Q3 2026 Cerence AI Earnings Call

August 6, 2026

Speaker #1: Good day and thank you for standing by Welcome to the third quarter 2020 earnings conference call At this time , all participants are in a listen only mode .

Operator: Good day. Thank you for standing by. Welcome to the Cerence Q3 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will 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 conference is being recorded. I would now like to hand the conference over to your speaker today, Kate Hickman, Vice President of Corporate Communications and Investor Relations. Please go ahead.

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: Being recorded. I would now like to hand the conference over to your speaker today, Kate Hickman, Vice President, Corporate Communications and Investor Relations.

Speaker #1: Please go ahead

Speaker #2: Hello , everyone , and welcome to third quarter 2026 Conference call . Before we begin , I would like to remind you that this call may involve certain forward looking statements .

Kate Hickman: Hello, everyone. Welcome to Cerence's Q3 2026 conference call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Any statements that are not statements of historical fact, including statements related to our expectations, anticipations, intentions, 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. The company may refer to certain non-GAAP measures, key performance indicators, and pro forma financial information during this call.

Speaker #2: Any statements that are not statements of historical fact , including statements to our expectations , anticipations , intentions , estimates , assumptions , beliefs , outlook , strategies , goals , objectives , targets , and plans are forward looking statements Terrance makes no representations to update those statements after today .

Speaker #2: 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.

Speaker #2: Our most recent form 10-q and our form 10-K filed on November 20th , 2025 . In addition , the company may refer to certain non-GAAP measures .

Speaker #2: 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 Raymond James 2026 Industrial Showcase on August 13th and the Needham Virtual Semiconductor and Semi Cap Conference on August 19th .

Kate Hickman: Please refer to today's press release for further details of the definitions, limitations, and uses of those measures and reconciliations of non-GAAP measures to the closest GAAP equivalent. The press release is available in the investor section of our website. Joining me on today's call are Brian Krzanich, CEO, and Tony Rodriguez, CFO. Please note that slides with further context are available in the investor section of our website. Before handing the call over to Brian, I would like to mention that we will be participating in the Raymond James 2026 Industrial Showcase on 13 August and the Needham Virtual Semiconductor and Semi Cap Conference on 19 August. Onto the call. Brian?

Speaker #2: , on to the call . Brian

Speaker #3: Thank you . Kate , and good afternoon everyone Now , before we dig in , I'd like to briefly reflect on Cerence Inc. progress as I approach my two year anniversary as CEO in October And when I stepped into the role , we established a clear roadmap .

Brian Krzanich: Thank you, Kate. Good afternoon, everyone. Before we dig in, I'd like to briefly reflect on Cerence's progress as I approach my two-year anniversary as CEO in October. When I stepped into the role, we established a clear roadmap. The first year was about strengthening the foundation of the business, improving our financial profile, restoring profitability, generating cash flow, and reducing debt. I believe we delivered on those commitments. We said the second year would be about execution as we approach the end of fiscal year 2026. I believe we have delivered there as well. We advanced our technology roadmap by bringing XUI from concept to production. We improved free cash flow, and we are continuing to create value for customers and shareholders. Most importantly, we're now beginning to see the early stages of our next chapter. XUI is entering into commercialization phase.

Speaker #3: The first year was about strengthening the foundation of the business , improving our financial profile , restoring profitability , generating cash flow and reducing debt .

Speaker #3: I believe we delivered on those commitments, and we said the second year would be about execution as we approach the end of fiscal year '26.

Speaker #3: I believe we have delivered there as well . We advanced our technology roadmap by bringing X UI concept to production . We improved free cash flow and we are continuing to create value for customers and shareholders Most importantly , we're now beginning to see the early stages of our next chapter .

Speaker #3: Z is entering into commercialization phase Our Agentic AI portfolio is gaining traction , and our Non-automotive initiatives are beginning to move from proof points toward revenue contribution We believe that our fiscal third quarter results demonstrate a company executing against its strategy , delivering strong financial performance and positioning itself for future growth .

Brian Krzanich: Our Agentic AI portfolio is gaining traction, our non-automotive initiatives are beginning to move from proof points toward revenue contribution. We believe that our fiscal Q3 results demonstrate a company executing against its strategy, delivering strong financial performance, positioning itself for future growth. In Q3, we delivered another strong quarter with revenue of approximately $70 million, in line with our guidance. Adjusted EBITDA above the high end of our guidance at $13.5 million, free cash flow of $20 million. Importantly, we continue to grow our recurring connected services business with revenue up more than 20% year over year. This growth further increases the recurring portion of our revenue mix, enhancing visibility into the future performance demonstrates the value of the connected platform we've built across our installed base.

Speaker #3: In Q3 , we delivered another strong quarter with revenue of approximately $70 million in line guidance Adjusted EBITDA above the high end of our guidance at $13.5 million and free cash flow of $20 million .

Speaker #3: Importantly , we continue to grow our recurring connected services business with revenue up more than 20% year over year This growth further increases the recurring portion of our revenue mix , enhancing visibility into the future performance and demonstrates the value of the connected platform we built across our installed base Looking ahead to the rest of the fiscal year , we're again raising our fiscal year 26 free cash flow guidance .

Brian Krzanich: Looking ahead to the rest of the fiscal year, we're again raising our fiscal year 2026 free cash flow guidance now to $76 million to $82 million, narrowing most of our remaining forecasts as we approach the end of fiscal year 2026. Given the continued cash-generating strength of our business, I'd like to give an update on our capital allocation strategy. As mentioned in the past, we have several core capital allocation priorities, all focused on delivering returns to our shareholders. Investing organically to support growth, reducing debt, managing equity dilution, selectively pursuing inorganic opportunities that can enhance our long-term growth and strategic position. We evaluate these priorities based on the opportunities available to us, the strength of our balance sheet, where we believe capital can generate attractive risk-adjusted return for shareholders.

Speaker #3: Now to 76 million to $82 million , and narrowing most of our remaining forecasts as we approach the end of fiscal year 26 .

Speaker #3: Given the continued cash generating strength of our business , I'd like to give an update on our capital allocation strategy As mentioned in the past , we have several core capital allocation priorities , all focused on delivering returns to our shareholders , investing organically to support growth , reducing debt , managing equity , dilution , and selectively pursuing inorganic opportunities that can enhance our long term growth and strategic position .

Speaker #3: And we evaluate these priorities based on the opportunities available to us, the strength of our balance sheet, and where we believe capital can generate attractive risk-adjusted returns for shareholders.

Speaker #3: So with that , I'm pleased to share that our board has authorized Cerence Inc. first ever share repurchase program . And this reflects our confidence in the business .

Brian Krzanich: With that, I'm pleased to share that our board has authorized Cerence's first ever share repurchase program. This reflects our confidence in the business, the progress we've made in improving profitability and cash generation, our commitment to disciplined capital allocation. As we look ahead, we remain focused on creating long-term shareholder value through execution, strategic investment, prudent capital allocation. The stock repurchase program adds another tool to that approach while preserving our flexibility to continue investing in growth reducing debt, also helping to offset dilution. Tony will provide further details on the program. Now, turning to updates and highlights from the quarter. We continue to see strong investment in next-generation Cerence AI-powered user experiences. Automakers increasingly view AI not as a discretionary investment, but as a strategic priority that reinforces their competitive position.

Speaker #3: The progress we've made in improving profitability and cash generation , and our commitment to disciplined capital allocation As we look ahead , we remain focused on creating long term shareholder value through execution , strategic investment and prudent capital allocation .

Speaker #3: The stock repurchase program adds another tool to that approach . While preserving our flexibility to continue investing in growth and reducing debt , while also helping to offset dilution .

Speaker #3: And Toni will provide further details on the program Now , turning to updates and highlights from the quarter . We continue to see strong investments in next generation AI powered user experiences .

Speaker #3: Automakers increasingly view AI not as a discretionary investment , but as a strategic priority that reinforces their competitive position as vehicles become more software defined , automakers are seeing differentiated user experiences that reinforce their brands and improve customer satisfaction and create opportunities for recurring revenue That's where we believe AI continues to be uniquely positioned and why we continue to win .

Brian Krzanich: As vehicles become more software-defined, automakers are seeking differentiated user experiences that reinforce their brands, improve customer satisfaction, create opportunities for recurring revenue. That's where we believe Cerence AI continues to be uniquely positioned why we continue to win. We combine decades of automotive expertise with leading AI capabilities, enabling OEMs to bring powerful conversational experiences to market while reducing complexity, cost, execution risk. As a result, despite the dynamic industry that OEMs are navigating, customer engagement remains strong. Our pipeline continues to grow, interest in our next-generation platform is growing. Cerence XUI, which is now available in nearly 20 languages, remains the center of our automotive strategy. In Q3, we signed a new XUI deal with Stellantis, who expects to deploy our platform across multiple brands and regions, with initial production having recently started.

Speaker #3: We combine decades of automotive expertise with leading AI capabilities , enabling OEMs to bring powerful conversational experiences to market while reducing complexity , cost , and execution risk As a result , despite the dynamic industry that OEMs are navigating , customer engagement remains strong .

Speaker #3: Our pipeline continues to develop an interest in our next generation platform is growing , Cerence Inc. Z , which is now available in nearly 20 languages , remains the center of our automotive strategy .

Speaker #3: In Q3 , we signed a new deal with Stellantis , who expects to deploy our platform across multiple brands and regions with initial production having recently started and throughout the quarter , we continued to advance our Z programs with JLR , a VW Group brand .

Brian Krzanich: Throughout the quarter, we continued to advance our XUI programs with JLR, a Volkswagen Group brand, BYD, Geely, and a major Japanese automaker. Several of these programs have started production or are expected to start production in fiscal Q4. Today, we have approximately 100,000 XUI-powered cars on the road, an important milestone in bringing this technology to market, and consistent with what we've said in the past. That XUI will begin its ramp at the end of 2026, and impact revenue during fiscal year 2027 and beyond as additional programs enter production and vehicle volumes scale. We continue to expect XUI deployments to support higher average price per unit, reflecting its broader functionality, increased software content, and expanding agentic capabilities. A testament to the value we're bringing to our customers, Cerence AI was recognized at JLR's Global Supplier Excellence Awards in June.

