich: Thank you, Kate, and good afternoon, and welcome, everyone. I'm excited to speak with you today following another strong quarter of performance for Cerence. We are pleased with our results this quarter, with revenue of $115.1 million and adjusted EBITDA above the high end of guidance at $44.6 million. Importantly, we generated record quarterly free cash flow of $35.6 million, demonstrating continued profitability. Now, Tony will provide further details on our Q1 results later in the call. As I mentioned on last quarter's call, we have three key priorities for 2026. They are advancing our business through leading technology, including our next-gen platform, xUI, maintaining cost diligence, and driving top-line growth. First, we made important progress in driving our business through continued innovation, especially as we geared up for the CES in early January.
Speaker #2: Now, on to the call. Brian.
Speaker #2: .
Speaker #3: Thank , and good afternoon and welcome everyone . excited to I'm speak with you today following another strong of quarter performance for Cerence are .
Speaker #3: you . Kate
Speaker #3: pleased with We our results this quarter with revenue of $115.1 million and adjusted EBITDA above the high end of guidance at $44.6 million , and importantly , we generated record quarterly cash flow of $35.6 million , demonstrating profitability continued .
Speaker #3: Tony will provide further Now , details Q1 on our results . Later in the call . As I mentioned on last quarter's call , we have three key priorities for 2026 .
Speaker #3: They are advancing our business through leading technology , including our next gen platform . Maintaining cost , diligence and driving top line growth .
Speaker #3: we made First , important progress in driving our business through continued innovation , especially as we geared up for the CES in early January on the in ground Vegas , we showcased the latest advancements to Cerence Inc. UI , highlighting new LM powered experiences spanning both edge and cloud .
Brian Krzanich: On the ground in Vegas, we showcased the latest advancement to Cerence xUI, highlighting new LLM-powered experiences, spanning both edge and cloud. We demonstrated our CaLLM Edge small language model running across multiple chipsets, enabling faster performance, lower latency, and reliable in-car interactions, even when connectivity is limited. Plus, we showcased xUI running live in a Geely vehicle, marking the first public demonstration of a near production car powered by xUI. We showed off our Audio AI suite, including advanced multi-speaker and multi-zone capabilities. Importantly, within Q1, we completed development of several of our new AI agents, which are now fully integrated into xUI, but can also be implemented in non-xUI platforms. At CES, for the first time, we demonstrated our mobile work agent, developed in partnership with Microsoft.
Brian Krzanich: On the ground in Vegas, we showcased the latest advancement to Cerence xUI, highlighting new LLM-powered experiences, spanning both edge and cloud. We demonstrated our CaLLM Edge small language model running across multiple chipsets, enabling faster performance, lower latency, and reliable in-car interactions, even when connectivity is limited. Plus, we showcased xUI running live in a Geely vehicle, marking the first public demonstration of a near production car powered by xUI. We showed off our Audio AI suite, including advanced multi-speaker and multi-zone capabilities. Importantly, within Q1, we completed development of several of our new AI agents, which are now fully integrated into xUI, but can also be implemented in non-xUI platforms. At CES, for the first time, we demonstrated our mobile work agent, developed in partnership with Microsoft.
Speaker #3: We demonstrated our calm small language model running multiple chipsets , enabling faster performance , lower latency and reliable in-car interactions . Even when connectivity is limited And .
Speaker #3: plus , we showcased x UI running live in a Geely vehicle , marking the demonstration of a near first public car powered by HCI .
Speaker #3: And we showed off our AI audio suite , including advanced Multi-speaker and Multi-zone capabilities . Importantly , within Q1 , we completed development of several of our AI new agents , which are now fully integrated into x UI .
Speaker #3: That can also be implemented in non platforms . At CES for the first time . We demonstrated our mobile work agent developed in partnership with Microsoft .
Brian Krzanich: Now, this agent turns your car into a trusted device with voice-first access to Microsoft's 365 Copilot, Teams, Outlook, and OneNote. This was incredibly well received, and we have significant customer traction and active commercial negotiations coming out of the show with OEMs who want to bring this new agent to their drivers. We also debuted two new purpose-built AI agents that expand our portfolio beyond the in-vehicle experience into broader areas of the automotive ecosystem. The new Dealer Assist Agent helps dealerships automate sales and service workflows, like lead capture, test drive booking, and service scheduling, while integrating with CRM and dealer management systems to improve responsiveness and efficiency. The Ownership Companion Agent enables OEMs to provide drivers with an always-on, in-car service companion that supports diagnostics, maintenance guidance, and instant service booking, creating a more connected ownership journey and strengthening brand loyalty.
Brian Krzanich: Now, this agent turns your car into a trusted device with voice-first access to Microsoft's 365 Copilot, Teams, Outlook, and OneNote. This was incredibly well received, and we have significant customer traction and active commercial negotiations coming out of the show with OEMs who want to bring this new agent to their drivers. We also debuted two new purpose-built AI agents that expand our portfolio beyond the in-vehicle experience into broader areas of the automotive ecosystem. The new Dealer Assist Agent helps dealerships automate sales and service workflows, like lead capture, test drive booking, and service scheduling, while integrating with CRM and dealer management systems to improve responsiveness and efficiency. The Ownership Companion Agent enables OEMs to provide drivers with an always-on, in-car service companion that supports diagnostics, maintenance guidance, and instant service booking, creating a more connected ownership journey and strengthening brand loyalty.
Speaker #3: This agent turns your car into a trusted device with voice . First access to Microsoft three . 65 Copilot teams . Outlook and OneNote .
Speaker #3: This was incredibly well received and we have significant customer traction and active commercial negotiations coming out of the show with OEMs who want to bring this new agent to their drivers .
Speaker #3: We also debuted two new purpose built AI agents that expand our portfolio beyond the in-vehicle experience into broader areas of automotive ecosystem . The new Dealer Assist agent helps dealerships automate sales service and workflows like lead capture , test drive booking and service scheduling .
Speaker #3: While integrating with CRM and dealer management systems to improve responsiveness and efficiency To . ownership . Companion agent enables OEMs to provide drivers with an always on in-car service companion that supports diagnostics , maintenance , guidance , and service booking , creating a more connected ownership journey .
Brian Krzanich: The introduction of these new agents expands our reach and enables us to deliver an end-to-end full journey solution, from vehicle purchase to regular in-car usage, to troubleshooting, and to service and maintenance. Overall, feedback from customers, partners, media, and analysts and investors was incredibly positive, including Cerence xUI being named Gizmodo's Best In-Vehicle Assistant in its Best of CES 2026 awards. We look forward to continuing the conversations we kicked off at the shows. On our second priority of cost diligence and strategic capital allocation, in Q1, we paid down $30 million of principal of debt due in 2028, using cash on hand, while maintaining our cash position to invest in future growth. In addition, we are continuing our attention to cost management and delivering strong cash performance.
Brian Krzanich: The introduction of these new agents expands our reach and enables us to deliver an end-to-end full journey solution, from vehicle purchase to regular in-car usage, to troubleshooting, and to service and maintenance. Overall, feedback from customers, partners, media, and analysts and investors was incredibly positive, including Cerence xUI being named Gizmodo's Best In-Vehicle Assistant in its Best of CES 2026 awards. We look forward to continuing the conversations we kicked off at the shows. On our second priority of cost diligence and strategic capital allocation, in Q1, we paid down $30 million of principal of debt due in 2028, using cash on hand, while maintaining our cash position to invest in future growth. In addition, we are continuing our attention to cost management and delivering strong cash performance.
Speaker #3: And strengthening brand loyalty . The introduction of these new agents expands our reach and enables us to deliver an end to end , full journey solution from vehicle purchase to regular in-car usage troubleshooting , and to to service and maintenance .
Speaker #3: Overall feedback from customers , partners , media and analysts and investors was incredibly positive , including Cerence Inc. UI being named Gizmodo's Best in Vehicle Assistant in its best of CES 2026 awards .
Speaker #3: We look forward to continuing the conversations we kicked off at the shows on our second priority of cost diligence and strategic capital allocation in Q1 .
Speaker #3: We paid down $30 million of principal of debt due in 2028, using cash on hand, while maintaining our cash position to invest in future growth.
Brian Krzanich: In Q1, we completed the implementation of the previously mentioned restructuring plan related to certain foreign operations, further reducing operating expenses, and positioning Cerence for profitable, sustainable future growth for the remainder of fiscal 2026. We will remain diligent and maintain our attention to cost management. And lastly, in terms of our goal of driving top-line growth, we believe there are three key areas of focus. First, increasing adoption of Cerence XUI and driving greater penetration of our stack in existing programs, which we believe will deliver increased PPU. To give you a sense of how we're progressing with customer adoption of XUI, as of today, we have now five significant customer programs for XUI. There's the previously mentioned programs with JLR and a brand within the Volkswagen Group. At CES, we announced our plans with Geely for their cars shipped outside of China.
Brian Krzanich: In Q1, we completed the implementation of the previously mentioned restructuring plan related to certain foreign operations, further reducing operating expenses, and positioning Cerence for profitable, sustainable future growth for the remainder of fiscal 2026. We will remain diligent and maintain our attention to cost management. And lastly, in terms of our goal of driving top-line growth, we believe there are three key areas of focus. First, increasing adoption of Cerence XUI and driving greater penetration of our stack in existing programs, which we believe will deliver increased PPU. To give you a sense of how we're progressing with customer adoption of XUI, as of today, we have now five significant customer programs for XUI. There's the previously mentioned programs with JLR and a brand within the Volkswagen Group. At CES, we announced our plans with Geely for their cars shipped outside of China.
Speaker #3: In addition , we are continuing our attention to cost management and delivering strong cash performance . in Q1 , we And completed the implementation of the previously mentioned restructuring plan related to certain foreign operations .
Speaker #3: Further reducing operating expenses and positioning for profitable , sustainable future growth . For the remainder of fiscal 26 , we will remain diligent and maintain our attention to cost management .
Speaker #3: And lastly , in terms of goal of our driving top line growth , we believe there are three key areas of focus . First , adoption of Cerence Inc. and driving greater penetration of our In stack .
Speaker #3: existing programs , which we believe will deliver increased GPU . To give you a sense of how we're progressing with customer adoption of Zui , as of today , we have now five significant customer programs for Zui .
Speaker #3: the There's previously mentioned programs with JLR and a brand within the Volkswagen Group at CES . We announced our plans with Geely for their cars shipped outside of China and in from new Q1 received a award we another major EV Chinese OEM , leveraging their Zui for overseas development .
