Cerence Reports Revenue Well Above Analyst Estimates Despite COVID-19 Slowdown
- Cerence’s $74.8 million in revenue was well above the analyst estimates of $61.5 million.
- The company said bookings are accelerating, with the second-highest rate of bookings for a quarter despite coronavirus-related slowdowns in manufacturing and sales of cars and will save $10 million a year after debt refinancing.
- Cerence offered fourth quarter guidance projecting $76 million to $80 million in revenue or $23 million to $26 million with adjusted EBITDA.
Expectations Surpassed
Cerence (CRNC), the developer of widely used automotive voice technology, announced Q3 FY2020 financial results well above analyst expectations. The company reported $74.8 million in revenue, making the $61.5 million estimated by analysts look very pessimistic. Dhawan pointed to the company’s debt refinancing this quarter as an important contributor to the short-term prospects of Cerence during the ongoing health crisis. The move will save more than $10 million a year in interest, while other business adjustments saved Cerence more than $6 million this quarter.
“While the impact of COVID-19 has weighed on the global economy, our fiscal year to-date revenues are up 8% compared to the same period in the prior year,” Cerence CEO Sanjay Dhawan told investors. “During a period of a dramatic drop-off in auto production our revenue declined less than 4% in the quarter versus a year ago. This was primarily due to the SaaS revenue contribution of our connected services and continued strength in our professional services business.”
New Features, More Bookings
Cerence claims that 54% of cars produced globally now include some of the company’s technology, giving it a real edge over its rivals. Amazon and Google are becoming increasingly competitive. Amazon is pushing out its Alexa Auto device to new countries at a steady clip and Google just signed a deal with Groupe PSA that will integrate its Android Automotive operating system into European car brands like Citroën, Peugeot, and Vauxhall. Cerence has been rolling out its own new features this year, though. Last week, the company launched a new synthetic voice called Cerence Reader and debuted the highly customizable Cerence Studio as well as the turn-key Cerence ARK Assistant to car companies this quarter. Dhawan teased some new products to come and described the success of the last quarter as a reason for optimism for the rest of the year.
“We recorded the second highest bookings quarter in the company’s history supported by several strategic wins in all major geographic markets,” Dhawan said. “While the business environment in the near term remains challenging, we are maintaining the 2024 growth targets in large part due to the strong bookings we have seen this year and the initial positive reactions by customers to our new product initiatives. These new products such as CarLife and Cerence Pay will play a key role in generating a new line of SaaS or transaction-based revenue as we move toward the 2024 target model.”
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