Speaker #3: BYD , Geely , and a major Japanese automaker Several of these programs have started production or are expected to start production in fiscal Q4 Today , we have approximately 100 000 Z powered cars on the road .

Speaker #3: An important milestone in bringing this technology to market, and consistent with what we've said in the past, is that we will begin its ramp at the end of '26.

Speaker #3: In impact revenue during fiscal year 27 . And beyond . As additional programs enter production and vehicle volumes , scale , and we continue to expect Z deployments to support higher average price per unit , reflecting its broader functionality .

Speaker #3: Increased software content and expanding Agentic capabilities A testament to the value we're bringing to our customers . Since I was recognized at jailer is global supplier Excellence Awards in June , JLR honored us with their exceptional creator recognition .

Brian Krzanich: JLR honored us with their exceptional creator recognition, a special category they introduced specifically to highlight truly outstanding partners. In their nomination, the JLR team highlighted how we fast-tracked our partnership into a true AI era collaboration. They specifically called out Cerence's flexibility as a key enabler in their ability to adopt new AI capabilities faster and innovate with confidence. That expectation, paired with our disciplined delivery and sharp roadmap alignment, is now their blueprint for future-facing technology. We believe this recognition validates not only our technology, but also our ability to serve as a trusted strategic partner as OEMs transition to next-generation AI platforms. During the quarter, we also advanced our Agentic AI roadmap across parking, dining, and other task-oriented experiences.

Speaker #3: A special category they introduced specifically to highlight truly outstanding partners in their nominations . The JLR team highlighted how a fast tracked our partnership into a true AI collaboration .

Speaker #3: They specifically called out . Sentences flexibility as a key enabler in their ability to adopt a new AI capabilities faster and innovate with confidence that execution , paired with our disciplined delivery and sharp roadmap alignment is now their blueprint for future facing technology .

Speaker #3: We believe this recognition validates not only our technology , but also our ability to serve as a trusted , strategic partner . As OEMs transition to next generation AI platforms During the quarter , we also advanced our AI roadmap across parking , dining , and other task oriented experiences Our goal is to evolve the in-vehicle assistant from a system that primarily responds to requests into an agentic experience that can take action and help users complete tasks in context .

Brian Krzanich: Our goal is to evolve the in-vehicle assistant from a system that primarily responds to requests into an agentic experience that can take action and help users complete tasks in context. Of note, we reached an important milestone in this strategy in Q3 by signing the first customer for our Mobile Work Agent, developed in collaboration with Microsoft. The customer is a global premium automaker and an existing Cerence customer, with rollout expected to begin in fiscal Q4. We believe this win is significant for two reasons. First, it demonstrates our ability to quickly deploy a complex agent that turns the car into a managed, trusted device with compliant access to enterprise tools in the Microsoft 365 suite. Second, it validates our strategy to sell and deploy agents on a standalone basis.

Speaker #3: Of note , we reached an important milestone in this strategy in Q3 by signing the first customer for our mobile work agent , developed in collaboration with Microsoft .

Speaker #3: The customer is a global premium automaker and an existing customer with roll out expected to begin in fiscal Q4 We believe this win is significant for two reasons .

Speaker #3: First , it demonstrates our ability to quickly deploy a complex agent that turns the car into a managed , trusted device with compliant access to enterprise tools in the Microsoft 365 sweet Second , it validates our strategy to sell and deploy agents on a standalone basis .

Brian Krzanich: Not only can these agents be deployed within the new XUI programs, but they can also be integrated into non-XUI programs and even competitive stacks. This expands our addressable opportunity and gives OEMs a flexible path to introduce agentic capabilities. We're in talks with several other automakers to deploy our Mobile Work Agent in the near future. Now, beyond XUI and our agent roadmap, we continue to win business across our broader technology portfolio. During the quarter, we signed our first customer for Exterior Vehicle Interaction, which extends the reach of the vehicle's voice assistant outside the cabin, allowing drivers to use their voice to perform authenticated vehicle actions like unlocking doors or opening the trunk. We also secured wins across our stack with Subaru, HKMC, and GM.

Speaker #3: Not only can these agents be deployed within the new X UI programs, but they can also be integrated into non-X UI programs and even competitive stacks. This expands our addressable opportunity and gives OEMs a flexible path to introduce agentic capabilities.

Speaker #3: We're in talks with several other automakers to deploy our mobile work agent in the near future Now , beyond X and our agent roadmap , continue to win business across our broader technology portfolio During the quarter , we signed our first customer for exterior vehicle interaction , which extends the reach of the vehicle's voice assistant outside the cabinet , allowing drivers to use their voice to perform authenticated vehicle actions like unlocking doors or opening the trunk We also secured wins across our stack with Subaru Hqmc and GM We signed an emergency vehicle detection program with a Chinese robotaxi company and a syringe assistant program with Stellantis for their vehicles that were not initially use Z These programs have the potential to generate recurring business , maintain our seat at the table within the OEM technology stack and create opportunities to expand our role over time , even when customers use multiple technology We're also making progress in extending our voice .

Brian Krzanich: We signed an Emergency Vehicle Detection program with a Chinese robotaxi company and a Cerence Assistant program with Stellantis for their vehicles that will not initially use XUI. These programs have the potential to generate recurring business, maintain our seat at the table within the OEM technology stack, and create opportunities to expand our role over time, even when customers use multiple technologies. We're also making progress in extending our voice AI and Agentic capabilities beyond the vehicle. We continue to focus on complex environments similar to the car, including commercial and industrial operations, robotics, and select IoT applications. We believe our products have the ability to serve as the trusted interaction layer across a broad range of verticals, where our edge AI, reliability, security, and domain-specific integration translate well and provide a meaningful competitive advantage.

Speaker #3: AI and Agentic capability beyond the vehicle . We continue to focus on complex environments similar to the car , including commercial and industrial operations , robotics and select IoT applications We believe our products have the ability to serve as the trusted interaction layer across a broad range of verticals , where our edge AI reliability , security , and domain specific integration translate well and provide a meaningful competitive advantage One example of our progress is the launch of our dealer assistant agent live at infinity of Grand Rapids , Michigan , charting a real pain point for dealerships .

Brian Krzanich: One example of our progress is the launch of our dealer assist agent live at INFINITI of Grand Rapids, Michigan, targeting a real pain point for dealerships, missed and after-hour sales and service calls that can translate into lost leads and revenue. Our AI agent provides an always-on, instant response, serving as a virtual expert on vehicle features, scheduling test drives, and booking service appointments while freeing staff from routine repetitive calls. Since the program went live, dealer assist agent has delivered measurable business impact to the customer. With 100% of after-hour calls now being captured, there's been a 20% increase in sales opportunities driven by always-on lead engagement and qualification, and nearly 30% increase in service appointments booked, improving utilization and capturing additional service revenue. While this is an early deployment, we believe that it demonstrates the impact of our Agentic solutions can deliver.

Speaker #3: Missed an after hours sales and service calls that can translate into lost leads and revenue Our AI agent provides an always on instant response , serving as a virtual expert on vehicle features , scheduling test drives , and booking service appointments while freeing staff from routine , repetitive calls Since the program went live , dealer assistant agent has delivered measurable business impact to the customer .

Speaker #3: With 100% of after hour calls now being captured There's been a 20% increase in sales opportunities , driven by always on lead engagement and qualification and nearly 30% increase in service appointments booked Improving utilization and capturing additional service revenue While this is an early deployment , we believe that it demonstrates the impact of our genetic solutions can deliver .

Speaker #3: And with tens of thousands of car dealerships worldwide , we see this as a promising growth opportunity . A consistent with our prior outlook , we expect approximately 7 million to 9 million in Non-auto revenue forecasted for full fiscal 2026 .

Brian Krzanich: With tens of thousands of car dealerships worldwide, we see this as a promising growth opportunity. Consistent with our prior outlook, we expect approximately $7 million to $9 million in non-auto revenue forecasted for full fiscal 2026, and the larger opportunity ahead of us in fiscal year 2027 and beyond. On our next earnings call, we look forward to providing you additional details on our fiscal year 2027 roadmap, forecast, and strategy for building a meaningful business beyond automotive. In terms of our intellectual property strategy and ongoing enforcement efforts, we continue to actively protect our technology and investments as part of the ordinary course of our business. While the timing of IP-related outcomes can be difficult to predict on a quarterly basis, we believe these efforts support our broader commitment to innovation and long-term shareholder value.

Speaker #3: And the larger opportunity ahead of us in fiscal year 2027 and beyond. On our next earnings call, we look forward to providing you with additional details on our fiscal year 2027 roadmap, forecast, and strategy for building a meaningful business beyond automotive.

Speaker #3: Now , in terms of our intellectual property strategy and ongoing enforcement efforts , we continue to actively protect our technology and investments as part of the ordinary course of our business .

Speaker #3: While the timing of IP related outcomes can be difficult to predict on a quarterly basis , we believe these efforts support our broader commitment to innovation and long term shareholder value .

Speaker #3: And we'll continue to keep you posted as additional progress is made As we approach the end of fiscal 2026 . I want to close with the four drivers that underpin our belief in long term value First , the sense occupies an important position in the automotive AI stack , supported by deep OEM relationships and a large install base and durable recurring revenue Second , our UI and Agentic AI wins provide an opportunity for ongoing growth and higher revenue per vehicle .