Brian Krzanich: And in Q1, we received a new award from another major Chinese EV OEM, leveraging xUI for their overseas development in five languages. In Q2, we received an award from a major volume global automaker, which we look forward to sharing more about in the future. These programs are currently on track to hit the road during the calendar year with strong PPU growth. There are a few important things to note about these deals. One, that we have a strong win rate for xUI, and that these wins have been against big tech competition. This not only tells us that xUI is needed in the market, but we believe also serves as a good indicator of how we'll perform in the outstanding RFQs we have on the table.
Brian Krzanich: And in Q1, we received a new award from another major Chinese EV OEM, leveraging xUI for their overseas development in five languages. In Q2, we received an award from a major volume global automaker, which we look forward to sharing more about in the future. These programs are currently on track to hit the road during the calendar year with strong PPU growth. There are a few important things to note about these deals. One, that we have a strong win rate for xUI, and that these wins have been against big tech competition. This not only tells us that xUI is needed in the market, but we believe also serves as a good indicator of how we'll perform in the outstanding RFQs we have on the table.
Speaker #3: In In Q2 , we five languages . received an award major from a volume , Global automaker , which we look forward to sharing more about in the future .
Speaker #3: These programs are currently on track to hit the road during the calendar year , with strong GPU growth . There are a few important things to note about deals .
Speaker #3: these One . That we have a strong win rate for Zui and that these wins have been against Big Tech competition . This not only tells us that she is needed in the market , but we believe also serves as a good indicator of how we'll perform in the outstanding Rfqs we have on the table .
Brian Krzanich: And two, all of these programs have PPUs that are higher than our current run rate, demonstrating clear value and OEM willingness to invest. We continue to see strong customer traction outside of xUI as well. In Q1, we signed several important deals, a win that brings our Generative AI apps, that's Cerence Chat Pro and Car Knowledge, to additional countries with HKMC, Audio AI wins with GM, Mercedes-Benz, and Daihatsu, and an upgrade to our latest Neural TTS for Mercedes. We contracted development of Slovenian language to help our customers meet regional language requirements, expanding our product offerings. Importantly, on the GM Audio AI deal, this was a competitive win-back that brings our speech signal enhancement, one of the highest margin elements of our software stack, to GM's next-generation infotainment platform across all brands.
Brian Krzanich: And two, all of these programs have PPUs that are higher than our current run rate, demonstrating clear value and OEM willingness to invest. We continue to see strong customer traction outside of xUI as well. In Q1, we signed several important deals, a win that brings our Generative AI apps, that's Cerence Chat Pro and Car Knowledge, to additional countries with HKMC, Audio AI wins with GM, Mercedes-Benz, and Daihatsu, and an upgrade to our latest Neural TTS for Mercedes. We contracted development of Slovenian language to help our customers meet regional language requirements, expanding our product offerings. Importantly, on the GM Audio AI deal, this was a competitive win-back that brings our speech signal enhancement, one of the highest margin elements of our software stack, to GM's next-generation infotainment platform across all brands.
Speaker #3: And two , all of these programs have purpose that are higher than our current run rate , demonstrating clear value and OEM willingness to invest .
Speaker #3: We continue to see strong customer traction outside of Zui as well . In Q1 , we signed several important deals a win that brings our generative AI apps that Cerence Inc. Pro and car knowledge to additional countries .
Speaker #3: With HCMC, Audioeye wins with GM, Mercedes-Benz, and Daihatsu, and an upgrade to our latest neural TTS for Mercedes. And we contracted development of Slovenian language to help our customers meet regional language requirements.
Speaker #3: Expanding our product offerings . Importantly , on the GM audio AI deal , this was competitive a win back our that brings speech signal enhancement one of the highest margin elements of our software stack to GM's next generation infotainment platform across all brands .
Brian Krzanich: This lays out the foundation for potential adoption of additional elements of our Audio AI suite with this major North American automaker in the future. We also saw 8 programs start production, including BYD, GWM, and HKMC. Trucking programs with Scania and Ford Trucks also went live this quarter, marking continued strong momentum in adjacent transportation markets and building upon our existing work with Daimler Trucks, Volvo Trucks, PACCAR, and Iveco Trucks. Our second area for potential growth is increasing the number of connected vehicles shipped, resulting in an expansion of our connected service business. As Tony will detail, we continue to see growth in connected services as customers continue to adopt connected solutions, and we believe this momentum will continue. This is a key pillar of our long-term growth strategy, providing high-quality, predictable revenue. And third, we have an opportunity for growth in our non-automotive businesses.
Brian Krzanich: This lays out the foundation for potential adoption of additional elements of our Audio AI suite with this major North American automaker in the future. We also saw 8 programs start production, including BYD, GWM, and HKMC. Trucking programs with Scania and Ford Trucks also went live this quarter, marking continued strong momentum in adjacent transportation markets and building upon our existing work with Daimler Trucks, Volvo Trucks, PACCAR, and Iveco Trucks. Our second area for potential growth is increasing the number of connected vehicles shipped, resulting in an expansion of our connected service business. As Tony will detail, we continue to see growth in connected services as customers continue to adopt connected solutions, and we believe this momentum will continue. This is a key pillar of our long-term growth strategy, providing high-quality, predictable revenue. And third, we have an opportunity for growth in our non-automotive businesses.
Speaker #3: This lays out the foundation for potential adoption of additional elements of our audio AI suite with this major North American automaker in the future.
Speaker #3: We also saw eight programs start production , including BYD , GW , and HCMC trucking programs with Scania and Ford trucks also went live this quarter , marking continued strong momentum in adjacent transportation markets and building existing work upon our with Daimler Trucks , Volvo Trucks , Paccar and Iveco Trucks .
Speaker #3: We also saw eight programs start production , including BYD , GW , and HCMC trucking programs with Scania and Ford trucks also went live this quarter , marking continued strong momentum in adjacent transportation markets and building existing work upon our with Daimler Trucks , Volvo Trucks , Paccar and Iveco Trucks . Our second area potential for growth is increasing the number of connected vehicles shipped , resulting in an expansion of our connected service business .
Speaker #3: will As Tony detail . We continue to see growth in connected services as customers continue to adopt connected solutions , and we believe this momentum will continue .
Speaker #3: is a This key pillar of our long term growth strategy , providing high quality , predictable revenue . And third , we have an opportunity growth in our for non-automotive businesses .
Brian Krzanich: In Q1, we continued to operationalize our strategy and model, and we spent time at CES meeting with new customers and validating our approach to bringing the power of agentic AI and voice to new industries, including one of the leading digital signage players worldwide that is interested in integrating our solutions across their portfolio. We have good momentum with awards expected through Q2 and beyond. As a reminder, we believe the impact of our work to expand beyond automotive will be seen in our revenue and profitability starting in late fiscal year 2026 and beyond, and this is reflected in the fiscal 2026 guidance we provided last quarter. We believe our IP monetization strategy will continue to yield benefits for Cerence.
Brian Krzanich: In Q1, we continued to operationalize our strategy and model, and we spent time at CES meeting with new customers and validating our approach to bringing the power of agentic AI and voice to new industries, including one of the leading digital signage players worldwide that is interested in integrating our solutions across their portfolio. We have good momentum with awards expected through Q2 and beyond. As a reminder, we believe the impact of our work to expand beyond automotive will be seen in our revenue and profitability starting in late fiscal year 2026 and beyond, and this is reflected in the fiscal 2026 guidance we provided last quarter. We believe our IP monetization strategy will continue to yield benefits for Cerence.
Speaker #3: In Q1 , we continued to operationalize our strategy and model , and we spent time at CES meeting with new and validating our approach to bringing the power of AI and voice to new industries , including one of the leading digital signage players worldwide that is interested in integrating our solutions across their portfolio .
Speaker #3: And we have good momentum with awards expected through Q2 and beyond, a reminder. As we believe, the impact of our work to expand beyond automotive will be seen in our revenue and profitability starting in late fiscal year 2026.
Speaker #3: And this is beyond reflected in the fiscal 2026 guidance . We provided last . And we believe our IP monetization strategy will to yield benefits for Sarens .
Brian Krzanich: As we mentioned on our last quarter's call, 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. We recorded this patent license revenue in Q1, and we believe the resolution of this suit marks an important milestone in our IP monetization strategy. We have cases with Sony, TCL, and Apple outstanding. As a reminder, with most cases taking multiple years to reach resolution, this is a long-term strategy. In conclusion, we believe we have a strong technology and customer momentum, and are on a solid ground to execute on our future growth plans through the rest of fiscal year 2026 and beyond. For Q2, we expect revenue of between $58 to 62 million, an Adjusted EBITDA of $2 to 6 million.
Brian Krzanich: As we mentioned on our last quarter's call, 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. We recorded this patent license revenue in Q1, and we believe the resolution of this suit marks an important milestone in our IP monetization strategy. We have cases with Sony, TCL, and Apple outstanding. As a reminder, with most cases taking multiple years to reach resolution, this is a long-term strategy. In conclusion, we believe we have a strong technology and customer momentum, and are on a solid ground to execute on our future growth plans through the rest of fiscal year 2026 and beyond. For Q2, we expect revenue of between $58 to 62 million, an Adjusted EBITDA of $2 to 6 million.
Speaker #3: we mentioned As on our last quarter's call continue , we resolved our suit with Samsung , which , among other things , resulted in Samsung agreeing to pay Sarens a one time lump sum payment .
Speaker #3: Of $49.5 million . We recorded this patent license revenue in Q1 , and we believe the resolution of this suit marks an important milestone in our IP monetization strategy , and we have with cases Sony , TCL and Apple outstanding .
Speaker #3: a As reminder , with most cases taking multiple years to reach resolution , this is a long term strategy . In conclusion , we believe we have a strong technology and customer momentum and are on a solid ground to execute on our future growth plans .
Speaker #3: To the rest of fiscal year 26 and beyond . For Q2 , we expect revenue of between 58 to $62 million and adjusted EBITDA of 2 million to $6 million , and we're pleased to our full year guidance that we provided on last quarter's call .
Brian Krzanich: And we're pleased to reaffirm our full year guidance that we provided on last quarter's call, and Tony will provide further details on this. We believe that Cerence has the right foundation for long-term, sustainable growth, and we're incredibly proud of what our team has accomplished this quarter. And with that, I'll turn it over to Tony.
Brian Krzanich: And we're pleased to reaffirm our full year guidance that we provided on last quarter's call, and Tony will provide further details on this. We believe that Cerence has the right foundation for long-term, sustainable growth, and we're incredibly proud of what our team has accomplished this quarter. And with that, I'll turn it over to Tony.
Speaker #3: And Tony provide further on details this We believe that . Sarens has the right foundation long for term sustainable growth , and we're incredibly proud of what our team has accomplished quarter this that , with .
