Cerence Authorizes First Share Repurchase Program
The board approved up to $30 million of buybacks as third-quarter revenue reached $69.6 million and Adjusted EBITDA rose 50% to $13.5 million.
Cerence Inc. (CRNC), a conversational-AI software company for vehicles, reported third-quarter fiscal 2026 revenue of $69.6 million, up 12% from a year earlier, and authorized its first share-repurchase program of up to $30 million of common stock over 12 months.
The revenue increase was driven primarily by the timing of fixed license contract execution and growth in Connected Services. License revenue was $41.6 million, including $12.5 million of fixed license contract revenue versus none in the year-ago quarter. Connected services revenue rose more than 20% to $15.5 million, reflecting continued adoption of connected solutions. Professional services revenue declined to $12.5 million, reflecting a continued focus on standardization and higher-margin implementations.
GAAP gross margin expanded to 76.0% from 73.7% a year earlier. GAAP net income was $1.5 million, or $0.03 a share, versus a $2.7 million loss, or $0.06 a share, a year earlier. Both results were within guidance. Adjusted EBITDA was $13.5 million, up 50% from $9.0 million, and exceeded the high end of the company’s outlook.
Cash generation remained a feature of the quarter. GAAP net cash provided by operating activities was $20.0 million. Free cash flow was $19.6 million, up more than 20% from $16.1 million a year earlier. The board’s buyback authorization is to be funded primarily with existing cash and secondarily with free cash flow. Cash and cash equivalents were $127.6 million at June 30, 2026. Long-term debt was $173.5 million.
Chief Executive Officer Brian Krzanich said the quarter showed execution across the business, strong cash generation, and momentum across the AI portfolio. The company signed a multi-brand Cerence xUI award with Stellantis and secured the first customer for its Mobile Work Agent.
Trailing-twelve-month penetration of worldwide auto production with Cerence technology was 50%, down from 51% in the first quarter. The change in Cerence connected cars shipped slowed to 4% from 14% in the first quarter. The change in Adjusted Total Billings rose to 6% from 2% in the first quarter.
For the fiscal fourth quarter ending September 30, 2026, revenue is expected at $61 million to $65 million, with no fixed license revenue contracts expected to be signed. Gross margins are projected between 72% and 75%. GAAP net income is projected at $1 million to $5 million, or $0.02 to $0.10 a share. Adjusted EBITDA is expected at $1 million to $5 million.
For the full fiscal year ending September 30, 2026, revenue is expected at $310 million to $314 million. Gross margin is expected at 78% to 79%. GAAP net (loss) income is projected at $(1) million to $3 million, or $(0.02) to $0.06 a share. Adjusted EBITDA is expected at $66 million to $70 million. Operating cash flow is projected at $81 million to $85 million, and free cash flow at $76 million to $82 million.
Krzanich said the company continues to build toward a larger opportunity as AI becomes a strategic priority for automakers and extends into adjacent markets. The company looks forward to providing additional perspective on its roadmap and long-term growth strategy next quarter.