Brian Krzanich: We'll continue to keep you posted as additional progress is made. As we approach the end of fiscal 2026, I want to close with the four drivers that underpin our belief in Cerence's long-term value. First is Cerence occupies an important position in the automotive AI stack, supported by deep OEM relationships and a large install base and durable recurring revenue. Second, our XUI and Agentic AI wins provide an opportunity for ongoing growth and higher revenue per vehicle as these programs enter production and scale. Third, we continue to deliver strong free cash flow while maintaining our focus on disciplined capital allocation. We believe that our business model supports debt reduction, balance sheet strength, inorganic growth, and the strategic and operational flexibility necessary to make key decisions like our stock repurchase program.

Speaker #3: As these programs enter production and scale And third , we continue to deliver strong free cash flow while maintaining our focus on disciplined capital allocation We believe that our business model supports debt reduction , balance sheet strength , inorganic growth , and the strategic and operational flexibility necessary to make key decisions like our stock repurchase program .

Speaker #3: And fourth , our expansion outside of automotive and our IP enforcement efforts provide additional sources of potential long term value . And with that , I'll turn it over to Tony

Brian Krzanich: Fourth, our expansion outside of automotive and our IP enforcement efforts provide additional sources of potential long-term value. Now, with that, I'll turn it over to Tony.

Speaker #4: Thank you . Brian Good afternoon , everyone , and thank you for joining us today . We appreciate your continued interest in Cerence .

Antonio Rodriquez: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your continued interest in Cerence. Today, I'll review our Q3 fiscal 2026 results, highlight the key drivers of the quarter, then provide guidance for our Q4 and the resulting full fiscal year. For the quarter, total revenue was approximately $70 million, within our guidance range of $68 to $72 million, and up 12% from $62 million in the prior year period. The increase was led by higher license revenue, including the timing of fixed license contract execution and a positive shift to recurring connected service revenue. Total license revenue was $41.6 million, up 22% year over year, reflecting the higher fixed license contribution this quarter.

Tony Rodriquez: Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your continued interest in Cerence. Today, I'll review our Q3 fiscal 2026 results, highlight the key drivers of the quarter, then provide guidance for our Q4 and the resulting full fiscal year. For the quarter, total revenue was approximately $70 million, within our guidance range of $68 to $72 million, and up 12% from $62 million in the prior year period. The increase was led by higher license revenue, including the timing of fixed license contract execution and a positive shift to recurring connected service revenue. Total license revenue was $41.6 million, up 22% year over year, reflecting the higher fixed license contribution this quarter.

Speaker #4: Today, I'll review our third quarter fiscal 2026 results, highlight the key drivers of the quarter, and then provide guidance for our fourth quarter and the resulting full fiscal year.

Speaker #4: For the quarter , total revenue was approximately $70 million . Within our guidance range of 68 to $72 million and up 12% from $62 million in the prior year period .

Speaker #4: The increase was led by higher license revenue , including the timing of fixed license contract execution and a positive shift to recurring connected service revenue Total license revenue was $41.6 million , up 22% year over year , reflecting the higher fixed license contribution this quarter Fixed license revenue was $12.5 million this quarter , compared to no fixed license revenue in the prior year period .

Antonio Rodriquez: Fixed license revenue was $12.5 million this quarter compared to no fixed license revenue in the prior year period, and above the approximately $10 million contemplated in our Q3 guidance. As we've discussed, fixed license revenue can vary quarter to quarter based on the timing of contract execution. We do not expect any additional fixed license revenue for the remainder of the fiscal year. Variable license revenue for the quarter was $29.1 million, down 15% year over year. Two factors drove the decrease. First, the comparison was against an exceptionally strong prior year quarter that benefited from higher than normal production as some manufacturers built ahead of anticipated tariff impacts and from favorable foreign exchange rates. Second, our unit volumes came in below the broader market this quarter. Production of vehicles with Cerence technology was down 8% year over year, while global light vehicle production declined roughly 2%.

Tony Rodriquez: Fixed license revenue was $12.5 million this quarter compared to no fixed license revenue in the prior year period, and above the approximately $10 million contemplated in our Q3 guidance. As we've discussed, fixed license revenue can vary quarter to quarter based on the timing of contract execution. We do not expect any additional fixed license revenue for the remainder of the fiscal year. Variable license revenue for the quarter was $29.1 million, down 15% year over year. Two factors drove the decrease. First, the comparison was against an exceptionally strong prior year quarter that benefited from higher than normal production as some manufacturers built ahead of anticipated tariff impacts and from favorable foreign exchange rates. Second, our unit volumes came in below the broader market this quarter. Production of vehicles with Cerence technology was down 8% year over year, while global light vehicle production declined roughly 2%.

Speaker #4: And above . The approximately $10 million contemplated in our Q3 guidance . As we have discussed , fixed license revenue can vary quarter to quarter based on the timing of contract execution .

Speaker #4: We do not expect any additional fixed license revenue for the remainder of the fiscal year Variable license revenue for the quarter was $29.1 million , down 15% year over year Two factors drove the decrease .

Speaker #4: First , the comparison was against an exceptionally strong prior year quarter that benefited from higher than normal production , as some manufacturers built ahead of anticipated tariff impacts and from favorable foreign exchange rates Second , our our unit volumes came in below the broader market this quarter Production of vehicles with Sarens technology was down 8% year over year , while global light vehicle production declined roughly 2% .

Speaker #4: Based on the customer production data available to us . The difference relative to the broader market primarily reflects our specific OEM and regional mix Much of the global markets relative resilience came from regions where we have limited presence , such as South America and South Asia .

Antonio Rodriquez: Based on the customer production data available to us, the difference relative to the broader market primarily reflects our specific OEM and regional mix. Much of the global market's relative resilience came from regions where we have limited presence, such as South America and South Asia, while the OEMs in regions that represent the majority of our volume saw softer production. This was compounded by a period of program life cycle transition, with some programs winding down faster than their replacements are ramping. That said, we have not seen a change in pricing or economics to our existing programs, and we have continued to experience recent design win activity. Connected services revenue was $15.5 million, up 20% year over year, driven by continued expansion of our connected install base and a higher attach rate.

Tony Rodriquez: Based on the customer production data available to us, the difference relative to the broader market primarily reflects our specific OEM and regional mix. Much of the global market's relative resilience came from regions where we have limited presence, such as South America and South Asia, while the OEMs in regions that represent the majority of our volume saw softer production. This was compounded by a period of program life cycle transition, with some programs winding down faster than their replacements are ramping. That said, we have not seen a change in pricing or economics to our existing programs, and we have continued to experience recent design win activity. Connected services revenue was $15.5 million, up 20% year over year, driven by continued expansion of our connected install base and a higher attach rate.

Speaker #4: While the OEMs and regions that represent the majority of our volumes are softer production . This was compounded by a period of program life cycle transition , with some programs winding down faster than their replacements are ramping .

Speaker #4: That said, we have not seen a change in pricing or economics to our existing programs, and we have continued to experience recent design win activity.

Speaker #4: Connected services revenue was $15.5 billion , up 20% year over year . Driven by continued expansion of our connected install base and higher and a higher attach rate We believe that this growth underscores the increasing importance of connected service revenue within our business model , and provides improved visibility into future performance .

Antonio Rodriquez: We believe that this growth underscores the increasing importance of connected service revenue within our business model and provides improved visibility into future performance. Professional services revenue was $12.5 million, down 18% year-over-year, reflecting our continued focus on standardization and higher margin implementations, as well as the impact of revenue deferrals when services are bundled with license arrangements. Gross margin for the quarter was 76%, compared to 74% in the prior year period, and in line with the high end of our guidance range of 75% to 76%. The improvement over prior year was driven primarily by favorable revenue mix, including the higher fixed license contribution, along with continued discipline across cost of revenue. Adjusted EBITDA for the quarter was $13.5 million, an increase of $4.5 million or 51% year-over-year, and ahead of our high end of our guidance range of $8 to 12 million.

Tony Rodriquez: We believe that this growth underscores the increasing importance of connected service revenue within our business model and provides improved visibility into future performance. Professional services revenue was $12.5 million, down 18% year-over-year, reflecting our continued focus on standardization and higher margin implementations, as well as the impact of revenue deferrals when services are bundled with license arrangements. Gross margin for the quarter was 76%, compared to 74% in the prior year period, and in line with the high end of our guidance range of 75% to 76%. The improvement over prior year was driven primarily by favorable revenue mix, including the higher fixed license contribution, along with continued discipline across cost of revenue. Adjusted EBITDA for the quarter was $13.5 million, an increase of $4.5 million or 51% year-over-year, and ahead of our high end of our guidance range of $8 to 12 million.

Speaker #4: Professional services revenue was $12.5 billion , down 18% year over year , reflecting our continued focus on standardization and higher margin implementations . As well as the impact of revenue deferrals .

Speaker #4: When services are bundled with license arrangements Gross margin for the quarter was 76% , compared to 74% in the prior year period . And in line with the high end of our guidance range of 75 to 76% .

Speaker #4: The improvement over prior year was driven primarily by favorable revenue mix , including the higher fixed license contribution , along with continued discipline across cost of revenue Adjusted EBITDA for the quarter was $13.5 million , an increase of $4.5 million , or 51% year over year .

Speaker #4: And ahead of our high end of our guidance range of 8 to $12 million , with revenue finishing near the midpoint of our range .

Antonio Rodriquez: With revenue finishing near the midpoint of our range, this outperformance was driven by favorable margin mix and operating expenses below plan. A portion of the expense variance was timing related and is expected to normalize in Q4, while the remainder reflects our continued cost discipline. Total non-GAAP operating expenses were $43 million compared to $40 million in the prior year period. Non-GAAP R&D expenses was $26.5 million, up from $24.4 million, reflecting lower capitalization of internally developed software rather than an increase in overall investment. Total technology spending remained stable. Non-GAAP sales and marketing expense was $4.6 million, down year-over-year by about 8%, but consistent with continued investment to support our customer base and long-term growth initiatives.