Tony Rodriguez: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your continued interest in Cerence. I'll walk through our Q1 fiscal 2026 results, highlight the key drivers of the quarter, and then share our outlook for Q2. For the Q1 of fiscal 2026, total revenue was $115.1 million, up $64.2 million, or 126%, from $50.9 million in the prior-year period. We believe it's important to start by highlighting the continued positive progress in our core technology business, including variable and fixed license revenue and our recurring connected services revenue stream.
Tony Rodriquez: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your continued interest in Cerence. I'll walk through our Q1 fiscal 2026 results, highlight the key drivers of the quarter, and then share our outlook for Q2. For the Q1 of fiscal 2026, total revenue was $115.1 million, up $64.2 million, or 126%, from $50.9 million in the prior-year period. We believe it's important to start by highlighting the continued positive progress in our core technology business, including variable and fixed license revenue and our recurring connected services revenue stream.
Speaker #3: it over to Tony . And
Speaker #4: Thank you Brian . Good , everyone , and afternoon thank you for joining us today . We appreciate your continued interest Sarens I'll walk .
Speaker #4: through our first quarter fiscal highlight the key 2026 results , drivers of the quarter , and then share outlook for our Q2 . For the first quarter of fiscal 2026 , total revenue was $115.1 million , up $64.2 million , or 126% , from $50.9 million in the prior year period .
Speaker #4: We to start important by highlighting the believe it's continued positive progress in technology business , including fixed license revenue and our recurring services revenue connected stream .
Tony Rodriguez: Excluding the impact of patent license revenue, our core technology lines delivered solid growth and stability, reflecting steady customer utilization, continued adoption across our programs, and the increasing importance of our recurring revenue base. Variable license revenue for the quarter was $30.5 million, up 34% year over year, driven by steady customer utilization, more in-period shipment recognition, and continued adoption across our core programs. Fixed license revenue was $7.8 million in the quarter. These fixed license deals were not present in Q1 of last year, as they were primarily recorded in Q2 of the prior year, creating a timing difference. Importantly, for the full fiscal year, we continue to expect fixed license revenue to be comparable to the prior year, and we view this as a timing shift rather than a change in underlying demand.
Tony Rodriquez: Excluding the impact of patent license revenue, our core technology lines delivered solid growth and stability, reflecting steady customer utilization, continued adoption across our programs, and the increasing importance of our recurring revenue base. Variable license revenue for the quarter was $30.5 million, up 34% year over year, driven by steady customer utilization, more in-period shipment recognition, and continued adoption across our core programs. Fixed license revenue was $7.8 million in the quarter. These fixed license deals were not present in Q1 of last year, as they were primarily recorded in Q2 of the prior year, creating a timing difference. Importantly, for the full fiscal year, we continue to expect fixed license revenue to be comparable to the prior year, and we view this as a timing shift rather than a change in underlying demand.
Speaker #4: Excluding the impact variable and license revenue, our core technology lines delivered solid growth and stability. Customer steady utilization continued across our programs, along with adoption and the increasing importance of our recurring revenue base.
Speaker #4: Verbal license revenue for the quarter was $30.5 million , up 34% year over year . Driven by steady customer utilization , more in period recognition , and continued shipment adoption across our core programs .
Speaker #4: License fixed was $7.8 million in the quarter. These fixed license deals were not present in Q1 of last year, as they were primarily recorded in Q2 of the prior year, creating a timing difference.
Speaker #4: Importantly, for the full fiscal year, we continue to expect fixed license revenue to be comparable to the prior year, and we view this as a timing shift rather than a change in underlying demand.
Tony Rodriguez: Connected services revenue was $14.5 million, up 6% year over year, despite a $2 million true-up benefit in the prior year quarter. Without this prior year true-up, connected services revenue would have increased over 20% year over year. This connected services revenue line represents a recurring revenue stream driven by continued expansion of our connected install base, and remains a key pillar of our long-term growth strategy, providing high-quality, predictable revenue and improved visibility over time. Now turning to a strategic milestone achieved during the quarter. During Q1, we recorded $49.5 million of patent license revenue, reflecting the successful resolution of our patent litigation with Samsung. As previously disclosed, this resolution includes a one-time lump sum payment to Cerence. The agreement is part of a confidential cross-license arrangement, which limits the level of detail we can provide.
Tony Rodriquez: Connected services revenue was $14.5 million, up 6% year over year, despite a $2 million true-up benefit in the prior year quarter. Without this prior year true-up, connected services revenue would have increased over 20% year over year. This connected services revenue line represents a recurring revenue stream driven by continued expansion of our connected install base, and remains a key pillar of our long-term growth strategy, providing high-quality, predictable revenue and improved visibility over time. Now turning to a strategic milestone achieved during the quarter. During Q1, we recorded $49.5 million of patent license revenue, reflecting the successful resolution of our patent litigation with Samsung. As previously disclosed, this resolution includes a one-time lump sum payment to Cerence. The agreement is part of a confidential cross-license arrangement, which limits the level of detail we can provide.
Speaker #4: Connected services revenue was $14.5 million , up 6% year over year , despite a $2 million true up benefit in the prior year quarter .
Speaker #4: Without this prior year , true up connected services revenue would have increased over 20% year over year . This connected Services revenue line represents a recurring revenue stream driven by continued expansion of our connected install base , and remains a key pillar of our long term growth strategy high , providing quality , predictable revenue and improved visibility over time .
Speaker #4: turning to Now , a milestone achieved strategic during the quarter . During Q1 , we recorded $49.5 million of patent license revenue , reflecting the successful resolution of our patent litigation with Samsung .
Speaker #4: As previously disclosed , this resolution includes a one time lump sum payment to Sarens . The agreement is part of a confidential Cross-license arrangement , which limits the level of detail we can provide .
Tony Rodriguez: That said, we believe this outcome represents an important validation of the strength and breadth of our IP portfolio, and a strong proof point for the applicability of our technology across multiple industries and verticals. Including the patent license revenue, total license revenue for the quarter was $87.8 million, compared to $22.7 million in the prior year. Professional services revenue was $12.8 million, down 12% year-over-year, reflecting our continued focus on standardization, scalability, and margin improvement, as well as the impact of revenue deferrals when services are bundled with license arrangements under applicable accounting guidance. Gross profit for the quarter was $99.4 million, representing a gross margin of 86%, up from 65% in the prior year period.
Tony Rodriquez: That said, we believe this outcome represents an important validation of the strength and breadth of our IP portfolio, and a strong proof point for the applicability of our technology across multiple industries and verticals. Including the patent license revenue, total license revenue for the quarter was $87.8 million, compared to $22.7 million in the prior year. Professional services revenue was $12.8 million, down 12% year-over-year, reflecting our continued focus on standardization, scalability, and margin improvement, as well as the impact of revenue deferrals when services are bundled with license arrangements under applicable accounting guidance. Gross profit for the quarter was $99.4 million, representing a gross margin of 86%, up from 65% in the prior year period.
Speaker #4: That said , we believe this outcome represents an important validation of the strength breadth of and our IP portfolio and a strong proof for the point applicability of our technology across multiple industries and verticals , including the patent license revenue , total license revenue for the quarter was $87.8 million , compared to $22.7 million in prior year .
Speaker #4: Professional services revenue was $12.8 million , down 12% year over year , reflecting our continued focus on standardization , scalability and margin improvement , as well as the impact of revenue deferrals when services are bundled with license arrangements under applicable accounting guidance .
Speaker #4: Gross profit for the quarter was $99.4 million , representing a gross margin of 86% , up from 65% in the prior year period .
Tony Rodriguez: This improvement reflects the favorable mix shift towards license revenue, as well as continued discipline across cost of revenue. Turning to operating expenses, total non-GAAP operating expenses was $57.3 million, up $23.2 million compared to Q1 of last year. The increase was driven primarily by the legal costs associated with achieving the patent license outcome this quarter. These costs were directly tied to the patent license value creation and are not reflective of our ongoing run rate expense structure. Additionally, while total R&D spend remained fairly comparable year-over-year, R&D expense increased as a smaller portion of our R&D costs qualified for capitalization as internally developed software, resulting in higher expense to R&D.
Tony Rodriquez: This improvement reflects the favorable mix shift towards license revenue, as well as continued discipline across cost of revenue. Turning to operating expenses, total non-GAAP operating expenses was $57.3 million, up $23.2 million compared to Q1 of last year. The increase was driven primarily by the legal costs associated with achieving the patent license outcome this quarter. These costs were directly tied to the patent license value creation and are not reflective of our ongoing run rate expense structure. Additionally, while total R&D spend remained fairly comparable year-over-year, R&D expense increased as a smaller portion of our R&D costs qualified for capitalization as internally developed software, resulting in higher expense to R&D.
Speaker #4: This improvement reflects the favorable shift mix towards license revenue , as well as discipline continued cost of across revenue . Turning to operating expenses .
Speaker #4: Total non-GAAP operating expenses were $57.3 million, up $23.2 million compared to Q1 of last year. The increase was driven primarily by the legal costs associated with achieving the patent license outcome this quarter.
Speaker #4: These costs were directly to the patent license value creation tied and are not reflective of our ongoing run rate expense structure . Additionally , while total R&D spend remained fairly year , over expense increased as a smaller portion of our costs qualified for capitalization as internally developed software , resulting in higher expense to R&D , resulting adjusted EBITDA for Q1 was $44.6 million .
Tony Rodriguez: Resulting adjusted EBITDA for Q1 was $44.6 million, representing a 39% margin, compared to $1.4 million, or 3%, in the prior year period. This reflects strong operating leverage, disciplined cost management, and the benefit of the patent license revenue. GAAP net loss for the quarter was $5.2 million, compared to a $24.3 million dollar net loss in the same quarter last year. Another key accomplishment during the quarter was the continued de-deleveraging of our balance sheet. During Q1, we repurchased $30 million in principal value of our 2028 convertible notes at a discount to par, using $37.9 million of cash generated from operating activities. We produced $35.6 million of free cash flow, a record for any quarter in the company's history.
Tony Rodriquez: Resulting adjusted EBITDA for Q1 was $44.6 million, representing a 39% margin, compared to $1.4 million, or 3%, in the prior year period. This reflects strong operating leverage, disciplined cost management, and the benefit of the patent license revenue. GAAP net loss for the quarter was $5.2 million, compared to a $24.3 million dollar net loss in the same quarter last year. Another key accomplishment during the quarter was the continued de-deleveraging of our balance sheet. During Q1, we repurchased $30 million in principal value of our 2028 convertible notes at a discount to par, using $37.9 million of cash generated from operating activities. We produced $35.6 million of free cash flow, a record for any quarter in the company's history.
