Cerence Stocks Drop After Mixed Quarterly Report and Dour Guidance

• Cerence reported earnings of $0.43, very slightly above the $0.42 analysts predicted.
• Cerence’s $89 million in revenue was well below the $91.7 million expected raised concern.
• Fourth quarter revenue projections of $52 million to $58 million far short of $98.5 million analyst expectation.
• The same goes for annual revenue projection of between $322 million and $328 million compared to $370.9 million prediction.
• Immediate fall in Cerence stock price from $29.85 to $23.84 in a single day, stabilizing around $24.

Cerence Switch-Up

Automotive voice technology developer, Cerence (CRNC) saw a quick fall in share prices after mixed Q3 FY2022 financial results and pessimistic projections for the remainder of the year. Though its $0.43 earnings beat expectations by a penny, analysts expecting $91.7 million in revenue were disappointed by the $89 million reported by the company. It was likely the shrunken revenue projections for the rest of the year that made the stock price lose nearly a quarter of its value and hover around $24. Cerence’s fourth quarter revenue is projected at between $52 million and $58 million, hitting between $322 million and $328 million for the year. That makes Wall Street’s previous expectations of $98.5 million and $370.9 million in revenue, respectively, seem far too optimistic.

Cerence cited forces beyond its control as the reason for the disconnect. The company began production on dozens of deals, launched a new Cerence Cloud service for professional services, and widened the reach of projects like Tour Guide to Mercedes, among other accomplishments. That said, Cerence’s concerns about inflation, computer chip availability, and supply chain slowdowns mean the company is limiting its fixed contracts to just $40 million a year and not sign any at all in the next quarter. Despite knowing the impact on its short-term financials, Cerence has determined the discomfort will help it reach its long-term growth goals.

“Notwithstanding external headwinds, we are invigorated for the future and confident in our direction,” Cerence CEO Stefan Ortmanns said. “Overall, we’re confident in our ability to make the type of decisions that will set us up for success in the coming quarters and years. We’re proud to continue to support our automaker partners as they build the next generation of connected in-vehicle experiences. And, with a strong innovation pipeline in place, we are confident in Cerence’s integral role for the digital cabin of the future.”

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