Tony Rodriquez: With revenue finishing near the midpoint of our range, this outperformance was driven by favorable margin mix and operating expenses below plan. A portion of the expense variance was timing related and is expected to normalize in Q4, while the remainder reflects our continued cost discipline. Total non-GAAP operating expenses were $43 million compared to $40 million in the prior year period. Non-GAAP R&D expenses was $26.5 million, up from $24.4 million, reflecting lower capitalization of internally developed software rather than an increase in overall investment. Total technology spending remained stable. Non-GAAP sales and marketing expense was $4.6 million, down year-over-year by about 8%, but consistent with continued investment to support our customer base and long-term growth initiatives.

Speaker #4: This outperformance was driven by favorable margin mix and operating expenses . Below plan A portion of the expense variance was timing related and is expected to normalize in the fourth quarter , while the remainder reflects our continued cost discipline Total non-GAAP operating expenses were $43 million , compared to $40 million in the prior year period .

Speaker #4: non-GAAP R&D expenses was $26.5 million , up from $24.4 million , reflecting lower capitalization of internally developed software . Rather than an increase in overall investment .

Speaker #4: Total technology spending remained stable . non-GAAP sales and marketing expense was $4.6 million , down year over year by about 8% . But consistent with continued investment to support our customer base and long term growth initiatives .

Speaker #4: non-GAAP G&A expense was $11.5 million , up from $10.1 million , reflecting normalized general operating costs as well as additional legal expenses associated with our ongoing efforts to protect and and license our IP portfolio .

Antonio Rodriquez: Non-GAAP G&A expense was $11.5 million, up from $10.1 million, reflecting normalized general operating costs as well as additional legal expenses associated with our ongoing efforts to protect, enforce, and license our IP portfolio. Excluding the one-time legal costs incurred in Q1 to secure our patent license agreement with Samsung, we expect full year fiscal 2026 IP-related legal costs of approximately $9 million. From a GAAP profitability perspective, Q3 net income was $1.5 million, with diluted EPS was $0.03, versus a net loss of $2.7 million and a net loss per share of $0.06 a year ago. On taxes, the Samsung-related withholding tax is spread across the year through our estimated annual effective tax rate, so it isn't confined to the quarter in which it incurred.

Tony Rodriquez: Non-GAAP G&A expense was $11.5 million, up from $10.1 million, reflecting normalized general operating costs as well as additional legal expenses associated with our ongoing efforts to protect, enforce, and license our IP portfolio. Excluding the one-time legal costs incurred in Q1 to secure our patent license agreement with Samsung, we expect full year fiscal 2026 IP-related legal costs of approximately $9 million. From a GAAP profitability perspective, Q3 net income was $1.5 million, with diluted EPS was $0.03, versus a net loss of $2.7 million and a net loss per share of $0.06 a year ago. On taxes, the Samsung-related withholding tax is spread across the year through our estimated annual effective tax rate, so it isn't confined to the quarter in which it incurred.

Speaker #4: Excluding the one time legal costs incurred in Q1 to secure our patent license agreement with Samsung . We expect full year fiscal 2026 IP related legal costs of approximately $9 million from a GAAP profitability perspective .

Speaker #4: Q3 net income was $1.5 billion, with diluted EPS of $0.03, versus a net loss of $2.7 million and a net loss per share of $0.06 a year ago.

Speaker #4: On taxes , the Samsung related withholding tax is spread across the year through our estimated annual effective tax rate , so it isn't confined to the quarter in which it occurred .

Speaker #4: That front loaded our tax expense in Q1 above the expected full year total , and impacts taxes even in quarters , with little or no pre-tax income like here in Q3 We continue to model full year tax expense of approximately $20 million , consistent with our prior projection range , with a significant tax benefit expected in Q4 During Q3 , we generated $20 million of cash from operations and $20 million of free cash flow Continuing our strong cash conversion performance , we ended the quarter with $128 million in cash and cash equivalents , which we believe provides significant flexibility to invest in our strategic priorities while further strengthening the balance sheet As we evaluate capital allocation , we continue to maintain a strong financial position and invest in the business while deploying excess capital toward opportunities that offer the highest risk adjusted returns in the current environment environment that may include discounted debt repurchases , share repurchases , and selective strategic investments that support our long term growth objectives .

Antonio Rodriquez: That front-loaded our tax expense in Q1 above the expected full-year total and impacts taxes even in quarters with little or no pre-tax income, like here in Q3. We continue to model full-year tax expense of approximately $20 million, consistent with our prior projection range, with a significant tax benefit expected in Q4. During Q3, we generated $20 million of cash from operations and $20 million of free cash flow, continuing our strong cash conversion performance. We ended the quarter with $128 million in cash and cash equivalents, which we believe provides significant flexibility to invest in our strategic priorities while further strengthening the balance sheet. As we evaluate capital allocation, we continue to maintain a strong financial position and invest in the business while deploying excess capital toward opportunities that offer the highest risk-adjusted returns.

Tony Rodriquez: That front-loaded our tax expense in Q1 above the expected full-year total and impacts taxes even in quarters with little or no pre-tax income, like here in Q3. We continue to model full-year tax expense of approximately $20 million, consistent with our prior projection range, with a significant tax benefit expected in Q4. During Q3, we generated $20 million of cash from operations and $20 million of free cash flow, continuing our strong cash conversion performance. We ended the quarter with $128 million in cash and cash equivalents, which we believe provides significant flexibility to invest in our strategic priorities while further strengthening the balance sheet. As we evaluate capital allocation, we continue to maintain a strong financial position and invest in the business while deploying excess capital toward opportunities that offer the highest risk-adjusted returns.

Antonio Rodriquez: In the current environment, that may include discounted debt repurchases, share repurchases, and selective strategic investments that support our long-term growth objectives. Putting that framework into action, earlier this fiscal year, we repurchased a portion of our 2028 convertible notes at a discount to par, reducing interest expense and leverage. Building on that, as Brian mentioned, today we announced that our board has approved our first share repurchase program, authorizing the repurchase of up to $30 million of our common stock over the next 12 months. We intend to execute through open market purchases funded from cash on hand and free cash flow while preserving the flexibility to keep investing in the business and to address our remaining outstanding convertible notes. The program does not obligate us to repurchase any specific amount. We expect to stay disciplined as we consider our capital allocation priorities.

Tony Rodriquez: In the current environment, that may include discounted debt repurchases, share repurchases, and selective strategic investments that support our long-term growth objectives. Putting that framework into action, earlier this fiscal year, we repurchased a portion of our 2028 convertible notes at a discount to par, reducing interest expense and leverage. Building on that, as Brian mentioned, today we announced that our board has approved our first share repurchase program, authorizing the repurchase of up to $30 million of our common stock over the next 12 months. We intend to execute through open market purchases funded from cash on hand and free cash flow while preserving the flexibility to keep investing in the business and to address our remaining outstanding convertible notes. The program does not obligate us to repurchase any specific amount. We expect to stay disciplined as we consider our capital allocation priorities.

Speaker #4: Putting that framework into action earlier this fiscal year, we repurchased a portion of our 2028 convertible notes at a discount to par.

Speaker #4: Reducing interest expense and leverage. Building on that, as Brian mentioned, today we announced that our board has approved our first share repurchase program.

Speaker #4: Authorizing the repurchase of up to $30 million of our common stock over the next 12 months . We intend to execute through open market purchases funded from cash on hand and free cash flow , while preserving the flexibility to keep investing in the business and to address our remaining outstanding convertible notes .

Speaker #4: The program does not obligate us to repurchase any specific amount , and we expect to stay disciplined as we consider our capital allocation priorities From a metric standpoint , for Q3 production of vehicles with technology totaled 11.4 million in the quarter , compared to 12.4 million a year ago .

Antonio Rodriquez: From a metric standpoint for Q3, production of vehicles with Cerence technology totaled 11.4 million in the quarter, compared to 12.4 million a year ago. Connected cars shipped increased 4% on the trailing 12-month basis, while recurring connected services revenue grew 20%, reflecting higher attach rates and per-unit economics. Adjusted total billings were $240 million, up 6% year-over-year. Pro forma royalties were $38 million compared to $43 million in the prior year period, reflecting the lower production volumes. Fixed license consumption within that quarter totaled $8.7 million. Before turning to guidance, let me put the Cerence XUI wins Brian discussed into financial context. From an accounting perspective, we recognized revenue as licenses ship and as connected services are delivered. New program wins flow through our reported results in stages rather than all at once.

Tony Rodriquez: From a metric standpoint for Q3, production of vehicles with Cerence technology totaled 11.4 million in the quarter, compared to 12.4 million a year ago. Connected cars shipped increased 4% on the trailing 12-month basis, while recurring connected services revenue grew 20%, reflecting higher attach rates and per-unit economics. Adjusted total billings were $240 million, up 6% year-over-year. Pro forma royalties were $38 million compared to $43 million in the prior year period, reflecting the lower production volumes. Fixed license consumption within that quarter totaled $8.7 million. Before turning to guidance, let me put the Cerence XUI wins Brian discussed into financial context. From an accounting perspective, we recognized revenue as licenses ship and as connected services are delivered. New program wins flow through our reported results in stages rather than all at once.

Speaker #4: Connected cars shipped increased 4% on the trailing 12 month basis , while recurring connected services revenue grew 20% , reflecting a higher attach rates and per unit economics .

Speaker #4: Adjusted total billings were 240 million , up 6% year over year . Pro forma royalties were 38 million , compared to 43 million in the prior year period , reflecting the lower production volumes .

Speaker #4: Fixed license consumption within that quarter totaled . Totaled was $8.7 million . Before turning to guidance , let me put the Z wins , Brian discussed into financial context .

Speaker #4: From an accounting perspective , we recognized revenue as licenses , ship and as connected services are delivered . So new program wins flow through our reported results in stages rather than all at once for multiyear platform transitions such as Z that cycle plays out over several years .