Speaker #4: Representing a 39% margin compared to $1.4 million , or in the 3% , prior year period . This reflects strong operating leverage , disciplined cost and the benefit of the patent management license revenue .
Speaker #4: GAAP net loss for the quarter was $5.2 million, compared to a $24.3 million net loss in the same quarter last year. Another key accomplishment during the quarter was the continued deleveraging of our balance sheet.
Speaker #4: During Q1, we repurchased $30 million in principal value of our 2028 convertible notes at a discount to par, using $37.9 million of cash generated from operating activities.
Tony Rodriguez: And while not necessarily indicative of future results, we have generated over $100 million of free cash flow over the last eight quarters. We ended the quarter with $92.1 million of cash and marketable securities, and we believe that the company remains well positioned to fund strategic initiatives while continuing to strengthen our balance sheet. From a metric standpoint, approximately 11.9 million cars were produced that included Cerence technology in the quarter, flat from 11.9 million in the prior year first quarter. We also grew our number of connected cars shipped by 14% on a trailing 12-month basis, underscoring the continued momentum that we are seeing in vehicle connectivity. Also, on a trailing 12-month basis, 51% of worldwide auto production included Cerence technology, remaining in line with our historical penetration.
Tony Rodriquez: And while not necessarily indicative of future results, we have generated over $100 million of free cash flow over the last eight quarters. We ended the quarter with $92.1 million of cash and marketable securities, and we believe that the company remains well positioned to fund strategic initiatives while continuing to strengthen our balance sheet. From a metric standpoint, approximately 11.9 million cars were produced that included Cerence technology in the quarter, flat from 11.9 million in the prior year first quarter. We also grew our number of connected cars shipped by 14% on a trailing 12-month basis, underscoring the continued momentum that we are seeing in vehicle connectivity. Also, on a trailing 12-month basis, 51% of worldwide auto production included Cerence technology, remaining in line with our historical penetration.
Speaker #4: We produced $35.6 million of free cash flow , a record for any quarter in the company's history , and while not necessarily indicative of future results , we have generated over $100 million of free cash flow over the last eight quarters .
Speaker #4: We ended the quarter with $92.1 million of cash and marketable securities , and we the that believe remains positioned well to fund strategic initiatives while continuing to strengthen our balance sheet .
Speaker #4: From a standpoint, metric, approximately 11.9 million cars were produced that included technology in the quarter, flat from 11.9 million in the prior year.
Speaker #4: First quarter . We also grew our number of connected cars shipped by 14% on a trailing 12 month basis , underscoring the momentum that we are seeing in vehicle connectivity .
Speaker #4: Also , on a trailing 12 month basis , 51% of worldwide auto production included technology remaining in line with our penetration historical adjusted total billings were $231 million , an increase of 2% year over year .
Tony Rodriguez: Adjusted total billings were $231 million, an increase of 2% year-over-year. 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 the shipments where revenue was recognized in a prior period as fixed license consumption. Our Pro Forma Royalties were $39.8 million, which were up as compared to $36.7 million for Q1 of last fiscal year. Consumption of our fixed license contracts totaled $8.7 million this quarter, lower than the same quarter last year by 38%, but in line with expectations, given the lower level of fixed contracts than historical periods.
Tony Rodriquez: Adjusted total billings were $231 million, an increase of 2% year-over-year. 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 the shipments where revenue was recognized in a prior period as fixed license consumption. Our Pro Forma Royalties were $39.8 million, which were up as compared to $36.7 million for Q1 of last fiscal year. Consumption of our fixed license contracts totaled $8.7 million this quarter, lower than the same quarter last year by 38%, but in line with expectations, given the lower level of fixed contracts than historical periods.
Speaker #4: As previously discussed , when we look at total licenses shipped , pro forma royalties as an operating measure , we use representing the value of total variable licenses shipped in a , including shipments quarter prior fixed licenses , where revenue was previously recognized contract signing upon .
Speaker #4: We refer to the shipments where revenue was recognized in a prior period as fixed license consumption . Our pro forma royalties were $39.8 million , which were up as compared to $36.7 million for Q1 of last fiscal year .
Speaker #4: Consumption of our fixed license contracts totaled $8.7 million this quarter, lower than the same quarter last year, but in line with 38%.
Tony Rodriguez: This drops more pro forma royalties into revenue in the current period as compared to a year ago. Similar to our five-year backlog metric, we will provide the details of our PPU metric in the middle and the end of each fiscal year. That said, we expect the PPU metric to increase by the end of fiscal 2026. Looking ahead to Q2 fiscal 2026, we expect revenue to be between $58 and 62 million, gross margins between 71% and 72%, a GAAP net income at about break even, with EPS between -$0.01 and $0.08, and adjusted EBITDA between $2 and 6 million. The Q2 revenue guidance reflects some fixed license revenue, but not to the extent of Q2 last year, where virtually all of last year's fixed license deals were recorded.
Tony Rodriquez: This drops more pro forma royalties into revenue in the current period as compared to a year ago. Similar to our five-year backlog metric, we will provide the details of our PPU metric in the middle and the end of each fiscal year. That said, we expect the PPU metric to increase by the end of fiscal 2026. Looking ahead to Q2 fiscal 2026, we expect revenue to be between $58 and 62 million, gross margins between 71% and 72%, a GAAP net income at about break even, with EPS between -$0.01 and $0.08, and adjusted EBITDA between $2 and 6 million. The Q2 revenue guidance reflects some fixed license revenue, but not to the extent of Q2 last year, where virtually all of last year's fixed license deals were recorded.
Speaker #4: Expectations given the lower level of fixed contracts than historical periods. This drops more pro forma royalties into revenue in the current period as compared to a year ago.
Speaker #4: Similar to our five-year backlog metric, we will provide the details of our PPE metric in the middle and the end of each fiscal year.
Speaker #4: That said, we expect the GPU metric to increase by the end of fiscal 2026. Looking ahead to Q2 fiscal 2026, we expect revenue to be between $58 million and $62 million.
Speaker #4: Gross margins between 71 and A 72% . GAAP net income at about break even with EPs between $0.01 and positive $0.08 , and adjusted EBITDA between 2 and $6 million .
Speaker #4: The Q2 revenue guidance reflects some fixed license revenue , but not to the extent of Q2 . Last year , where virtually all of year's last fixed license deals were recorded .
Tony Rodriguez: We are also reaffirming our full-year fiscal 2026 guidance, as previously communicated, with revenue between $300 and 320 million, adjusted EBITDA between $50 and 70 million, free cash flow between $56 and 66 million, and gross margins between 79% and 80%. In summary, Q1 marked a strong start to fiscal 2026, highlighted by solid core technology performance, an important IP milestone, and continued progress towards sustainable profitability and balance sheet strength. We believe Cerence is well positioned to execute against our strategy, expand recurring revenue, and deliver long-term shareholder value. With that, I'll turn it back to Brian.
Tony Rodriquez: We are also reaffirming our full-year fiscal 2026 guidance, as previously communicated, with revenue between $300 and 320 million, adjusted EBITDA between $50 and 70 million, free cash flow between $56 and 66 million, and gross margins between 79% and 80%. In summary, Q1 marked a strong start to fiscal 2026, highlighted by solid core technology performance, an important IP milestone, and continued progress towards sustainable profitability and balance sheet strength. We believe Cerence is well positioned to execute against our strategy, expand recurring revenue, and deliver long-term shareholder value. With that, I'll turn it back to Brian.
Speaker #4: We are also reaffirming our full fiscal 2026 guidance . As year previously communicated with revenue between 300 and $320 million , EBITDA between adjusted 50 and $70 million free cash flow between 56 and $66 million , and gross margins between 79 and 80% .
Speaker #4: In summary , Q1 marked a to strong start fiscal 2026 , highlighted by core solid technology performance and important IP milestone , and continued progress toward sustainable profitability and balance sheet strength .
Speaker #4: We believe Cerence is well positioned to execute against our strategy, expand recurring revenue, and deliver long-term shareholder value. With that, I'll turn it back to Brian.
Brian Krzanich: Thanks, Tony. In closing, we're pleased with our results this quarter and incredibly proud of what our team accomplished as we start 2026. We remain focused on the three key priorities: driving top-line growth, advancing our business through leading technology, including xUI, and maintaining cost diligence. We believe we have an exciting path ahead, and we look forward to sharing more on next quarter's call. We'll now open it up for questions.
Brian Krzanich: Thanks, Tony. In closing, we're pleased with our results this quarter and incredibly proud of what our team accomplished as we start 2026. We remain focused on the three key priorities: driving top-line growth, advancing our business through leading technology, including xUI, and maintaining cost diligence. We believe we have an exciting path ahead, and we look forward to sharing more on next quarter's call. We'll now open it up for questions.
Speaker #3: Thanks , Tony . So in closing , we're pleased with our results this quarter . An incredibly proud of what our team accomplished .
Speaker #3: As we start 2026 , we remain focused on the three key priorities driving top line growth , advancing our business through leading technology , including UI and maintaining cost .
Speaker #3: We believe we have an exciting path ahead, and we look forward to more sharing on next quarter's call. We'll now open it up for questions.
Operator: As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Your line is open.
Operator: As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of Jeff Van Rhee from Craig-Hallum Capital Group. Your line is open.
Speaker #1: As a reminder, to ask a question, please press star one one on your telephone, and you will need to wait for your name to be announced.
Speaker #1: your question , press star one one again . Please stand we compile the Q&A by while . One roster moment for our first question .
Speaker #1: And our first question comes from line of Jeff Van Rhee from Craig-hallum Capital Group . Your line is open .
Jeffrey Van Rhee: Great, thanks. Thanks for taking my questions, guys. A couple for me. On the connected side, I'm curious on the mobile work agent. Just, you know, where does that rank in terms of the agents and xUI and other capabilities as you're layering in a lot of sort of AI-centric capabilities? Is that top of list in terms of what customers are most enthusiastic? It sounded like you were sort of messaging extremely strong demand there, or interest there. And then along those lines, just any sort of framing around the impact that that can have on, on your ARPU going forward?
Jeff Van Rhee: Great, thanks. Thanks for taking my questions, guys. A couple for me. On the connected side, I'm curious on the mobile work agent. Just, you know, where does that rank in terms of the agents and xUI and other capabilities as you're layering in a lot of sort of AI-centric capabilities? Is that top of list in terms of what customers are most enthusiastic? It sounded like you were sort of messaging extremely strong demand there, or interest there. And then along those lines, just any sort of framing around the impact that that can have on, on your ARPU going forward?
