Cerence AI (NASDAQ: CRNC) lifts Q3 revenue 12% and OKs $30M repurchase
Rhea-AI Filing Summary
Cerence Inc. reported third-quarter fiscal 2026 revenue of $69.6 million, up 12% year-over-year, with GAAP net income of $1.5 million and gross margin of 76.0%. Adjusted EBITDA was $13.5 million, up 50% year-over-year and above the company’s guidance range.
The business generated $20.0 million in cash from operating activities and $19.6 million of free cash flow, which the company describes as up more than 20% year-over-year. Connected Services revenue increased more than 20% and total revenue benefited from $12.5 million of fixed license contract revenue, while Professional Services revenue declined as the company emphasized standardized, higher-margin implementations.
The Board of Directors authorized Cerence’s first stock repurchase program, permitting repurchases of up to $30,000,000 of common stock over the next 12 months. Key operating indicators included a 50% share of worldwide auto production using Cerence technology on a trailing-twelve-month basis and a 4% increase in connected cars shipped, offset by an 8.1% year-over-year decline in total units shipped with Cerence technology.
Positive
- Revenue increased 12% year-over-year to $69.6 million, with gross margin at 76.0% and GAAP net income of $1.5 million, indicating profitable growth in the quarter.
- Adjusted EBITDA reached $13.5 million, up 50% year-over-year, exceeding the high end of guidance and reflecting stronger operating performance on a non-GAAP basis.
- Free cash flow was $19.6 million, described as up more than 20% year-over-year, contributing to cash and cash equivalents of $127,607 thousand and supporting capital deployment flexibility.
- The Board authorized the first-ever share repurchase program of up to $30,000,000 over 12 months, allowing the company to return capital to shareholders when conditions are favorable.
Negative
- Approximately 11.4 million units shipped with Cerence technology in Q3, a decrease of 8.1% year-over-year, compared with a 1.8% decline in global auto production, signaling weaker unit volumes than the broader market.
- For the nine months ended June 30, 2026, the company recorded a GAAP net loss of $2.0 million on income before income taxes of $28.6 million, driven by a $30.7 million provision for income taxes.
Filing Explained
Cerence has authorization, not a completed buyback: up to $30 million may be spent starting August 10, with no required purchase amount.
This Form 8-K reports that Cerence authorized its first stock-repurchase program, with purchases permitted to begin
The disclosed ceiling is
The company says it intends to fund repurchases primarily with existing cash and secondarily with operating free cash flow, so the immediate structural change is a permitted cash-allocation program rather than a completed reduction in shares outstanding.
The filing says purchases may occur through open-market, privately negotiated, block, accelerated-share-repurchase, or other transactions, including authorized Rule 10b5-1 plans; it does not provide timing or amount for any individual repurchase.
The next concrete resolution point is a later company disclosure of an actual repurchase, because this filing leaves timing and amount open.
8-K Event Classification
3 items: 2.02, 8.01, 9.01
3 items
Item 2.02
Results of Operations and Financial Condition
Financial
Disclosure of earnings results, typically an earnings press release or preliminary financials.
Item 8.01
Other Events
Other
Voluntary disclosure of events the company deems important to shareholders but not covered by other items.
Item 9.01
Financial Statements and Exhibits
Exhibits
Financial statements, pro forma financial information, and exhibit attachments filed with this report.
Key Figures
Q3 FY26 Revenue: $69.6 million
Q3 GAAP Net Income: $1.5 million
Q3 Adjusted EBITDA: $13.5 million
+5 more
8 metrics
Q3 FY26 Revenue
$69.6 million
GAAP revenue for the three months ended June 30, 2026; increased 12% year-over-year.
Q3 GAAP Net Income
$1.5 million
Net income for the quarter ended June 30, 2026; diluted EPS was $0.03.
Q3 Adjusted EBITDA
$13.5 million
Adjusted EBITDA for the quarter; up 50% year-over-year and above the high end of guidance.