Antonio Rodriquez: For multi-year platform transitions such as Cerence XUI, that cycle plays out over several years. As a result, the wins we've announced are not fully reflected in our current revenue run rate, and for connected services, the near-term impact will show up first in billings with more meaningful revenue contribution phasing in during fiscal 2027 and beyond. These programs carry attractive per-unit economics that we expect to support both revenue growth and margin as they scale. Also, consistent with Brian's comments, our current outlook continues to assume only modest initial contribution from non-automotive programs as we exit fiscal 2026, with the larger opportunity remaining primarily a fiscal 2027 and beyond growth driver. Turning to Q4, with respect to the sequential progression, there are two dynamics to keep in mind. First, our Q3 results included $12.5 million of fixed license revenue.

Tony Rodriquez: For multi-year platform transitions such as Cerence XUI, that cycle plays out over several years. As a result, the wins we've announced are not fully reflected in our current revenue run rate, and for connected services, the near-term impact will show up first in billings with more meaningful revenue contribution phasing in during fiscal 2027 and beyond. These programs carry attractive per-unit economics that we expect to support both revenue growth and margin as they scale. Also, consistent with Brian's comments, our current outlook continues to assume only modest initial contribution from non-automotive programs as we exit fiscal 2026, with the larger opportunity remaining primarily a fiscal 2027 and beyond growth driver. Turning to Q4, with respect to the sequential progression, there are two dynamics to keep in mind. First, our Q3 results included $12.5 million of fixed license revenue.

Speaker #4: As a result, the wins we've announced are not fully reflected in our current revenue run rate. And for connected services, the near-term impact will show up first in billings, with more meaningful revenue contribution phasing in during fiscal 2027 and beyond.

Speaker #4: These programs carry attractive per unit economics that we expect to support both revenue growth and margin as they scale . Also , consistent with Brian's comments , our current outlook continues to assume only modest initial contribution from Non-automotive programs .

Speaker #4: As we exit FY 26 with the larger opportunity remaining primarily a fiscal fiscal 2027 and beyond . Growth driver Turning to the fourth quarter with respect to the sequential progression , there are two dynamics to keep in mind .

Speaker #4: First , our third quarter results included 12.5 million of fixed license revenue and consistent with the timing driven nature of these arrangements , we are not contemplating any fixed license revenue in the fourth quarter .

Antonio Rodriquez: Consistent with the timing-driven nature of these arrangements, we are not contemplating any fixed license revenue in Q4. Second, we expect a normal seasonality, with production volumes often stepping down a bit from Q3 to Q4. Together, this means we expect Q4 revenue to be lower on a sequential basis. For Q4, we expect revenue between $61 and $65 million, gross margin between 72% and 75%, expected EBITDA between $1 and $5 million, net income in the range of $1 to $5 million, and diluted EPS between $0.02 and $0.10. I want to be clear that this guidance reflects the timing of fixed license revenue and ordinary seasonal patterns, not a change we see in the health of the underlying business.

Tony Rodriquez: Consistent with the timing-driven nature of these arrangements, we are not contemplating any fixed license revenue in Q4. Second, we expect a normal seasonality, with production volumes often stepping down a bit from Q3 to Q4. Together, this means we expect Q4 revenue to be lower on a sequential basis. For Q4, we expect revenue between $61 and $65 million, gross margin between 72% and 75%, expected EBITDA between $1 and $5 million, net income in the range of $1 to $5 million, and diluted EPS between $0.02 and $0.10. I want to be clear that this guidance reflects the timing of fixed license revenue and ordinary seasonal patterns, not a change we see in the health of the underlying business.

Speaker #4: Second , we expect normal seasonality with production volumes often stepping down a bit from the third quarter to the fourth . Together , this means we expect fourth quarter revenue to be lower on a sequential basis For the fourth quarter , we expect revenue between 61 and $65 million .

Speaker #4: Gross margin between 72 and 75% . Expected EBITDA between 1 and $5 million , net income in the range of 1 to $5 million and diluted EPS between $0.02 and $0.10 .

Speaker #4: I want to be clear that this guidance reflects the timing of fixed license revenue , and ordinary seasonal patterns , not a change we see in the health of the underlying business .

Speaker #4: Excluding the fixed license revenue recognized in Q3 , the midpoint of our fourth quarter revenue outlook is higher than our underlying Q3 revenue level Our per unit economics have remained intact .

Antonio Rodriquez: Excluding the fixed license revenue recognized in Q3, the midpoint of our Q4 revenue outlook is higher than our underlying Q3 revenue level. Our per-unit economics have remained intact, our recurring connected services revenue, up 20% year over year, has continued to grow, and our design win momentum is expected to support future volume. A couple of further notes on Q4. First, because Q4 does not carry the high margin contribution from fixed license, we expect gross margin to normalize below the 76% we reported in Q3. Second, as we discussed previously, the Samsung IP license resulted in an unusually high tax expense earlier in the year, particularly in Q1. The expected Q4 benefit is incorporated into our Q4 and full year outlook.

Tony Rodriquez: Excluding the fixed license revenue recognized in Q3, the midpoint of our Q4 revenue outlook is higher than our underlying Q3 revenue level. Our per-unit economics have remained intact, our recurring connected services revenue, up 20% year over year, has continued to grow, and our design win momentum is expected to support future volume. A couple of further notes on Q4. First, because Q4 does not carry the high margin contribution from fixed license, we expect gross margin to normalize below the 76% we reported in Q3. Second, as we discussed previously, the Samsung IP license resulted in an unusually high tax expense earlier in the year, particularly in Q1. The expected Q4 benefit is incorporated into our Q4 and full year outlook.

Speaker #4: Our recurring connected services revenue, up 20% year over year, has continued to grow, and our design win momentum is expected to support future volume. A couple of further notes on the fourth quarter.

Speaker #4: First , because the fourth quarter does not carry the high margin contribution from fixed license , we expect gross margin to normalize below the 76% we reported in the third quarter .

Speaker #4: Second, as we discussed previously, the Samsung IP license resulted in an unusually high tax expense earlier in the year, particularly in the first quarter.

Speaker #4: The expected fourth quarter benefit is incorporated into our Q4 and full year outlook . Taken together with our year to date results , this Q4 outlook is contemplated within the full year guidance , I'll walk through next and reflects the same discipline execution we've delivered through the first three quarters of the year For the full fiscal year , we now expect revenue of $310 million to $314 million .

Antonio Rodriquez: Taken together with our year-to-date results, this Q4 outlook is contemplated within the full year guidance I'll walk through next and reflects the same disciplined execution we've delivered through Q1, Q2, and Q3 of the year. For the full fiscal year, we now expect revenue of $310 million to $314 million. Gross margin of 78% to 79%. GAAP profitability in the range of net loss of $1.1 million to net income of $2.9 million. Diluted EPS of a loss of $0.02 to an income of $0.06. Adjusted EBITDA of $66 to $70 million, and free cash flow of $76 to $82 million, an increase from our prior outlook of $66 to $76 million. In closing, we delivered solid execution this Q3 with growth in total revenue, gross margin ahead of guidance, continued strength in our recurring connected services, and year-over-year profitability growth.

Tony Rodriquez: Taken together with our year-to-date results, this Q4 outlook is contemplated within the full year guidance I'll walk through next and reflects the same disciplined execution we've delivered through Q1, Q2, and Q3 of the year. For the full fiscal year, we now expect revenue of $310 million to $314 million. Gross margin of 78% to 79%. GAAP profitability in the range of net loss of $1.1 million to net income of $2.9 million. Diluted EPS of a loss of $0.02 to an income of $0.06. Adjusted EBITDA of $66 to $70 million, and free cash flow of $76 to $82 million, an increase from our prior outlook of $66 to $76 million. In closing, we delivered solid execution this Q3 with growth in total revenue, gross margin ahead of guidance, continued strength in our recurring connected services, and year-over-year profitability growth.

Speaker #4: Gross margin of 78 to 79% . GAAP profitability in the range of net loss of $1.1 million to net income of $2.9 million .

Speaker #4: Diluted EPS of a loss of $0.02 to an income of $0.06 . Adjusted EBITDA of 66 to $70 million and free cash flow of 76 to $82 million , an increase from our prior outlook of 66 to $76 million .

Speaker #4: In closing , we delivered solid execution in this third quarter with growth in total revenue . Gross margin guidance , continued strength in our recurring connected services and year over year profitability , growth .

Speaker #4: As we look to the remainder of fiscal 2026 , we remain focused on disciplined execution , strong cash flow generation and maintaining the financial flexibility to support long term profitable growth .

Antonio Rodriquez: As we look to the remainder of fiscal 2026, we remain focused on disciplined execution, strong cash flow generation, and maintaining the financial flexibility to support long-term profitable growth. On our next call, we expect to provide our initial fiscal 2027 guidance and an update on our strategic priorities. With that, I'll turn it back to Brian.

Tony Rodriquez: As we look to the remainder of fiscal 2026, we remain focused on disciplined execution, strong cash flow generation, and maintaining the financial flexibility to support long-term profitable growth. On our next call, we expect to provide our initial fiscal 2027 guidance and an update on our strategic priorities. With that, I'll turn it back to Brian.

Speaker #4: On our next call , we expect to provide our initial fiscal 2027 guidance and an update on our strategic priorities With that , I'll turn it back to Brian

Speaker #3: Thanks , Tony . In closing , we're proud of our performance as we approach the end of fiscal 2026 . We believe that our results reflect strong execution , solid cash generation , and continued customer momentum together with a disciplined approach to capital allocation .

Brian Krzanich: Thanks, Tony. In closing, we're proud of our performance as we approach the end of fiscal 2026. We believe that our results reflect strong execution, solid cash generation, and continued customer momentum, together with a disciplined approach to capital allocation. We believe the underlying trajectory of the business remains strong. Connected services continues to be our expected growth engine. The economics of our recent business are very attractive, and the XUI and agent programs discussed today are expected to position us well for growth as they scale. The story of fiscal 2026 has been one of execution. We believe that the story of fiscal 2027 will be one of growth, powered by the foundation we've built, the customer commitments we've delivered, and the opportunities we see ahead with XUI and outside of automotive. We remain confident in our strategy and execution, and we're excited about the path ahead.