Speaker #5: thanks . Great , Thanks for taking my questions , guys . A couple for me on the card connected curious on side . I'm work the mobile agent you , just , know , that rank in terms of where does the agents and UI and other capabilities as you're layering in a lot of sort of AI centric capabilities , is that top of list in terms of what customers are most enthusiastic ?
Speaker #5: It sounded like you were sort of messaging extremely strong demand . There or interest there . And then along those lines , just any sort of framing around the impact that that can have on on your arpus going forward .
Brian Krzanich: Sure. So this is Brian. Jeff, then I can start. So the Microsoft Outlook or Office 365 does not require xUI, and that's a good thing. It's a cloud-based solution... that actually just makes the car a trusted device and then puts our LLM on top of that. So we manage the request. So when you put a request in that says, for example, "Hey, I only want to get messages from Jeff while I'm driving to work because he's the most important person I need to talk to this morning," it will filter all that and manage that, so you're not distracted while you're driving.
Brian Krzanich: Sure. So this is Brian. Jeff, then I can start. So the Microsoft Outlook or Office 365 does not require xUI, and that's a good thing. It's a cloud-based solution... that actually just makes the car a trusted device and then puts our LLM on top of that. So we manage the request. So when you put a request in that says, for example, "Hey, I only want to get messages from Jeff while I'm driving to work because he's the most important person I need to talk to this morning," it will filter all that and manage that, so you're not distracted while you're driving.
Speaker #3: Sure . is So this Brian and I , Jeff can start . So the the Microsoft Outlook or office 365 is require . not .
Speaker #3: And and that's a good thing . It's a cloud based solution that just makes the car a trusted actually device . And then puts realm on that .
Speaker #3: So it we manage the requests . So so a when you put request says , for example , hey , I want to in that only messages from Jeff while I'm driving to work because he's the most important need to talk person I to this morning .
Brian Krzanich: What's good about that, the fact that it is cloud-based, is it can go on existing vehicles that are, you know, maybe two to three years old that have a connected capability as well. So what we're seeing is the interest is not only in the future forward-looking xUI systems, but we have OEMs coming to us and saying they'd like to put this on vehicles back two and three years. So, it's quite positive. We haven't talked about pricing yet, but it will be an additive, and, you know, it will add to our PPU. Did that answer your question, Craig, or Jeff, I mean? Just wanna make sure I've got that.
Brian Krzanich: What's good about that, the fact that it is cloud-based, is it can go on existing vehicles that are, you know, maybe two to three years old that have a connected capability as well. So what we're seeing is the interest is not only in the future forward-looking xUI systems, but we have OEMs coming to us and saying they'd like to put this on vehicles back two and three years. So, it's quite positive. We haven't talked about pricing yet, but it will be an additive, and, you know, it will add to our PPU. Did that answer your question, Craig, or Jeff, I mean? Just wanna make sure I've got that.
Speaker #3: filter all that and It will manage that . So you're not distracted while you're What's driving . about that ? The fact that it is cloud based can go on existing vehicles is it that are , you know , maybe 2 to 3 years old good connected that have a capability as well .
Speaker #3: And so we're seeing is the interest is what only in the forward future , looking UI systems , but we have OEMs coming to us and saying to put this on vehicles back two and three years .
Speaker #3: And so it's quite positive . And we haven't talked pricing about yet , but it will be an additive . And , you know , it will add to our our GPU .
Jeffrey Van Rhee: Yeah, it does. It does. And, you know, in terms of an existing car, if you make it available to an existing vehicle, is that a revenue event, or is that you're just getting people addicted to the technology, and you get the revenue down the road? How does that work?
Jeff Van Rhee: Yeah, it does. It does. And, you know, in terms of an existing car, if you make it available to an existing vehicle, is that a revenue event, or is that you're just getting people addicted to the technology, and you get the revenue down the road? How does that work?
Speaker #3: your question , Did I answer Craig or Jeff ? I mean , I just want to make sure .
Speaker #5: Yeah it does , it does . And is the , know , in terms of an existing you if you if you make it available to an existing vehicle , is that a revenue that you're just is event or people addicted to the technology get the revenue down the road ?
Brian Krzanich: It would be a revenue event for us.
Brian Krzanich: It would be a revenue event for us.
Jeffrey Van Rhee: Okay, got it. And then on the numbers front, you called on a number of interesting bookings or signings, including this major volume global automaker in Q2. I'm curious, in terms of TTM billings, is that gonna show up? Are we gonna start to see TTM billings growing in Q2, and maybe even just a preview of backlog that's gonna be reported at the end of Q2? Are those gonna step in there, where we should see some meaningful uptick, both in backlog and TTM billings when we wrap up Q2?
Jeff Van Rhee: Okay, got it. And then on the numbers front, you called on a number of interesting bookings or signings, including this major volume global automaker in Q2. I'm curious, in terms of TTM billings, is that gonna show up? Are we gonna start to see TTM billings growing in Q2, and maybe even just a preview of backlog that's gonna be reported at the end of Q2? Are those gonna step in there, where we should see some meaningful uptick, both in backlog and TTM billings when we wrap up Q2?
Speaker #5: How does that work and you ?
Speaker #3: It would be an IT revenue event for us.
Speaker #5: , okay Okay . Okay . Got it . then And numbers front called out a number of of interesting on the bookings or signings , including this major automaker Q2 in volume curious .
Speaker #5: in global terms I'm of of TPM that going to billings , is show up or are we to see TPM going to start billings growing in Q2 and , and maybe even just preview a of backlog that's going to be reported at the end of Q2 ?
Speaker #5: Are those going to step where we in there should see some meaningful, both in backlog and TPM uptick, when we billings? Wrap up Q2?
Brian Krzanich: So I'm gonna let Tony talk about how it'll see in the profile. But if I take a look at that, we talked about JLR and the Volkswagen Group vehicle coming in late summer, let's call it.
Brian Krzanich: So I'm gonna let Tony talk about how it'll see in the profile. But if I take a look at that, we talked about JLR and the Volkswagen Group vehicle coming in late summer, let's call it.
Speaker #3: So I'm going to let Tony talk how it will see in the in the about in in the profile . But if I take a look at that , talked about JLR and the the Volkswagen vehicle Group we in in late summer .
Jeffrey Van Rhee: Mm-hmm.
Jeff Van Rhee: Mm-hmm.
Brian Krzanich: The other ones we've said the other ones are all going to come in this calendar year, but that's really start of production, and they'll ramp, right? So remember, we get paid both when the car ships out of the factory and then for the connected portion, when the car drives off the dealer lot. So the revenue from a pure revenue stream won't start until late summer and will start to ramp, right, as the vehicles kind of go through their normal ramp in both geography and volume. And then a lot of it will really happen at the back end.
Brian Krzanich: The other ones we've said the other ones are all going to come in this calendar year, but that's really start of production, and they'll ramp, right? So remember, we get paid both when the car ships out of the factory and then for the connected portion, when the car drives off the dealer lot. So the revenue from a pure revenue stream won't start until late summer and will start to ramp, right, as the vehicles kind of go through their normal ramp in both geography and volume. And then a lot of it will really happen at the back end.
Speaker #3: call Let's it the other ones we've said the other ones are are going to come in . This year , but calendar that's really start production .
Speaker #3: of ramp . Right . both when the So car ships get out of the And then paid for the connected portion , when the car off , remember we factory .
Speaker #3: lot . So the dealer revenue from a pure revenue stream won't start until late summer . And we'll start to ramp right as the vehicles kind of go through their normal ramp in both geography and volume .
Brian Krzanich: So what I was trying to do by showing all 5 is that, you know, I've gotten a lot of questions in the past, "Hey, I said, you know, we have 6 RFQs out, and we're, you know, got 2 guys already signed up with JLR and the Volkswagen Group company." I wanted to give you guys an additional update that we're now actually, you know, signing more deals and seeing good growth and good PPU growth out of this technology. And so those 6 RFQs are turning into actual deals signed.
Brian Krzanich: So what I was trying to do by showing all 5 is that, you know, I've gotten a lot of questions in the past, "Hey, I said, you know, we have 6 RFQs out, and we're, you know, got 2 guys already signed up with JLR and the Volkswagen Group company." I wanted to give you guys an additional update that we're now actually, you know, signing more deals and seeing good growth and good PPU growth out of this technology. And so those 6 RFQs are turning into actual deals signed.
Speaker #3: And then a lot of it will happen at the back end . So really what I was trying to do by showing all that five is we've gotten a lot of questions in the I've past .
Speaker #3: Hey , I said , hey , you know , we have six rfqs out and we're , you know , got already two guys JLR and the signed up Volkswagen Group company .
Speaker #3: wanted to give you guys an update that additional continuing we're I , actually , you know , signing deals and seeing more good growth and good growth out of this technology .
Jeffrey Van Rhee: Yep.
Jeff Van Rhee: Yep.
Brian Krzanich: Kind of that loop for you guys.
Brian Krzanich: Kind of that loop for you guys.
Speaker #3: And so those six RFQs turning into actual, are deals signed that you guys—
Jeffrey Van Rhee: Got it. Got it. And then maybe the other part of the question, just, maybe for Tony, should we expect... You know, are these signings that you're putting up and that you're talking about here big enough that we should, assuming, you know, continued trend and continued strength in Q2, that we should start to see backlog and TTM billings pop by the end of Q2?
Jeff Van Rhee: Got it. Got it. And then maybe the other part of the question, just, maybe for Tony, should we expect... You know, are these signings that you're putting up and that you're talking about here big enough that we should, assuming, you know, continued trend and continued strength in Q2, that we should start to see backlog and TTM billings pop by the end of Q2?
Speaker #5: Got it . Got
Speaker #5: it . And . of the the other part question , just Tony , is maybe for the should we expect , you know , are these are these signings that you're , that you're putting up and you're talking about here big should we assuming , you know trend and continued strength in Q2 that we should start to backlog TTN in Q2 of by the end .
Tony Rodriguez: Yeah. Well, these will be reflected in a five-year backlog, of course, 'cause, you know, once the contracts are signed, and then, as you know, you've been familiar with this, that we project the volume over a contract period, or at least if it's over five years, in the five-year period, and apply the contract price to that volume, and so you will see it in backlog next quarter.
Tony Rodriquez: Yeah. Well, these will be reflected in a five-year backlog, of course, 'cause, you know, once the contracts are signed, and then, as you know, you've been familiar with this, that we project the volume over a contract period, or at least if it's over five years, in the five-year period, and apply the contract price to that volume, and so you will see it in backlog next quarter.
Speaker #6: Yeah . be reflected in a five year These will course , because , you know , once contracts signed and then , as you
Speaker #6: are , you've been familiar the with this , that we project volume over a contract period , or if it's the over at least five years within the five year period .