Q3 Free Cash Flow
$19.6 million
Free cash flow for the three months ended June 30, 2026; described as up more than 20% year-over-year.
Share Repurchase Authorization
$30,000,000
Maximum aggregate amount of common stock the company may repurchase under its first stock repurchase program over 12 months.
Cash and Cash Equivalents
$127,607 thousand
Cash and cash equivalents balance as of June 30, 2026 on the condensed consolidated balance sheet.
Percent of Worldwide Auto Production
50%
Trailing-twelve-month share of global auto production incorporating Cerence technology in Q3 FY26.
Units Shipped with Cerence Technology
11.4 million
Approximate Q3 FY26 units; decreased 8.1% year-over-year while global auto production decreased 1.8%.
Key Terms
Adjusted EBITDA, free cash flow, stock repurchase program, Rule 10b5-1, +2 more
6 terms
Adjusted EBITDA financial
"Adjusted EBITDA of $13.5 million increased 50% year-over-year and exceeded the high end of guidance."
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
free cash flow financial
"Generated $20 million in operating cash flow and approximately $20 million in free cash flow."
Free cash flow is the amount of money a company has left over after paying all its expenses and investing in its business, like buying equipment or updating facilities. It shows how much cash is available to reward shareholders, pay down debt, or save for future growth. This helps investors understand if a company is financially healthy and able to grow.
stock repurchase program financial
"Board of Directors authorized the Company's first-ever share repurchase program, permitting repurchases of up to $30 million."
A stock repurchase program is when a company buys back its own shares from the market. This can make each remaining share more valuable and shows that the company believes its stock is a good investment. It’s like a business treating its shares like a limited resource, hoping to boost confidence and share prices.
Rule 10b5-1 regulatory
"including authorized Rule 10b5-1 plans which would permit the Company to repurchase shares during blackout periods."
Rule 10b5-1 is a regulation that allows company insiders to buy or sell their shares at predetermined times, even if they have access to non-public information. It acts like setting a schedule in advance for transactions, helping prevent accusations of unfair trading. This rule provides a way for insiders to plan trades transparently, giving investors confidence that these transactions are not based on hidden information.
fixed license contracts financial
"Q3FY26 revenue included $12.5 million of revenue from fixed license contracts, respectively."
Adjusted Total Billings financial
"Adjusted Total Billings TTM of $240.0 million, an increase of 6.3% compared to the same period last year."
Adjusted total billings is a company-reported sales measure that shows how much it invoiced or contracted for customers during a period, after removing or normalizing one-time items (like the effects of acquisitions, major currency swings, or unusual credits). For investors it’s useful because it highlights underlying sales momentum and customer demand independent of accounting timing, similar to checking how much people actually signed up to pay before bookkeeping spreads those amounts over time.
Earnings Snapshot
Q3 revenue: $69.6 million · Guidance included
Quarter and nine months ended June 30, 2026
Q3 revenue
$69.6 million
Revenue increased 12% year-over-year.
Q3 GAAP net income
$1.5 million
Improved from a GAAP net loss of $2.7 million in the prior-year quarter.
Q3 Adjusted EBITDA
$13.5 million
Adjusted EBITDA increased 50% year-over-year and exceeded the high end of guidance.
Q3 free cash flow
$19.6 million
Free cash flow was described as up more than 20% year-over-year.
FY26 revenue guidance
$310 million to $314 million
Company provided full-year fiscal 2026 revenue outlook within this range.
Guidance
For Q4 FY26, the company guides to revenue of $61–$65 million, gross margin of 72–75%, GAAP diluted EPS of $0.02–$0.10, and Adjusted EBITDA of $1–$5 million. For FY26, it expects revenue of $310–$314 million, gross margin of 78–79%, GAAP diluted EPS of $(0.02)–$0.06, Adjusted EBITDA of $66–$70 million, net cash provided by operating activities of $81–$85 million, and free cash flow of $76–$82 million.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
What were Cerence (CRNC)'s key Q3 fiscal 2026 financial results?