Speaker #3: We believe the underlying trajectory of the business remains strong . Connecting services continues to be our expected growth engine . The economics of our recent attractive and the sky and agent programs discussed today are expected to position us well for growth as they scale the story of fiscal 2026 has been one of execution We believe that the story of fiscal 2027 will be one of growth , powered by the foundation we've built , the customer commitments we've delivered , and opportunities we see ahead .

Speaker #3: With Z and outside of automotive , we remain confident in our strategy and execution , and we're excited about the path ahead . And with that , we'll open up the line for questions

Brian Krzanich: With that, we'll open up the line for questions.

Speaker #1: Thank you As a reminder to ask a question , please press star one one on your telephone and wait for your name to be announced .

Operator: Thank you. As a reminder, to ask a question, please press *1 on your telephone and wait for your name to be announced. To withdraw your question, please press *1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.

Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A roster Our first question comes from the line of Mark Delaney with Goldman Sachs .

Speaker #1: Your line is now open

Speaker #5: Yes . Good afternoon . Thank you very much for taking the questions Congratulations on the win with Stellantis . I am hoping to better understand the financial implications of the UI backlog , including the recent win .

Mark Delaney: Yes, good afternoon. Thank you very much for taking the questions. Congratulations on the XUI win with Stellantis. I'm hoping to better understand the financial implications of the XUI backlog, including the recent win, and now I think you have six in total. I understood the comments around that taking time to ramp up, but maybe you can help investors to better understand what those existing wins will mean for the business for both revenue and profits when they do fully ramp, and how long that may take to occur.

Speaker #5: And now I think you have six in total . Understood the comments around that . Taking time to to ramp up . But maybe you can help investors to better understand what those existing wins will mean for the business , for both revenue and profits when they do fully ramp , and how long that may take to occur .

Brian Krzanich: Sure, I can start. This is Brian, and then Tony can jump in probably with some of the more high level detail of the finances. We said there's about 100,000 vehicles on the road right now with XUI, and that's really pretty good considering really starting production was just a little over a month ago. You know, for me, the ramp is off and going. We have several more OEMs that should do start of production, say, at the end of Q4, beginning of Q1. We don't actually control exactly when, and there's a lot of partners that have to come together to deliver the on-time launch. I really think that number is going to go up significantly as we go into Q1, Q2, Q3, fiscal of 2027.

Speaker #3: I can start . This is Brian . And then Tony can jump in , probably with some of the more high level detail of the finances , but , you know , we said there's about 100,000 vehicles on the road right now with Zoey , and that's really pretty good considering really started production was just a little over a month ago So , you know , for me , the ramp is going .

Speaker #3: We have several more OEMs that should do start up production , say , at the end of Q4 , beginning of Q1 You know , we don't actually control exactly when .

Speaker #3: And there's a lot of , you know , partners that have to come together to , to deliver the on time launch , but , you know , so I really think that number is going to go up significantly as we go into Q1 , Q2 , Q3 , fiscal 27 .

Speaker #3: So , you know , if I looked at 27 in total , I think you should see , you know , a couple million cars on the road with Z versus , you know , the 100,000 that we have today Financially , what that'll mean is we get paid the same way we do with the prior products , where we get the connect , the license fee .

Brian Krzanich: If I looked at 2027 in total, I think we should see a couple million cars on the road with Cerence XUI versus the 100,000 that we have today. Financially, what that will mean is we get paid the same way we do with the prior products, where we get the license fee when the car is shipped from the factory, and then the connected fee over the life of the connection. What we're seeing is these licenses for connected vehicles are actually going longer. We said in the past that our average was like three-ish years. The average of the Cerence XUI deals would be more close to 7 years. We're seeing much longer times for those. For 2027, Cerence XUI and connected will be the growth engines in automotive for us.

Speaker #3: When the product , the is shipped from the factory , and then the connected fee over the life of the connection . And what we're seeing is these licenses for connected vehicles are actually going longer .

Speaker #3: We said in the past that our average was like three ish years . The average of the Z deals would be more close to seven years .

Speaker #3: So we're seeing much longer times for those So for 27 , it will actually we will Z and connected will be the growth engines .

Speaker #3: And automotive for us . We haven't forecasted . 27 so I expect it to still be relatively minimum . You know , as they ramp up in Q4 .

Brian Krzanich: We haven't forecasted 2027. I expect it to still be relatively minimum, as they ramp up in Q4. As we go into 2027, it will fuel the growth along with connected. All the Cerence XUI models are connected, so it kind of has a double whammy. You get paid more for Cerence XUI, and they are all connected. We haven't given an exact price for what the Cerence XUI deals are, the price per unit, but it is significantly higher than the current price per unit that we quote in our earnings calls for our current products. We haven't given an exact number for that. Part of that is because it varies depending on the features that everybody chooses and some of that, but all of them are significantly higher than what we're quoting today.

Speaker #3: But as we go into 27 , it will fuel the growth along with connected all the Z models are connected . So it kind of has a double whammy .

Speaker #3: You get paid more for Z and they're all connected . We haven't given an exact price for what the Z deals are . The price per unit , but it is significantly higher than the current price per unit that we quote in our earnings calls for our current products .

Speaker #3: So but we haven't given an exact number for that . And part of that's because it varies depending on the features that everybody chooses .

Speaker #3: And , and some of that . But all are significantly higher than what we're quoting today

Speaker #4: Yeah . And just to summarize that , I think it's exactly right . The , you know , the impact of Z is that it's a growth driver both to grow to revenue and to profitability , but it does take time to ramp the old programs down , ramp the new programs up , but it'll be , you know , it will result in higher p U over time as those ramp up .

Antonio Rodriquez: Yeah, just to summarize that, I think it is exactly right. The impact of Cerence XUI is that it is a growth driver, both to revenue and to profitability. It does take time to ramp the old programs down, ramp the new programs up. It will result in higher PPU over time as those ramp up. With the higher PPU, it creates the operating leverage that we have talked about. Bryan and I have always talked about that our goal is to have a growing business that is increasingly profitable. We have shown that over the last probably 8 quarters now that we have been together. Yeah, Cerence XUI means again, revenue growth and increasing profitability growth.

Tony Rodriquez: Yeah, just to summarize that, I think it is exactly right. The impact of Cerence XUI is that it is a growth driver, both to revenue and to profitability. It does take time to ramp the old programs down, ramp the new programs up. It will result in higher PPU over time as those ramp up. With the higher PPU, it creates the operating leverage that we have talked about. Bryan and I have always talked about that our goal is to have a growing business that is increasingly profitable. We have shown that over the last probably 8 quarters now that we have been together. Yeah, Cerence XUI means again, revenue growth and increasing profitability growth.

Speaker #4: And with the higher p U and , you know , creates the operating leverage that we've talked about , Brian , I've always talked about that we you know , our goal is to have a , you know , a growing business that's increasingly profitable .

Speaker #4: And we've shown that over the last probably , you know , eight quarters now that we've been together . So yeah , this will , you know , Z means , you know , again , revenue growth and increasing profitability , growth

Speaker #5: Very helpful context. My other question was about the revenue trajectory into next year. I very much recognize your comments around needing to wait for next quarter for the quantitative guidance.

Mark Delaney: Very helpful context. My other question was about the revenue trajectory into next year. Very much recognize your comments around needing to wait for next quarter for the quantitative guidance. I do think last call, the company suggested that revenue next year could grow high singles or low double digits. If you could just speak a little bit qualitatively on how you think about the top line trajectory into 2027, if you have any early thoughts there and any key puts and takes. Thank you.

Speaker #5: I do think last call the company suggested that revenue next year could grow high single to low double digits . So if you could speak a little bit qualitatively on how you think about the top line trajectory into 27 , if you have any early thoughts , there and any key puts and takes .

Speaker #5: Thank you

Speaker #3: Sure . I can start again . And Tony again can give you kind of the breakdown with a little more financial detail , but again , we tried to give you a little bit of a grounding this quarter by giving you , hey , there's 100,000 vehicles on the road and you know , I expect Non-auto to be , you know , 7 to $9 million , that kind of gives you the baseline for this year for where we're at , right ?

Brian Krzanich: Sure. I can start again, Tony can give you kind of the breakdown with a little more financial detail. Again, we tried to give you a little bit of a grounding this quarter by giving you, hey, there are 100,000 Cerence XUI vehicles on the road, and I expect non-auto to be $79 million. That kind of gives you the baseline for this year for where we're at, right? By the time Q4 ends, expect the Cerence XUI number to be significantly higher than that 100,000, right? We'll probably give you the number again at the end of the year just to, again, kind of set the baseline. Yeah, I think overall, you'll see us in the high single to low double digits overall growth.

Speaker #3: By the time Q4 ends , expect , you know , the Z number to be significantly higher than that 100,000 , right ? And , and we'll probably give you the number again at the end of the year , just to , again , kind of set the baseline .

Speaker #3: If I look into 27 . Yeah , I think overall , you'll see us in the high single to low double digits . Overall growth , but again , what I think you'll see is strong growth in connected because the Z vehicles will be the driver of a lot of those connected vehicles .

Brian Krzanich: Again, what I think you'll see is strong growth in connected because the Cerence XUI vehicles will be the driver of a lot of those connected vehicles. You'll see strong growth in PPU as Cerence XUI continues to grow more into the product base. We plan on having significant growth in the non-automotive space for next year. We haven't given you the forecast for that, but you can think of it as my expectation is non-automotive will grow faster as a percentage than the automotive space for next year. You put those together, and that's how you get to that, Well, it should be high single digits to low double digits. It's going to be increasingly better as we go through the year.

Speaker #3: You'll see strong growth in P U as connected as Z continues to to grow more into the the product base and then , you know , we plan on having significant growth in the non space for next year .