Speaker #6: are , you've been familiar the with this , that we project volume over a contract period , or if it's the over at least five know And apply the contract price to the to that And so you volume .
Jeffrey Van Rhee: Mm-hmm. Okay, and just last from me, and I'll let somebody else jump on the... Also, on the connected side, just curious, based on the metrics that you're watching, how is usage of the existing in-car connected systems trending? I think back in the day, you used to share some metrics around how frequently people were interacting with the system. Just what trends and what learnings with respect to sort of apples to apples usage of a person who has connected in their car over time are you seeing?
Jeff Van Rhee: Mm-hmm. Okay, and just last from me, and I'll let somebody else jump on the... Also, on the connected side, just curious, based on the metrics that you're watching, how is usage of the existing in-car connected systems trending? I think back in the day, you used to share some metrics around how frequently people were interacting with the system. Just what trends and what learnings with respect to sort of apples to apples usage of a person who has connected in their car over time are you seeing?
Speaker #6: will billings pop in , in next quarter backlog .
Speaker #5: And just Okay . last for me , I'll let somebody else the also on the jump on connected side . Just curious based on the metrics that you're watching , how usage is existing in-car of the connected systems in the think back day , you used to share trending ?
Speaker #5: metrics frequently people were the interacting with just what I trends and system , what with learnings respect to apples to apples sort of usage of a has connected in their car over time .
Brian Krzanich: Yeah. I'd tell you that if you have one of the older systems, the usage is, you know, pretty good early on when you first get the vehicle, and then it kind of drops off. That was before LLMs really available. If you look at vehicles from, say, let's say, the Cerence Assistant and onward, we're starting to see more and more usage. We don't publicly talk about, you know, what's the percentage and all, but what we're seeing is, as functionality has increased and ease of use has increased, we're absolutely seeing stronger usage of the product. And we think as you add things like the Microsoft Suite, the Office 365 and all of that, it's just gonna, you know, really massively increase the usage rate of these products.
Brian Krzanich: Yeah. I'd tell you that if you have one of the older systems, the usage is, you know, pretty good early on when you first get the vehicle, and then it kind of drops off. That was before LLMs really available. If you look at vehicles from, say, let's say, the Cerence Assistant and onward, we're starting to see more and more usage. We don't publicly talk about, you know, what's the percentage and all, but what we're seeing is, as functionality has increased and ease of use has increased, we're absolutely seeing stronger usage of the product. And we think as you add things like the Microsoft Suite, the Office 365 and all of that, it's just gonna, you know, really massively increase the usage rate of these products.
Speaker #5: Are you seeing .
Speaker #3: Yeah person who , I tell you that if you have one of the older systems , the usage is , you know , pretty good early on when first get the you vehicle and kind of then it drops off .
Speaker #3: That was before really LMS available . If you look at from say , let's say the and assistant vehicles onward , we're starting to see more and more We usage .
Speaker #3: don't publicly talk about , you know , what's the percentage and all , but seeing is as what we're functionality has increased and ease of use has increased , we're absolutely seeing stronger usage of the .
Speaker #3: And think as you add things like the the Microsoft the office three , all of that , just going it's to , Suite , you know , really massively increase usage rate of these the products .
Jeffrey Van Rhee: Got it. Great. Thanks for taking my questions.
Jeff Van Rhee: Got it. Great. Thanks for taking my questions.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Mark Delaney from Goldman Sachs. Your line is open.
Speaker #5: Great . Got it . Thanks for questions .
Speaker #1: Thank you . One moment for our next . Our question will next line of Mark come from the Delaney from Goldman Your line question is Sachs .
Aman S. Gupta: Hey, guys. You have Aman on for Mark. Thanks for taking the questions. I guess, sticking with the xUI and AI product front, thanks for the updates on the pipeline there. Maybe if you can help parse out the interest from, you know, more of the Western OEMs versus, you know, you talked about getting two wins, one with Geely and one with another China OEM for overseas business. You know, how is that pipeline relative to the Western OEMs? And are you seeing any difference in time to market from when you sign one of these agreements and actually start of production? And any PPU on that as well would be helpful. Thank you.
Aman Gupta: Hey, guys. You have Aman on for Mark. Thanks for taking the questions. I guess, sticking with the xUI and AI product front, thanks for the updates on the pipeline there. Maybe if you can help parse out the interest from, you know, more of the Western OEMs versus, you know, you talked about getting two wins, one with Geely and one with another China OEM for overseas business. You know, how is that pipeline relative to the Western OEMs? And are you seeing any difference in time to market from when you sign one of these agreements and actually start of production? And any PPU on that as well would be helpful. Thank you.
Speaker #1: open .
Speaker #7: Hey guys . You on for have Mark . Aman Thanks for taking the questions . I guess sticking with the UI and AI product front .
Speaker #7: the on updates the Thanks for Maybe if you can help parse out the interest from , you know , more of the western There .
Speaker #7: versus talked about one with Gillian , one with getting two another . China OEM wins , overseas for you business . You know , how is pipeline relative to the Western ?
Speaker #7: OEMs And are you that time to sign market from one of these agreements ? And actually start of when you and any PPE .
Brian Krzanich: Sure. So let's see. So as you just described, three of the five are, I'll call them from Western or more classic OEMs. So we're seeing, you know, strong interest. We still have, you know, several other OEMs we're talking to in negotiation and deal preparation, that tend to be more Western as well. I'd tell you, you know, if I take a look at the JLR and the Volkswagen one, they're running about as fast as the Chinese ones. So I don't see a huge difference. I'd say the Western OEMs are becoming, especially kind of the leading ones, more and more aggressive about their timing in bringing this stuff to production. So I'd tell you right now, three of the five are Western or more classic OEMs versus the two Chinese brands.
Brian Krzanich: Sure. So let's see. So as you just described, three of the five are, I'll call them from Western or more classic OEMs. So we're seeing, you know, strong interest. We still have, you know, several other OEMs we're talking to in negotiation and deal preparation, that tend to be more Western as well. I'd tell you, you know, if I take a look at the JLR and the Volkswagen one, they're running about as fast as the Chinese ones. So I don't see a huge difference. I'd say the Western OEMs are becoming, especially kind of the leading ones, more and more aggressive about their timing in bringing this stuff to production. So I'd tell you right now, three of the five are Western or more classic OEMs versus the two Chinese brands.
Speaker #7: you helpful ? Thank that
Speaker #3: Sure three of five are I'll from classic Western call them OEMs . So let's . And so seeing you
Speaker #3: see . So as you just described , the
Speaker #3: strong We still have interest . , you know , several other OEMs . We're talking or more to . And in . negotiation and deal preparation that tend to be more Western as .
Speaker #3: I'd tell you well , you know , if I take a look at the the Volkswagen one , they're running as about fast as the would be Chinese ones .
Speaker #3: So I don't see a huge difference . the the Western OEMs are say becoming especially leading ones I'd kind of the becoming more and more aggressive about their .
Speaker #3: And stuff to production bringing this tell I'd you right now , three five are Western or more of OEMs classical versus the two Chinese We're seeing .
Brian Krzanich: We're seeing additional Western OEMs with interest. From a PPU standpoint, all we've said publicly is that, you know, the prices we're getting for XUI on these deals is significantly higher than what our current listed PPU is, that we've talked about, which is around $5. I think it's $5.05, if I remember correct. Tony can correct me if I've got that off, that we published last quarter. So, we're seeing a good significant increase in PPU from those deals. They're all a little bit different because they all... You know, they take different features and stuff like that. So, you know, you'll see, as Tony said, you'll start to see it in backlog, and then you'll start to see it in revenue in the back half of this year and into fiscal 2027.
Brian Krzanich: We're seeing additional Western OEMs with interest. From a PPU standpoint, all we've said publicly is that, you know, the prices we're getting for XUI on these deals is significantly higher than what our current listed PPU is, that we've talked about, which is around $5. I think it's $5.05, if I remember correct. Tony can correct me if I've got that off, that we published last quarter. So, we're seeing a good significant increase in PPU from those deals. They're all a little bit different because they all... You know, they take different features and stuff like that. So, you know, you'll see, as Tony said, you'll start to see it in backlog, and then you'll start to see it in revenue in the back half of this year and into fiscal 2027.
Speaker #3: the OEMs with from a brands . GPU standpoint . All we've said publicly is So , you know , prices the getting we're on these for deals is significantly higher than current listed CPU is interest that we've about , which is around $5 .
Speaker #3: I think it's 505 . If I remember correctly . Tony can correct me if I got that off we that published quarter . So we're seeing a significant increase in PPE from those those deals , and they're all a little bit different because they all , you know , they take different features and stuff like that .
Speaker #3: So they're know you , you'll as Tony said , you'll start see to see it in backlog . you'll start to see it in revenue in the back half of this year .
Brian Krzanich: It will be more and more significant.
Brian Krzanich: It will be more and more significant.
Speaker #3: And into fiscal 27 , there will be . significant
Aman S. Gupta: Understood. Thank you for that color. And then maybe one a little more on the financials. I think EBITDA came in $2 million above the high end of your Q1 Q2 guide, but you maintained the full year guide. Are there any, you know, puts and takes or things we should be thinking about through the balance of the year? Or is it, you know, how should we think about the full year guide being maintained relative to the Q1 guide, beyond some of those metrics?
Aman Gupta: Understood. Thank you for that color. And then maybe one a little more on the financials. I think EBITDA came in $2 million above the high end of your Q1 Q2 guide, but you maintained the full year guide. Are there any, you know, puts and takes or things we should be thinking about through the balance of the year? Or is it, you know, how should we think about the full year guide being maintained relative to the Q1 guide, beyond some of those metrics?
Speaker #7: , caller . you for that Understood . Thank And then maybe one a little more on the financials . I think . EBITDA came in a above the high end of your one guide .
Speaker #7: million you maintain the couple year guide . Are there any , you know , takes puts and or things we should be about through the the year , or is it , you know , how think about the full year guide being Q guide ?
Tony Rodriguez: Yeah, and couple things. One is, you know, yes, we did overachieve on EBITDA, and that was, that was good. We, we, you know, we're one quarter in though, right? So what we wanna look at is as we think about the rest of the year, we typically wouldn't change guidance unless there was some a significant movement, you know, that would guide us that way, for the full year. So what it, you know, does is provide us really confidence. You know, Q1 certainly provides us, you know, much confidence in achieving the full year EBITDA estimate, which we've reaffirmed. So, you know, and I would think that some of that is, you know, a little bit of deferral of some expenses in Q1 into the other three quarters.