Cerence reported Q3 FY26 revenue of $69.6 million, GAAP net income of $1.5 million, and Adjusted EBITDA of $13.5 million. Gross margin was 76.0%, and the company generated $20.0 million in operating cash flow and $19.6 million of free cash flow.
How did Cerence (CRNC)'s revenue mix look in Q3 fiscal 2026?
Total revenue was $69.6 million, including $41.6 million of license, $15.5 million of Connected Services, and $12.5 million of Professional Services. Fixed license contracts contributed $12.5 million, while Connected Services revenue increased more than 20% year-over-year.
What stock repurchase program did Cerence (CRNC) approve?
The Board authorized a stock repurchase program of up to $30,000,000 of common stock over 12 months. Repurchases may be made via open market purchases, Rule 10b5-1 plans, privately negotiated transactions, block trades, or other methods, and the program is fully discretionary.
What guidance did Cerence (CRNC) provide for Q4 fiscal 2026?
For Q4 FY26, Cerence expects revenue of $61–$65 million, gross margin of 72–75%, and GAAP diluted EPS of $0.02–$0.10. Adjusted EBITDA is projected between $1 million and $5 million, excluding stock-based compensation, restructuring costs and related items.
How strong is Cerence (CRNC)'s balance sheet and cash position?
As of June 30, 2026, Cerence held $127,607 thousand in cash and cash equivalents and had long-term debt of $173,458 thousand. Stockholders’ equity totaled $166,354 thousand, providing a capital base to support operations and the new repurchase program.
What key operating KPIs did Cerence (CRNC) highlight for Q3 FY26?
Cerence reported 50% of worldwide auto production using its technology on a trailing-twelve-month basis. Adjusted Total Billings TTM were $240.0 million, up 6.3% year-over-year, and the connected attach rate increased to 34.1% from 31.0% a year earlier.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________
FORM 8-K
________________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 5, 2026
________________________________________________________
(Exact name of Registrant as Specified in Its Charter)
________________________________________________________
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| (Address of Principal Executive Offices) | (Zip Code) | |||||||||||||
Registrant’s Telephone Number, Including Area Code: (857 ) 362-7300
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
________________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On August 5, 2026, Cerence Inc. (the “Company”) announced its financial results for the fiscal quarter ended June 30, 2026. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.
Also on August 5, 2026, the Company will use a presentation on its call with investors, discussing its financial results for the fiscal quarter ended June 30, 2026, and such earnings release presentation is furnished herewith as Exhibit 99.2. The press release and earnings release presentation include certain non-GAAP financial measures. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release and earnings release presentation.
The information in this Item 2.02 and the exhibits attached hereto are being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
Item 8.01 Other Events.
Cerence Inc.’s (the “Company”) Board of Directors authorized a stock repurchase program, pursuant to which the Company may purchase up to $30,000,000 of its outstanding common stock beginning August 10, 2026. Under the stock repurchase program, the Company intends to repurchase shares through open market purchases, privately-negotiated transactions, block purchases or otherwise in accordance with applicable federal securities laws, including authorized Rule 10b5-1 plans (which would permit the Company to repurchase shares when the Company might otherwise be precluded from doing so under insider trading laws) and Rule 10b-18 of the Securities Exchange Act of 1934.
The Company may choose to suspend or discontinue the stock repurchase program at any time. The stock repurchase program does not obligate the Company to purchase any particular number of shares. A copy of the Company's press release announcing the stock repurchase program is attached to this Current Report on Form 8-K as Exhibit 99.1.
Item 9.01 Financial Statements and Exhibits.
(d)Exhibits.
