Cerence Shares Drop On Q3 Revenue Miss, Dismal Guidance

  • Cerence Inc CRNC reported a third-quarter FY22 revenue decline of 8% year-on-year to $89.04 million, missing the consensus of $91.7 million. Non-GAAP EPS of $0.43 beat the consensus of $0.42.
  • Segments: Revenue from License fell 7.1% Y/Y to $46.45 million, Connected services decreased 34% Y/Y to $19.99 million, and Professional services rose 36.6% Y/Y to $22.6 million.
  • Margins: The non-GAAP gross margin contracted 540 bps to 73.7%.
  • The non-GAAP operating margin contracted 830 bps to 29.4%, and the adjusted EBITDA margin contracted 800 bps to 32%.
  • Cerence's free cash flow was negative $(8.4) million and held $127.3 million in cash and equivalents.
  • Outlook: Cerence sees Q4 revenue of $52 million - $58 million, below the consensus of $98.5 million. Non-GAAP EPS loss of $(0.32) - $(0.20), below the consensus of $0.54.
  • Cerence cut the FY22 revenue outlook from $365 million - $385 million to $322 million - $328 million below the consensus of $370.9 million.
  • Non-GAAP EPS of $1.08 - $1.17 (prior view $1.80 - $2.16) were below the consensus of $1.89.
  • Price Action: CRNC shares traded lower by 23.53% at $22.75 in the premarket on the last check Tuesday.
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