Tony Rodriquez: Yeah, and couple things. One is, you know, yes, we did overachieve on EBITDA, and that was, that was good. We, we, you know, we're one quarter in though, right? So what we wanna look at is as we think about the rest of the year, we typically wouldn't change guidance unless there was some a significant movement, you know, that would guide us that way, for the full year. So what it, you know, does is provide us really confidence. You know, Q1 certainly provides us, you know, much confidence in achieving the full year EBITDA estimate, which we've reaffirmed. So, you know, and I would think that some of that is, you know, a little bit of deferral of some expenses in Q1 into the other three quarters.
Speaker #7: Be those metrics ?
Speaker #6: of things . Yeah , a couple you
Speaker #6: yes , overachieve on on did that was One is , good . We you know ,
Speaker #6: we're one quarter in though
Speaker #6: is as we we we typically wouldn't is , guidance unless there was some significant You know , that would guide way for the full year .
Speaker #6: So so what it is provide us really confidence , you know , Q1 certainly provides the year , know , much confidence achieving in the movement .
Speaker #6: we've which reaffirmed . So , you know , that some of would think and I that is , you a little bit of maintained expenses in estimate , Q1 into the other three quarters .
Tony Rodriguez: So, we're still, I guess, like we reiterated that, you know, we're reaffirming guidance for the full fiscal year, and this just gives us, you know, good confidence in that range.
Tony Rodriquez: So, we're still, I guess, like we reiterated that, you know, we're reaffirming guidance for the full fiscal year, and this just gives us, you know, good confidence in that range.
Speaker #6: So so guess , still I like reiterated that we , you know , we're guidance reaffirming for the fiscal full year . And this just gives us a , you know , good in that that range .
Speaker #6: So so guess , still I like reiterated that we , you know , we're guidance reaffirming for the fiscal full year . And this just gives us a , you know , good in that that range confidence
Aman S. Gupta: Thank you very much.
Aman Gupta: Thank you very much.
Operator: Thank you. Once again, that's star one one for questions. One moment for our next question. Our next question comes from the line of Itay Michaeli from TD Cowen. Your line is open.
Operator: Thank you. Once again, that's star one one for questions. One moment for our next question. Our next question comes from the line of Itay Michaeli from TD Cowen. Your line is open.
Speaker #7: very much Thank you .
Speaker #1: Thank you . Once one again . one for questions . One moment for our next question . Our next will come from question the line of it .
Itay Michaeli: Great. Thanks. Good afternoon, everybody. Just to follow up on the EBITDA question, can you just mention, you know, what kind of allowed you to beat the range in fiscal Q1? And then just clarify, perhaps, what the EBITDA was, excluding the settlement in the quarter.
Itay Michaeli: Great. Thanks. Good afternoon, everybody. Just to follow up on the EBITDA question, can you just mention, you know, what kind of allowed you to beat the range in fiscal Q1? And then just clarify, perhaps, what the EBITDA was, excluding the settlement in the quarter.
Speaker #1: Micheli from TD, your line is open. Callan.
Speaker #8: Thanks . Good afternoon everybody . Just to follow up on the EBITDA question , can you mention , you know what kind of allowed you to beat the the range fiscal in Q1 .
Speaker #8: And then just clarify , perhaps what the EBITDA was , excluding settlement in the quarter .
Brian Krzanich: I don't know if Tony is unable to get off.
Brian Krzanich: I don't know if Tony is unable to get off.
Tony Rodriguez: Sorry. Sorry, sorry, guys. Yeah, let's, we'll talk a little bit about the beat first. So, a couple things. One is, we had some good news with regard to legal costs associated with the Samsung settlement. So as I think we've discussed in the past, and certainly in Q4 when we talked about it, is that the patent license agreement part of that was that the legal fees were on a contingent basis. And so we were able to look at that agreement and achieve about $4 million better in legal costs associated with that. So that was part of the beat. The other one related to compensation.
Tony Rodriquez: Sorry. Sorry, sorry, guys. Yeah, let's, we'll talk a little bit about the beat first. So, a couple things. One is, we had some good news with regard to legal costs associated with the Samsung settlement. So as I think we've discussed in the past, and certainly in Q4 when we talked about it, is that the patent license agreement part of that was that the legal fees were on a contingent basis. And so we were able to look at that agreement and achieve about $4 million better in legal costs associated with that. So that was part of the beat. The other one related to compensation.
Speaker #3: Tony off , And
Speaker #6: sorry Sorry , sorry
Speaker #6: guys . Yeah . Let's
Speaker #6: little bit about the beat first . a is things . if couple of some good news So with to legal we had costs associated with the One is Samsung So as I think settlement .
Speaker #6: the past , discussed in in certain Q4 we when talked about that it , is the patent license agreement , part of was that the that legal fees were contingent basis , and on a so we were able to look at that agreement and achieve $4 million better about in legal costs associated with that , so that was part the beat .
Tony Rodriguez: Looking at a couple of R&D projects that have been deferred, so that assisted in OpEx in the quarter, is really the two main areas.
Tony Rodriquez: Looking at a couple of R&D projects that have been deferred, so that assisted in OpEx in the quarter, is really the two main areas.
Speaker #6: Of other one related to compensation. So, looking at a couple projects that deferred. So, got that assisted in of R&D the quarter is the really the two, the two main areas.
Itay Michaeli: That's all for now. And then maybe, secondly, on the, the new win with the, the major volume global, automaker, maybe just walk us through maybe, Brian, just the, how the competitive process, went and kind of what you think kind of led to, to your win there. And, and maybe going forward, how you think about your win rate going forward, just given some of the recent traction you've experienced.
Itay Michaeli: That's all for now. And then maybe, secondly, on the, the new win with the, the major volume global, automaker, maybe just walk us through maybe, Brian, just the, how the competitive process, went and kind of what you think kind of led to, to your win there. And, and maybe going forward, how you think about your win rate going forward, just given some of the recent traction you've experienced.
Speaker #8: helpful . And That's secondly , on the the new the major volume global win with automaker maybe just just walk us through maybe Brian , just how the competitive process went and kind of what you think kind of led your win to to then and maybe going forward , how you think about your win rate going forward , just given recent traction you've experienced some of the ?
Brian Krzanich: Yeah, sure. This is Brian. You know, I’m excited by the progress we’ve made, right? To have the five deals signed, considering we really, you know, officially launched the xUI product in the back half of last year, calendar year, is significant. And all of the competitions, it’s, you know, coming down to there’s usually just a couple of us left in the running at the end, and it becomes less about things like price and all. You know, price is always a bit of a part of the negotiation, but really, at the end, it comes down to a couple of things. One, capability of the technology. Do they have belief that you’re going to deliver in what you say you’re going to deliver?
Brian Krzanich: Yeah, sure. This is Brian. You know, I’m excited by the progress we’ve made, right? To have the five deals signed, considering we really, you know, officially launched the xUI product in the back half of last year, calendar year, is significant. And all of the competitions, it’s, you know, coming down to there’s usually just a couple of us left in the running at the end, and it becomes less about things like price and all. You know, price is always a bit of a part of the negotiation, but really, at the end, it comes down to a couple of things. One, capability of the technology. Do they have belief that you’re going to deliver in what you say you’re going to deliver?
Speaker #3: Yeah , sure . This is Brian . You know , am excited by the progress we've I made , right . To have the signed , considering we really , you know , officially the launched product in of last year , the back half calendar year is significant .
Speaker #3: And and all of the competitions you know , down it's , there's usually to couple of us left in the running in , at the end it becomes and less about things like price and all .
Speaker #3: You know , price is coming a bit of a part of the But really at the comes negotiation . a couple of to down One capability of the technology , things .
Brian Krzanich: And for us, we're able to show up with a vehicle like we did at CES, fully functional, with the xUI, fully operating. And including things like the Microsoft Office 365, fully functioning, running in the vehicle live. So that gives them confidence that the technology's there, it can go, it can do what we say. So that's the first thing. And then it's about the confidence in the team's ability to actually work with the OEM. And we have a long history of that with our team. And then just the overall technology capability of your product, right? What can it do?
Brian Krzanich: And for us, we're able to show up with a vehicle like we did at CES, fully functional, with the xUI, fully operating. And including things like the Microsoft Office 365, fully functioning, running in the vehicle live. So that gives them confidence that the technology's there, it can go, it can do what we say. So that's the first thing. And then it's about the confidence in the team's ability to actually work with the OEM. And we have a long history of that with our team. And then just the overall technology capability of your product, right? What can it do?
Speaker #3: have belief that you're do going to you say deliver what you're going to deliver ? And for us , we're able show up vehicle like we did at with a CES to XY , fully , fully operating and including things the Microsoft like the Outlook 365 , , office fully functioning , running in the vehicle alive .
Speaker #3: that gives them confidence that the So technology's there . It can go can do what we , it say . So that's the first thing .
Speaker #3: And then it's it's confidence in the team's about ability to actually with work OEM . And we have a long history of that our with team .
Brian Krzanich: And we have a lot of things that differentiate us, everything from, you know, some of the agents we've added, like the Microsoft one, the audio technologies we've added. So it really comes down to the end; it's more about the technology and the team, and less about the price. And that's really how we win. And then it's oftentimes around customizations. They'll have things that they want that are unique to their brand or to the product they're trying to deliver, and our ability to, to be very flexible in that space and deliver those customizations, you know, time and matters, is oftentimes a differential, too. That was, in some of the earlier ones, a clear differentiator.
Brian Krzanich: And we have a lot of things that differentiate us, everything from, you know, some of the agents we've added, like the Microsoft one, the audio technologies we've added. So it really comes down to the end; it's more about the technology and the team, and less about the price. And that's really how we win. And then it's oftentimes around customizations. They'll have things that they want that are unique to their brand or to the product they're trying to deliver, and our ability to, to be very flexible in that space and deliver those customizations, you know, time and matters, is oftentimes a differential, too. That was, in some of the earlier ones, a clear differentiator.
Speaker #3: then and And the overall technology the product . Right . What what can it do ? have a lot of things that And we Everything from , you know , some of differentiate agents we've the the Microsoft audio technologies we've added .
Speaker #3: So it really then just us . end . It's more and the technology team added , like and less about the price . And and that's really the how we went .
Speaker #3: then And it's oftentimes around have things customizations . that they are unique to their brand the They'll trying to deliver . And our to ability to be very flexible in that space .
Speaker #3: And deliver those customizations in timely is , is oftentimes a differential to that down to was a in earlier ones some of the , a differentiator ?
Itay Michaeli: Terrific. That's very helpful. Thank you.
Itay Michaeli: Terrific. That's very helpful. Thank you.
Operator: Thank you. I'm not showing any further questions in the queue. I'd like to turn it back over to Brian for closing remarks.
Operator: Thank you. I'm not showing any further questions in the queue. I'd like to turn it back over to Brian for closing remarks.