Exhibit Number | Description | |||||||
| 99.1 | Press Release announcing financial results dated August 6, 2026. | |||||||
| 99.2 | Earnings Release Presentation dated August 6, 2026. | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Cerence Inc. | ||||||||
Date: August 5, 2026 | By: | /s/ Tony Rodriquez | ||||||
| Name: Tony Rodriquez | ||||||||
| Title: Executive Vice President, Chief Financial Officer | ||||||||
Cerence AI Reports Third Quarter Results: Revenue Up 12% YoY, Connected Services Revenue Up 20% YoY; Operating Cash Flow of $20M Supports First-Ever Share Repurchase Program Headlines • Revenue of $69.6 million and GAAP net income of $1.5 million were within guidance; Adjusted EBITDA of $13.5 million increased 50% year-over-year and exceeded the high end of guidance. Connected Services revenue increased more than 20% year-over-year. • Generated $20 million in operating cash flow and approximately $20 million in free cash flow, up more than 20% YoY. • Expanded AI platform momentum and adoption, including a new multi-brand Cerence xUI award from Stellantis and the first customer win for Cerence's Mobile Work Agent. • Board of Directors authorized the Company's first-ever share repurchase program, permitting repurchases of up to $30 million of common stock over 12 months, reflecting confidence in the business and commitment to disciplined capital allocation. BURLINGTON, Mass., August 6, 2026 – Cerence Inc. (NASDAQ: CRNC) (“Cerence AI”), a global leader pioneering conversational AI-powered user experiences, today reported its third quarter fiscal year 2026 results for the period ended June 30, 2026. The Company also announced that its Board of Directors has authorized the Company's first share repurchase program, pursuant to which the Company may purchase up to $30,000,000 of its outstanding common stock over the next 12 months. “Our third-quarter results demonstrate continued execution across the business, with solid execution, strong cash generation, and momentum across our AI portfolio,” said Brian Krzanich, Chief Executive Officer of Cerence AI. “We signed an important multi-brand Cerence xUI award with Stellantis, secured the first customer for our Mobile Work Agent, and saw 20% year-over-year growth in Connected Services revenue. Together with our first-ever share repurchase authorization - which reflects the Board and management’s confidence in Cerence AI’s strategy, cash generation ability, and long-term value - we believe these results demonstrate our progress in strengthening the business through disciplined execution, innovation, and capital allocation." Krzanich continued, “We continue to build toward a much larger opportunity. As AI continues to be a strategic priority for automakers and increasingly extends into adjacent markets, we believe Cerence AI is uniquely positioned to serve as the interaction layer between people and intelligent systems. We believe that our portfolio of conversational, agentic, and embedded AI solutions, combined with our deep domain expertise, global reach, and long-standing customer relationships, provides a strong foundation for growth as we help customers bring the next generation of AI-powered experiences to life. We look forward to providing additional perspective on our roadmap and long-term growth strategy next quarter." Stock Repurchase Program Under the stock repurchase program, the Company intends to repurchase shares from time to time in the open market in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, pursuant to Rule 10b5-1 trading plans, in privately negotiated transactions, through accelerated share repurchase Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
arrangements, purchases, or by other means. The Company may repurchase shares under this program depending on a variety of factors, including, among other things, the impact of dilution from employee stock awards, market conditions, stock price, applicable legal and regulatory requirements, and other factors. Because the program is discretionary, the program does not obligate the Company to acquire any particular number of shares or any specific dollar amount, and there is no assurance as to the timing or amount of any repurchases. The Company intends to fund repurchases under the program primarily with existing cash and cash equivalents and, secondarily, free cash flow generated by operations. Results Summary (1) (in millions, except per share data) Cerence AI delivered third-quarter revenue and net income within its guidance ranges; adjusted EBITDA above the high end of guidance and up 50% year-over-year; and $19.6 million of free cash flow, up more than 20% year-over-year. Revenue increased 12% year-over-year, primarily driven by the timing of fixed license contract execution and growth in Connected Services revenue, which increased more than 20% year-over-year, reflecting continued adoption of the Company’s connected solutions. Professional Services revenue was down year-over-year, reflecting the Company's continued focus on standardization and higher-margin implementations. Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 GAAP revenue (2) $ 69.6 $ 62.2 $ 248.9 $ 191.1 GAAP gross margin 76.0 % 73.7 % 80.2 % 72.8 % GAAP total operating expenses (3) $ 51.0 $ 46.8 $ 170.8 $ 139.7 Non-GAAP total operating expenses (3) $ 42.7 $ 39.6 $ 143.2 $ 107.8 GAAP net income (loss) $ 1.5 $ (2.7) $ (2.0) $ (5.4) Adjusted EBITDA $ 13.5 $ 9.0 $ 65.4 $ 39.8 GAAP net cash provided by operating activities $ 20.0 $ 23.7 $ 72.0 $ 48.4 Free cash flow $ 19.6 $ 16.1 $ 68.9 $ 37.1 GAAP net income (loss) per share - diluted $ 0.03 $ (0.06) $ (0.05) $ (0.12) (1) Please refer to the “Discussion of Non-GAAP Financial Measures” and “Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures” included elsewhere in this release for more information regarding the Company's use of non-GAAP financial measures. (2) Q1FY26 revenue included $49.5 million of IP license revenue related to a previously disclosed agreement with Samsung. Q3FY26 and Q3FY25 revenue included $12.5 million and $0.0 million of revenue from fixed license contracts, respectively. (3) Q1FY26 GAAP and Non-GAAP operating expenses included $20.8 million of expenses related to the Company's previously disclosed agreement with Samsung. Cerence Key Performance Indicators To help investors gain further insight into Cerence AI’s business and performance, management provides a set of key performance indicators (KPIs). The Company believes the KPIs for the quarter reflect continued Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
adoption of its connected solutions and disciplined pricing, with year-over-year growth in connected cars shipped and Adjusted Total Billings. Key Performance Indicator1 Q3FY26 Percent of worldwide auto production with Cerence Technology (trailing twelve months (“TTM”)) 50% Change in number of Cerence connected cars shipped (TTM over prior year TTM)2 4% Change in Adjusted Total Billings (TTM over prior year TTM)3 6% (1) Please refer to the “Key Performance Indicators” section included elsewhere in this release for more information regarding the definitions and use of key performance indicators. (2) Based on IHS Markit data, global auto production increased 1% TTM over prior-year TTM. (3) Adjusted Total Billings excludes professional services and fixed license contracts and is adjusted for fixed license consumption. Change in Adjusted Total Billings is calculated TTM over prior-year TTM. Fourth Quarter and Full Year Fiscal 2026 Outlook For the fiscal fourth quarter ending September 30, 2026: • Revenue is expected to be in the range of $61 million to $65 million, with no fixed license revenue contracts expected to be signed during the quarter. • Gross margins are projected between 72% and 75%. • GAAP net income is projected to be between $1 million and $5 million. • GAAP EPS (diluted) is expected to be between $0.02 and $0.10. • Adjusted EBITDA is expected to be in the range of $1 million to $5 million. Adjusted EBITDA guidance excludes amortization of acquired intangible assets, stock-based compensation, restructuring and other costs. For the full fiscal year ending September 30, 2026: • Revenue is expected to be in the range of $310 million to $314 million. • Gross margin is expected to be in the range of 78% to 79%. • GAAP net (loss) income is projected to be in the range of $(1) million to $3 million. • GAAP EPS (diluted) is expected to be between $(0.02) and $0.06. • Adjusted EBITDA is expected to be in the range of $66 million to $70 million. • Net cash provided by operating activities is projected to be in the range of $81 million to $85 million. • Free cash flow in the range of $76 million to $82 million. Cerence Conference Call and Webcast The Company will host a live conference call and webcast with slides to discuss its results today at 4:30pm Eastern Time / 1:30pm Pacific Time. Interested investors and analysts are invited to dial into the conference call by registering here. Webcast access also will be available on the Investor section of the Company’s website at investors.cerence.com. A replay of the webcast can be accessed by visiting the Company’s website 90 minutes following the conference call at investors.cerence.com. Forward Looking Statements Statements in this press release, as well as oral statements made by Cerence management from time to time, regarding: Cerence’s future performance, results and financial condition; expected growth, profitability and Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