Speaker #3: We haven't given you the forecast for that , but you can think of it as my expectation is not will grow faster as a percentage than the automotive space for next year .

Speaker #3: And so you put those together and and that's how you get to that . Well , it should be high single digits to , to , to low double digits .

Speaker #3: But then , you know , it's going to be increasingly better as we go through the year . I expect it's going to be growing much faster as we exit 27 because more and more of it will be connected .

Brian Krzanich: I expect it's going to be growing much faster as we exit 2027 because more and more of it will be connected, and more and more of it will be non-automotive. It'll be a nice steady ramp as it goes through that year. We haven't given the numbers yet. I'd love to give you what we're thinking right now, but I'm held to my forecast process. Yeah, that's what's going to drive it and fuel the growth.

Speaker #3: And more and more of it will be non-automotive . So it'll it'll be a nice steady ramp as we go through that year .

Speaker #3: We haven't given the numbers yet . You know , I'd love to give you what we're thinking right now , but I'm held to my forecast process .

Speaker #3: But yeah , that's what's going to drive and fuel the growth .

Speaker #4: Yeah . And in a couple caveats , of course , when we talked about the those growth rates that , that we see in our core business , it was for the technology growth .

Antonio Rodriquez: Yeah, a couple caveats, of course. When we talked about those growth rates that we see in our core business, it was for the technology growth. Again, I think we've said before that professional services, as they become more efficient, will decrease as a percentage in the mix. We still think there's a strong base in professional services, but certainly, we don't believe that that's growing. We think that's kind of a base number and that it's important to the business, but it will lower as a percentage of the mix. As Brian mentioned, the non-automotive will kind of be the real growth from a percentage standpoint growth engine in the future, albeit at a smaller base out of the blocks.

Tony Rodriquez: Yeah, a couple caveats, of course. When we talked about those growth rates that we see in our core business, it was for the technology growth. Again, I think we've said before that professional services, as they become more efficient, will decrease as a percentage in the mix. We still think there's a strong base in professional services, but certainly, we don't believe that that's growing. We think that's kind of a base number and that it's important to the business, but it will lower as a percentage of the mix. As Brian mentioned, the non-automotive will kind of be the real growth from a percentage standpoint growth engine in the future, albeit at a smaller base out of the blocks.

Speaker #4: Again , I think we've said before that , you know , professional services , as they become more efficient , will , will decrease as a percentage in the mix .

Speaker #4: And we still think there's a strong base in professional services , but it certainly we don't believe that that's growing . We think that's a kind of a base number .

Speaker #4: And and that it's important to the business . But it lower as a percentage of the mix . And as Brian mentioned , the Non-automotive will kind of be the growth , the real growth from percentage standpoint , growth engine in the future , albeit at a , at a smaller base out of the blocks .

Speaker #3: And then just to none of those forecasts include anything about IP monetization . And we've said that we have currently efforts going with Sony , TCL Apple and Amazon in that space .

Brian Krzanich: Just remember, none of those forecasts include anything about IP monetization. We've said that we have currently efforts going with Sony, TCL, Apple, and Amazon in that space. We don't forecast those because we can't absolutely predict the schedules, so if I miss by a month because of court dates or whatever, I need to be careful. Those would all be on top of that. We have a couple of those that are due to go to the court before the end of the year, this year, and then some more into next year. I see that as on top of everything else we've talked about from our core technology.

Speaker #3: And we don't forecast those because we don't really we can't predict the schedules . And so if I miss by a month because of court dates or whatever , I need to be careful .

Speaker #3: So those would all be on top of that. We have a couple of those that are due to go to the court before the end of the year.

Speaker #3: This year . And then , you know , some more into next year . So I , I see that as on top of everything else we've talked about from our core technology

Speaker #5: Thank you . I'll pass it on .

Mark Delaney: Thank you. I'll pass it on.

Speaker #1: Thank you . Our next question comes from the line of it . Michelle , with TD Cowan . Your line is now open .

Operator: Thank you. Our next question comes from the line of Itay Michaeli with TD Cowen. Your line is now open.

Speaker #6: Hey , great . This is Justin on Free Thai . How's everyone doing ?

[Analyst] (TD Cowen): Hey, great. This is Justin on for Itay. How's everyone doing?

Speaker #7: Good .

Brian Krzanich: Good.

Speaker #6: So a couple quick questions , Tony . Maybe the first one for you . Appreciate you highlighting the Q4 seasonality . Anything outside of normal seasonality that you might be seeing , at least in current production schedules , volatilities that may be hitting kind of Q4 on the licensing side or have things been like relatively stable ?

[Analyst] (TD Cowen): a couple quick questions. Tony, maybe the first one for you. Appreciate you highlighting the Q4 seasonality. Anything outside of normal seasonality that you might be seeing, at least in current production schedules, volatilities, that may be hitting kind of Q4 on the licensing side? Or have things been relatively stable? Obviously, the H2 production environment's a little bit more volatile at this point, just trying to get a better understanding of what you might be seeing there.

Speaker #6: Obviously , the , you know , the second half production environments a little bit more volatile at this point . So just to get a better understanding of what you might be seeing there .

Antonio Rodriquez: I think we kind of highlighted that a little bit in the call. Again, from a volume standpoint, Q3 over Q3 a year ago, I think we saw some volume declines primarily because, again, there were some volume ramp-ups in a Q3 a year ago, given the tariff oppositions. As we think about Q3 to Q4, I don't see really any movement off of those volumes other than potentially, we've looked back in history, and there is oftentimes a slight decrease in our Q4 in timeframe with regard to volumes, but not anything really material that we're seeing. You got to remember that ours is, again, a volume business on the license, variable license side. We think about the broader market and our specific piece of the broader market. Volume is always important. I don't see anything really changing much from Q3 to Q4.

Speaker #4: Yeah , I think we kind of highlighted that a little bit in in the call . So , you know , again , from a volume standpoint , Q3 over Q3 a year ago , I think we saw some volume declines primarily because , again , there were some volume ramp ups in a Q3 a year ago , given the tariff positions , but as we think about Q3 to Q4 , I don't see really any .

Tony Rodriquez: I think we kind of highlighted that a little bit in the call. Again, from a volume standpoint, Q3 over Q3 a year ago, I think we saw some volume declines primarily because, again, there were some volume ramp-ups in a Q3 a year ago, given the tariff oppositions. As we think about Q3 to Q4, I don't see really any movement off of those volumes other than potentially, we've looked back in history, and there is oftentimes a slight decrease in our Q4 in timeframe with regard to volumes, but not anything really material that we're seeing. You got to remember that ours is, again, a volume business on the license, variable license side. We think about the broader market and our specific piece of the broader market. Volume is always important. I don't see anything really changing much from Q3 to Q4.

Speaker #4: You're really movement off of kind of those volumes other than potentially we've we've looked back in history and there is oftentimes a slight decrease in our Q4 in , you know , time frame with regard to volumes .

Speaker #4: But but not anything really material that we're seeing . So but you got to remember that ours is , again , a volume business on the license , a license side .

Speaker #4: So , you know , you know , we think about the broader market and our specific piece of the broader market . You know , that's volume is always important , but I don't see anything really changing much from Q3 to Q4 .

Speaker #6: Perfect . Appreciate the color there . And then , Brian , maybe a couple for you , maybe any update or that you could share on the bid X UI launch , how are things progressing ?

[Analyst] (TD Cowen): Perfect. Appreciate the color there. Brian, maybe a couple for you maybe. Any update or that you could share on the BYD Cerence XUI launch, how are things progressing? What's going on there? Then maybe double-clicking a little bit on that Stellantis win, kind of what are the key parameters and benchmarks that you were comped against, and maybe how the competitive environment was within that business quoting?

Speaker #6: What's going on there ? And then maybe double clicking a little bit on that Stellantis win , kind of what are the key parameters and benchmarks that you were comped against and maybe how the competitive environment was within that business , quoting

Speaker #3: Sure . So , you know , when we said 100,000 vehicles on the road bid is a part of that and there's another OEM that is a part of that as well .

Brian Krzanich: Sure. When we said 100,000 vehicles on the road, BYD is a part of that. There's another OEM that is a part of that as well. There's more than one OEM in that 100,000. What happens is they ramp these things by geography and by language, and sometimes by model, especially in some of the larger OEMs where they have maybe 10 different models of vehicle. They'll launch them kind of sequentially. From a BYD perspective, though, it's going well. We're continuing to add more geographies and more languages. We're up to 20, we said now. We add them as they require, based on their production ramp. The feedback's been really good. The feedback's been very positive on Cerence XUI from an end-user standpoint, and just the production capability of being able to build a vehicle and develop the software into the vehicle.

Speaker #3: So there's , there's more than one OEM in that 100,000 . You know , what happens is they go , they ramp these things by geography and by language and sometimes by model , especially in some of the other and some of the larger OEMs where they have maybe , you know , ten , ten different models of vehicle , they'll they'll launch them kind of sequentially from a bid perspective , though , it's going well .

Speaker #3: We're , we're continuing to add more geographies and more languages . We're up to 20 . We said now . And so we add them as they require based on their production ramp .

Speaker #3: And the feedback has been really good . The feedback has been very positive on X UI from a user end user standpoint , and just the production capability of being able to build a vehicle and , and develop the , the software into the vehicle .

Speaker #3: So for us , we think the ramp is going quite well

Brian Krzanich: For us, we think the ramp's going quite well.

Speaker #6: Very helpful . Appreciate it .

[Analyst] (TD Cowen): Very helpful. Appreciate it.

Speaker #1: Thank you . As a reminder to ask a question at this time , please press star one one on your touchtone telephone Our next question comes from the line of Jeff Van Ree with Craig-hallum Capital Group .

Operator: Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Your line is now open.

Speaker #1: Your line is now open .

Speaker #8: Hey , Brian . Tony , this is Daniel on for Jeff on maybe sort of if you want to characterize how the typical sales cycle for Z looks like , how long are these conversations ?