Speaker #8: Terrific. Helpful. Thank you.
Speaker #8: Terrific . helpful . Thank you .
Brian Krzanich: Yeah-
Brian Krzanich: Yeah-
Tony Rodriguez: One thing before Brian probably kicks in, too, that we should probably clarify a little bit, 'cause we talked about the EBITDA beat, which was great. You know, as we've said, we're very successful profitability quarter and cash flow quarter. And as we think about the GAAP financials, if you look at the earnings release and look at the pre-tax income, compared to a year ago, it's pretty dramatic improvement, year-over-year. And with the EBITDA, we actually beat our; we don't put guidance out for pre-tax income, but the pre-tax income was actually better than anticipated, similar to EBITDA.
Tony Rodriquez: One thing before Brian probably kicks in, too, that we should probably clarify a little bit, 'cause we talked about the EBITDA beat, which was great. You know, as we've said, we're very successful profitability quarter and cash flow quarter. And as we think about the GAAP financials, if you look at the earnings release and look at the pre-tax income, compared to a year ago, it's pretty dramatic improvement, year-over-year. And with the EBITDA, we actually beat our; we don't put guidance out for pre-tax income, but the pre-tax income was actually better than anticipated, similar to EBITDA.
Speaker #1: any questions in the queue . further I'd like
Speaker #1: it back over to Brian for closing remarks .
Speaker #6: one thing before Brian One probably kicks in to should that , clarify a little probably talked about EBITDA the beat , we which is which great .
Speaker #6: one thing before Brian One probably kicks in to should that , clarify a little probably talked about EBITDA the beat , we which is That's very which was You was know , as as we've said , we were very successful profitability quarter and cash clear quarter .
Speaker #6: And as we think about the gap financials , if you look at the earnings release and look at flow pre-tax the income compared to a year it's pretty dramatic improvement year .
Speaker #6: And year over we we beat and We actually beat our we EBITDA . don't put guidance out ago , income . But the for pre-tax pre-tax income was actually better than anticipated .
Tony Rodriguez: That said, you can see in our materials that we had an effective tax rate of 117%. And what's a little bit wonky about these taxes is many of you know, the analysts are on the call that understand FIN 18, and the fact that what you do each quarter is you project your anticipated tax rate for, you know, for the full year, you put into each quarter. So the fact that you can see that this quarter was 117%. So what that really says is, for the full fiscal year, we expect a tax rate of about 117%.
Tony Rodriquez: That said, you can see in our materials that we had an effective tax rate of 117%. And what's a little bit wonky about these taxes is many of you know, the analysts are on the call that understand FIN 18, and the fact that what you do each quarter is you project your anticipated tax rate for, you know, for the full year, you put into each quarter. So the fact that you can see that this quarter was 117%. So what that really says is, for the full fiscal year, we expect a tax rate of about 117%.
Speaker #6: Similar to EBITDA said , you . can see in our our our materials that we had an effective tax rate 117% . And what's a little bit wonky about these taxes is many of you know that the analysts are on the call , but understand fin 18 and and the fact that what you do each quarter is you project your anticipated tax rate for the full for year you put the So fact that quarter .
Speaker #6: and you can see that this into each quarter was 117% . So what that really says is of for the full fiscal expect a tax rate of about 117% .
Tony Rodriguez: That said, we still, like, we've mentioned, we've reiterated or reaffirmed our net income guidance of negative $8 million to positive 12 million. But what's a little bit wonky about that is that we have a certain amount of tax that we are going to pay this year. Part of it is the withholding tax associated with the patent license agreement that we did this year with, you know, in Korea, so that'll be a big chunk of foreign withholding tax. We also have other entities that we pay foreign withholding tax.
Tony Rodriquez: That said, we still, like, we've mentioned, we've reiterated or reaffirmed our net income guidance of negative $8 million to positive 12 million. But what's a little bit wonky about that is that we have a certain amount of tax that we are going to pay this year. Part of it is the withholding tax associated with the patent license agreement that we did this year with, you know, in Korea, so that'll be a big chunk of foreign withholding tax. We also have other entities that we pay foreign withholding tax.
Speaker #6: year , we we said , we like we've we've mentioned , reiterated or That reaffirmed our still income guidance of negative 8 million to positive 12 million .
Speaker #6: Well , what's a little bit wonky that ? about Is that we amount of tax that going to we are this year . Part of have a certain associated the agreement that we did year Korea .
Speaker #6: Well , what's a little bit wonky that ? about Is that we amount of tax that going to we are this year . Part of have a certain associated the agreement that we did year , you know , in So that'll be a of foreign this tax .
Tony Rodriguez: So there's a certain amount of set tax that we are going to pay, and we're so close to breakeven that that percentage really impacts, you know, is impacted by the actual results, and then that set amount of tax, as opposed to what most people think about as you think about a tax rate, and you apply that to, again, a little bit higher or lower earnings. So I guess way to think about this, if you're doing your modeling, is to think that we're probably gonna have a, you know, an actual tax provision in the range of probably $18 to, you know, call it 22 million dollars.
Tony Rodriquez: So there's a certain amount of set tax that we are going to pay, and we're so close to breakeven that that percentage really impacts, you know, is impacted by the actual results, and then that set amount of tax, as opposed to what most people think about as you think about a tax rate, and you apply that to, again, a little bit higher or lower earnings. So I guess way to think about this, if you're doing your modeling, is to think that we're probably gonna have a, you know, an actual tax provision in the range of probably $18 to, you know, call it 22 million dollars.
Speaker #6: We also have other entities that we paid for and withholding tax . So there's a certain amount of set tax that we are going to pay .
Speaker #6: so close to And we're with that , that , that , that percentage really know , is impacts , you impacted by the then that , results .
Speaker #6: That actual set amount, as opposed to what most people think about as your tax rate, is what applies to lower earnings, and you—again, a little bit applies to lower earnings.
Speaker #6: So I guess higher or way to think about this . If you're doing your modeling is to think that we're probably going to have a , you know , an actual tax provision in the range of probably 18 to , you call $22 million .
Tony Rodriguez: And then if you see that 117% effective tax rate that we use this year, you can really, really back into the expectation of pre-tax income for the whole year by taking the net income average, which is negative eight to twelve, the middle of that is roughly 2. And then you can say, well, if you had to gross that up to get to, you know, if you're gonna have roughly mid-range taxes of about $20 million, that means pre-tax income about of about 22. So a mid-range guidance.
Tony Rodriquez: And then if you see that 117% effective tax rate that we use this year, you can really, really back into the expectation of pre-tax income for the whole year by taking the net income average, which is negative eight to twelve, the middle of that is roughly 2. And then you can say, well, if you had to gross that up to get to, you know, if you're gonna have roughly mid-range taxes of about $20 million, that means pre-tax income about of about 22. So a mid-range guidance.
Speaker #6: And then if you , you see that 117% . Effective tax rate year , you that we can really , really into the the back expectation of pre-tax income for the whole year by taking the use this income average , which is -8 to 12 , in the middle of that is is roughly two .
Speaker #6: And then you can say , well , if you gross had to that up to get to , you know , you're going to have roughly mid-range taxes of 20 million .
Tony Rodriguez: So, it's a little bit wonky, this one, so the fact that we overachieved in pre-tax income and applied that 117% FIN 18 rate, actually increased our net loss, even though we had a better than expected pre-tax loss. So a little confusing, but certainly if the folks on the call have, in subsequent discussions, if you want to talk a little bit more about taxes, we can.
Tony Rodriquez: So, it's a little bit wonky, this one, so the fact that we overachieved in pre-tax income and applied that 117% FIN 18 rate, actually increased our net loss, even though we had a better than expected pre-tax loss. So a little confusing, but certainly if the folks on the call have, in subsequent discussions, if you want to talk a little bit more about taxes, we can.
Speaker #6: That means pre-tax about of about 22 . So a mid mid-range about . So it's a little this one . So the fact that we bit wonky overachieved in pre-tax income and applied that 117% 18 rate actually increased our net even though we had a better than loss , expected So a little , little confusing .
Speaker #6: But certainly if if the folks on the call have you in subsequent you want to talk a little bit about taxes , we can .
Brian Krzanich: Okay. Thanks for that, Tony. That was very helpful. I, I know that that whole tax situation was a little bit confusing for everyone. To close, I just wanna say, you know, it was a great Q1 and start of our fiscal 2026. You know, really happy with the deals we've signed on xUI. I think they're clear indicators of the power of the technology and our ability to compete in this marketplace, against, you know, whoever our competitors are at the time. And so I'm really proud of what the teams both delivered and, and accomplished this quarter. You saw the great earnings, the great results that we've had, record free cash flow, and we're set up for a great Q2. And so I just look forward to talking to everybody at the end of this quarter.
Brian Krzanich: Okay. Thanks for that, Tony. That was very helpful. I, I know that that whole tax situation was a little bit confusing for everyone. To close, I just wanna say, you know, it was a great Q1 and start of our fiscal 2026. You know, really happy with the deals we've signed on xUI. I think they're clear indicators of the power of the technology and our ability to compete in this marketplace, against, you know, whoever our competitors are at the time. And so I'm really proud of what the teams both delivered and, and accomplished this quarter. You saw the great earnings, the great results that we've had, record free cash flow, and we're set up for a great Q2. And so I just look forward to talking to everybody at the end of this quarter.
Speaker #6: .
Speaker #3: Okay . Thanks for that , Tony . That was very
Speaker #3: that that whole tax situation bit confusing everyone for to close . I just want to say , you know , it was a great Q1 and discussions , if start of our fiscal 26 .
Speaker #3: You really happy with the deals we've signed on was a little know , think they're indicators of the clear power of the technology and our ability to compete in this marketplace you against , , whoever our competitors know time proud of what really so I'm .
Speaker #3: the both and accomplished and teams And quarter this . You saw the great earnings , the results that we've had , record free cash flow .
Brian Krzanich: You know, I think you'll be happy with our results. With that, I'll talk to you all during the quarter, and look forward to talking to you on this call at the end of Q2. So thank you very much.
Brian Krzanich: You know, I think you'll be happy with our results. With that, I'll talk to you all during the quarter, and look forward to talking to you on this call at the end of Q2. So thank you very much.
Speaker #3: And we're set up for a great Q2 . so I just And I look forward to talking to everybody at the end of this quarter .
Speaker #3: know I You think you'll you'll be happy with our results . And with that I'll talk to you all during the quarter and look forward to talking to you on this call at the end of Q2 .
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Speaker #3: So thank much you very .
Speaker #1: Thank your participation in today's conference . conclude the This does program . You may now disconnect . Everyone , have a great day .