cash flow; outlook and momentum; Cerence's business model; transformation plans and cost efficiency initiatives; stock repurchase program including, but not limited to, the amount and timing;strategy; opportunities; business, industry and market trends; plans and expectations regarding fixed license contracts and the impact on financial results; revenue visibility; backlog; revenue timing and mix; demand for Cerence products; innovation and new product offerings, including AI technology and Cerence xUI; expansion into adjacent markets; expected benefits of technology partnerships; IP licensing, enforcement, and protection efforts; and management’s future expectations, anticipations, intentions, estimates, assumptions, beliefs, goals, objectives, targets, plans, outlook or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “goal,” “objective,” “anticipates,” “projects,” “forecasts,” “expects,” “intends,” “continues,” “will,” “may,” or “estimates” or similar expressions) should also be considered to be forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions as of the date of this press release, such statements involve known and unknown risk, uncertainties and other factors, which may cause actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements including but not limited to: the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry or the global economy more generally; volatility in the political, legal and regulatory environment in which we operate, including trade, tariffs and other policies implemented by the United States, actions taken by other countries in response or other changes in law and regulation applicable to us; the ongoing conflicts in Ukraine and the Middle East; risks of international operations, including in China; automotive production curtailment or delays; changes in customer forecasts and the timing and receipt of royalty reports; our inability to control and successfully manage our expenses and cash position; our inability to deliver improved financial results from process optimization efforts and cost reduction actions; pricing pressures from our customers; the impact on our business of the transition to a lower level of fixed license contracts, including the failure to achieve such a transition; our failure to win, renew or implement service contracts; the cancellation or postponement of existing contracts; the loss of business from any of our largest customers; effects of customer defaults; a decrease in the level of professional services projects; fluctuations in our financial and operating results, including as a result of licensing transactions and litigation settlements or judgments; our inability to successfully introduce and drive customer adoption of new products, applications and services; our strategies to increase cloud offerings and deploy generative AI and large language models (LLMs) and shift to more recurring revenue streams; the inability to expand into adjacent or non-auto markets; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents and compliance with global privacy and data security requirements; failure to protect our intellectual property; adverse developments related to our intellectual property enforcement litigation, the outcome of such litigation, or remedies that could be awarded in connection with such litigation; risks and challenges posed by the development and use of artificial intelligence; the evolving regulatory landscape governing artificial intelligence; defects or interruptions in service with respect to our products; supply chain interruptions; fluctuating currency rates and interest rates; inflation; financial and credit market volatility; restrictions on our current and future operations under the terms of our debt; the use of cash to service or repay our debt; the use of cash to repurchase shares under our stock repurchase program; the ability to repurchase shares of our common stock under our repurchase program at favorable prices or at all; and our inability to generate sufficient cash from our operations; and the other factors discussed in our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document. Discussion of Non-GAAP Financial Measures We believe that providing the non-GAAP information, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP. We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and nine months ended June 30, 2026 and 2025, our management has either included or excluded the following items in general categories, each of which is described below. Adjusted EBITDA. Adjusted EBITDA is defined as net income attributable to Cerence Inc. before net income (loss) attributable to income tax (benefit) expense, other income (expense) items, net, depreciation and amortization expense, and excluding amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs, net and impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets, if any. From time to time we may exclude from Adjusted EBITDA the impact of events, gains, losses or other charges that affect the period-to-period comparability of our operating performance. Other income (expense) items, net include interest expense, interest income, and other income (expense), net (as stated in our Condensed Consolidated Statement of Operations). Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs. Restructuring and other costs, net. Restructuring and other costs, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business such as employee severance costs, consulting costs relating to our transformation initiatives, and costs for consolidating duplicate facilities. Amortization of acquired intangible assets. We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets. Stock-based compensation. Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
Because of varying valuation methodologies, subjective assumptions and the variety of award types, we exclude stock-based compensation from our operating results. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and awards granted are influenced by the Company’s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods. Other expenses. We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, in order to measure operating performance and current and future liquidity both with and without these expenses. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as other charges (credits), net (gains) losses from extinguishment of debt, net (gains) losses from foreign currency translation, and changes in indemnification assets corresponding with the release of pre-spin liabilities for uncertain tax positions. Non-GAAP total operating expenses. Non-GAAP total operating expenses reflect GAAP operating expenses excluding stock-based compensation, intangible asset amortization, and restructuring and other costs. Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs. Key Performance Indicators We believe that providing key performance indicators (“KPIs”) allows investors to gain insight into the way management views the performance of the business. We further believe that providing KPIs allows investors to better understand information used by management to evaluate and measure such performance. KPIs should not be considered superior to, or a substitute for, operating results prepared in accordance with GAAP. In assessing the performance of the business during the three months ended June 30, 2026, our management has reviewed the following KPIs, each of which is described below: • Percent of worldwide auto production with Cerence Technology (TTM): The number of Cerence enabled cars shipped on a TTM basis as compared to IHS Markit car production data. • Change in number of Cerence connected cars shipped: The year-over-year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis. • Change in Adjusted total billings YoY (TTM): The year over year change in total billings excluding Professional Services and fixed license billings and adjusted for fixed license consumption. Amounts calculated on a TTM over prior year TTM basis. ____________ See the tables at the end of this press release for non-GAAP reconciliations to the most directly comparable GAAP measures. To learn more about Cerence AI, visit www.cerence.ai, and follow the company on LinkedIn. About Cerence Inc. Cerence Inc. (NASDAQ: CRNC) is a global industry leader in creating intuitive, seamless, AI-powered experiences across automotive and transportation. Leveraging decades of innovation and expertise in voice, generative AI, and large language models, Cerence powers integrated experiences that create safer, more connected, and more enjoyable journeys for drivers and passengers alike. With more than 525 million cars Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
shipped with Cerence technology, the company partners with leading automakers, transportation OEMs, and technology companies to advance the next generation of user experiences. Cerence is headquartered in Burlington, Massachusetts, with operations globally and a worldwide team dedicated to pushing the boundaries of AI innovation. For more information, visit www.cerence.ai. Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