[Analyst] (Craig-Hallum Capital Group): Hey, Bryan, Tony. This is Daniel on for Jeff. Maybe sort of if you want to characterize how the typical sales cycle for XUI looks like, how long are these conversations? What's the competition like? Maybe you could use Stellantis as an example, but typical XUI sales cycle.

Daniel Hibshman: Hey, Bryan, Tony. This is Daniel on for Jeff. Maybe sort of if you want to characterize how the typical sales cycle for XUI looks like, how long are these conversations? What's the competition like? Maybe you could use Stellantis as an example, but typical XUI sales cycle.

Speaker #8: What's the competition like ? Maybe you could use Stellantis as an example , but typical sales cycle .

Speaker #7: You know .

Brian Krzanich: Boy, the sales cycle, they're not short. You typically, it starts with the OEM producing an RFQ. Oftentimes, especially if we are already involved with that OEM, we help them generate what the RFQ should look like as far as what kind of features they want to look for and what's the technology out there capable of. That starts the process. From there, you usually have to come in with a proposal that includes what the technology is, what your hardware requirements are. What we often do is bring in vehicles that are actually running the technology, and bring them, for example, we went into one large OEM back in the spring with the vehicles to their headquarters and brought their whole board of directors to the meeting to sit in the vehicle and actually see what was capable.

Speaker #3: The sales cycle , they're not sure . You typically , you know , it starts with the OEM producing an RFQ and oftentimes , especially if we are already involved with that OEM , we help them generate what the RFQ should look like .

Speaker #3: As far as what kind of features they want to look for . And , you know , what's what's the technology out there capable of .

Speaker #3: So that starts the process from there . You usually have to come in with a proposal that includes what the technology is , what your hardware requirements , what we often do is bring in vehicles that are actually running the technology and bring them , for example , we went into one large OEM back in the spring with the vehicles to their headquarters and brought their whole board of directors to the to the meeting , to , to sit in the vehicle and actually see what was capable .

Speaker #3: And then you start kind of getting into the pricing and features and timing . And oftentimes what's really important is the amount of support you're willing to give , because the integration of the software , it's not a simple download like you do on your phone or your PC .

Brian Krzanich: You start kind of getting into the pricing and features and timing. Oftentimes what's really important is the amount of support you're willing to give, because the integration of the software, it's not a simple download like you do on your phone or your PC. There's a great deal of integration with the OEM, the tier one, hardware providers, other software providers that you all have to do to get to that point. It's the amount of support you're willing to give. We oftentimes have engineers sitting in the OEM to really help develop the product. That all takes probably on average 6 months at least. I've got some that are going well beyond that now. You're kind of waiting for their process.

Speaker #3: There's a great deal of integration with the OEM , the tier one , the hardware providers , the , you know , other software providers that you all have to do to , to get to that , that point .

Speaker #3: And it's the amount of support you're willing to give . So we oftentimes have engineers sitting in the OEM to really help develop the product that all takes probably on average , six months at least .

Speaker #3: I've got some that are going well beyond that . Now , because then you're kind of waiting for their process from a competitive standpoint , what usually happens is kind of like everybody shows up at the beginning and they usually narrow it down to 1 or 2 , usually two of us at the end .

Brian Krzanich: From a competitive standpoint, what usually happens is everybody shows up at the beginning, and they usually narrow it down to one or two, usually two of us at the end. It's kind of a runoff. What's interesting to me is it's not been a price war. It hasn't been, Well, we need another dollar out of this, or something like that. It's really been more about features and support. Can you support all of the interconnects they want, the connections to other third-party products that they're trying to do to personalize the vehicle, and then the amount of support you'll give in launching the vehicle and getting this thing to production. That's really been more what's the debate at the end. Yeah, there's a little bit of price.

Speaker #3: And then it's kind of a runoff . What's interesting to me is it's not been a price war . It hasn't been , you know , well , we need another dollar out of this or something like that .

Speaker #3: It's really been more about features and support , you know , can you support all of the interconnects ? They want the connections to other third party products that they're trying to do to personalize the vehicle .

Speaker #3: And then the amount of support you’ll give in launching the vehicle and getting this thing to production—that’s really been more what’s kind of the debate at the end.

Speaker #3: And then , yeah , there's a little bit of price . I'm not going to say there's nothing , but we haven't gotten to a point where we think it's a race to the bottom .

Brian Krzanich: I'm not going to say there's nothing, but we haven't gotten to a point where we think it's a race to the bottom. Like I said, the prices we're getting right now are quite a bit higher than what we currently quote for our PPU.

Speaker #3: And like I said , the price were getting right now are are quite a bit higher than what we currently quote for our GPU .

Speaker #8: Great . And that's helpful . And then on kind of Q4 and just what's implied as I look at it , it in our model , I think the Q4 uptick ex fixed license , it looks like it sort of implies a rebound in variable license and pro forma royalties , maybe something like a 10% jump in , variable slash pro forma , just your thoughts on , on Q4 , what's your visibility ?

[Analyst] (Craig-Hallum Capital Group): Great. That's helpful. On Q4 and just what's implied, as I look at it in our model, I think the Q4 uptick ex-FIX license, it looks like it sort of implies a rebound in variable license and pro forma royalties, maybe something like a 10% jump in variable/pro forma. Just your thoughts on Q4, what's your visibility? Are you expecting a rebound in unit volume, sort of in end customers or maybe in percentage of cars shipped with? Just what are you thinking to get you to that Q4 number?

Daniel Hibshman: Great. That's helpful. On Q4 and just what's implied, as I look at it in our model, I think the Q4 uptick ex-FIX license, it looks like it sort of implies a rebound in variable license and pro forma royalties, maybe something like a 10% jump in variable/pro forma. Just your thoughts on Q4, what's your visibility? Are you expecting a rebound in unit volume, sort of in end customers or maybe in percentage of cars shipped with? Just what are you thinking to get you to that Q4 number?

Speaker #8: Are you expecting a rebound in unit volumes , sort of in the end , customers or maybe in percentage of cars shipped with just what are you thinking to get you to that Q4 number ?

Speaker #3: You know , we always have pretty good insight into the numbers . And , and , you know , we're already a little bit into the fourth quarter , right ?

Brian Krzanich: We always have pretty good insight into the numbers. We're already a little bit into the Q4, right? We have some insight into this number set. What you're really just seeing, like Tony said, was we see kind of a return to the typical seasonal Q4 output numbers from production vehicles. We're seeing more and more connected. We saw 20% year-over-year growth in the Q3 in connected. We're going to see similar kinds of growth in the Q4 for connected as well. We just continue to see we're back to seasonality. We're back to a normal Q4, and we're seeing more and more connected, and that kind of gets us to our Q4 number. Tony, if there's anything else you want to-

Speaker #3: So we , we have some insight into this number set and what you're really just seeing , like Tony said , was we see kind of a return to the typical seasonal Q4 output numbers from a production vehicles .

Speaker #3: We're seeing more and more connected . We saw 20% year over year growth in the third quarter in connected . You know , we're going to see similar kinds of growth in the fourth quarter for connected as well .

Speaker #3: So , you know , we just continue to see our kind of we're back to seasonality . We're back to a normal Q4 and you know , we're we're seeing more and more connected .

Speaker #3: And that kind of gets us to our Q4 number. Tony, if there's any—

Speaker #4: Yeah , the only other thing I would add is we think about some of our Non-automotive areas . We see some activity of that , that really won't get into specifically or in the details , but there's some non-automotive increase in the number as well .

Antonio Rodriquez: Yeah. The only other thing I would add is we think about some of our non-automotive areas. We see some activity of that I really won't get into specifically or into details, there's some non-automotive increase in the number as well.

Tony Rodriquez: Yeah. The only other thing I would add is we think about some of our non-automotive areas. We see some activity of that I really won't get into specifically or into details, there's some non-automotive increase in the number as well.

Speaker #8: Okay. That's helpful. Thanks, guys.

[Analyst] (Craig-Hallum Capital Group): Okay, that's helpful. Thanks, guys.

Daniel Hibshman: Okay, that's helpful. Thanks, guys.

Speaker #1: Thank you . And I'm currently showing no further questions at this time . I'd now like to hand the call back over to Brian Krzanich for closing remarks

Operator: Thank you. I'm currently showing no further questions at this time. I'd now like to hand the call back over to Brian Krzanich for closing remarks.

Speaker #3: Yeah , I just would like to say thank you , everybody , for coming to our third quarter earnings call . We really look forward to our fourth quarter , where we can present our 2027 roadmap and forecasts .

Brian Krzanich: I just would like to say thank you, everybody, for coming to our Q3 earnings call. We really look forward to our Q4, where we can present our 2027 roadmap and forecasts. We're excited for the work we're already doing lining up to that. Like we said, it's the year of growth for 2027, where Cerence XUI really helps fuel that growth. The connected vehicles percentage will continue to increase, as we said. Then it's going to be a year where we will see more and more of the non-automotive space growth, and we expect that space to grow at a rate much faster than the automotive portion of our business as well. We look forward to seeing you in December for the Q4 results and our forecast into 2027.

Speaker #3: We're excited for the work . We're already doing , lining up for that . And like we said , it's it's the year of growth for 2027 , where Z really helps fuel that growth .

Speaker #3: The connected vehicles percentage will continue to increase . As we said , and , and then it's going to be a year where , you know , we will see more and more of the Non-automotive space growth .

Speaker #3: And we expect that space to grow at a rate much faster than the automotive portion of our business , as well . So we look forward to seeing you in December for the fourth quarter results and our forecast into 27 .

Speaker #3: Thank you for joining . And I'd just like to thank the whole team for great quarter . Really great execution and great results .

Brian Krzanich: Thank you for joining, and I'd just like to thank the whole Cerence team for a great quarter, really great execution, and great results. With that, I'll say good evening.

Speaker #3: And with that , I'll say good evening .

Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.

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