CERENCE INC. Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 Revenues: License $ 41,600 $ 34,176 $ 166,935 $ 108,361 Connected services 15,465 12,842 45,307 39,197 Professional services 12,522 15,218 36,613 43,584 Total revenues 69,587 62,236 248,855 191,142 Cost of revenues: License 1,362 1,074 4,291 5,288 Connected services 4,906 4,805 14,860 16,095 Professional services 10,405 10,469 30,144 30,618 Total cost of revenues 16,673 16,348 49,295 52,001 Gross profit 52,914 45,888 199,560 139,141 Operating expenses: Research and development 29,237 27,152 84,235 71,353 Sales and marketing 5,829 5,916 17,905 15,612 General and administrative 14,714 12,340 59,497 36,293 Amortization of intangible assets — 578 — 1,668 Restructuring and other costs, net 1,259 850 9,180 14,744 Total operating expenses 51,039 46,836 170,817 139,670 Income (loss) from operations 1,875 (948) 28,743 (529) Interest income 710 895 2,230 3,250 Interest expense (1,450) (2,409) (4,592) (8,518) Other income, net 413 1,673 2,250 2,444 Income (loss) before income taxes 1,548 (789) 28,631 (3,353) Provision for income taxes 15 1,932 30,664 2,000 Net income (loss) $ 1,533 $ (2,721) $ (2,033) $ (5,353) Net income (loss) per share: Basic $ 0.03 $ (0.06) $ (0.05) $ (0.12) Diluted $ 0.03 $ (0.06) $ (0.05) $ (0.12) Weighted-average common shares outstanding: Basic 45,184 43,262 45,077 43,127 Diluted 47,744 43,262 45,077 43,127 Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
CERENCE INC. Condensed Consolidated Balance Sheets (in thousands, except per share amounts) June 30, September 30, 2026 2025 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 127,607 $ 84,017 Marketable securities — 3,433 Accounts receivable, net of allowances of $72 and $68 45,903 58,937 Deferred costs 4,331 4,481 Prepaid expenses and other current assets 34,415 39,889 Total current assets 212,256 190,757 Property and equipment, net 31,381 35,761 Deferred costs 13,020 15,501 Operating lease right of use assets 12,448 16,762 Goodwill 295,976 299,003 Deferred tax assets 38,709 54,207 Other assets 17,146 18,600 Total assets $ 620,936 $ 630,591 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,693 $ 901 Deferred revenue 55,799 51,865 Short-term operating lease liabilities 4,056 4,344 Accrued expenses and other current liabilities 39,388 44,080 Total current liabilities 101,936 101,190 Long-term debt 173,458 199,693 Deferred revenue, net of current portion 142,408 140,021 Long-term operating lease liabilities 9,538 13,083 Other liabilities 27,242 25,928 Total liabilities 454,582 479,915 Stockholders' Equity: Common stock, $0.01 par value, 560,000 shares authorized; 45,188 and 43,374 shares issued and outstanding, respectively 451 434 Accumulated other comprehensive loss (27,880) (25,469) Additional paid-in capital 1,136,270 1,116,165 Accumulated deficit (942,487) (940,454) Total stockholders' equity 166,354 150,676 Total liabilities and stockholders' equity $ 620,936 $ 630,591 Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
CERENCE INC. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Nine Months Ended June 30, 2026 2025 Cash flows from operating activities: Net loss $ (2,033) $ (5,353) Adjustments to reconcile net loss to net cash provided by operations: Depreciation and amortization 7,822 8,512 Provision for credit loss reserve 6 208 Stock-based compensation 19,616 20,047 Non-cash interest expense 2,416 4,647 Gain on debt extinguishment (1,051) (327) Deferred tax provision (benefit) 15,561 (5,303) Unrealized foreign currency transaction loss (gain) 425 (2,708) Other, net 776 (33) Changes in operating assets and liabilities: Accounts receivable 7,540 (2,949) Prepaid expenses and other assets 11,986 27,132 Deferred costs 2,166 3,068 Accounts payable 1,686 1,484 Accrued expenses and other liabilities (5,339) (17,134) Deferred revenue 10,384 17,130 Net cash provided by operating activities 71,961 48,421 Cash flows from investing activities: Capital expenditures (3,071) (11,353) Sale and maturities of marketable securities 3,425 3,493 Other investing activities (873) (1,145) Net cash used in investing activities (519) (9,005) Cash flows from financing activities: Principal payments of long-term debt (27,600) — Principal payments of short-term debt — (87,089) Common stock repurchases for tax withholdings for net settlement of equity (7,606) (2,200) Principal payment of lease liabilities arising from a finance lease (12) (331) Proceeds from the issuance of common stock 8,112 2,204 Net cash used in financing activities (27,106) (87,416) Effects of exchange rate changes on cash and cash equivalents (746) 187 Net change in cash and cash equivalents 43,590 (47,813) Cash and cash equivalents at beginning of period 84,017 121,485 Cash and cash equivalents at end of period 127,607 73,672 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 11,034 $ 4,739 Cash paid for interest $ 2,925 $ 3,980 CERENCE INC. Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (unaudited - in thousands) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 GAAP revenue $ 69,587 $ 62,236 $ 248,855 $ 191,142 GAAP gross profit $ 52,914 $ 45,888 $ 199,560 $ 139,141 GAAP gross margin 76.0% 73.7% 80.2% 72.8% GAAP total operating expenses $ 51,039 $ 46,836 $ 170,817 $ 139,670 Stock-based compensation* 7,100 5,796 18,418 15,488 Amortization of intangible assets — 578 — 1,668 Restructuring and other costs, net* 1,259 850 9,180 14,744 Non-GAAP total operating expenses $ 42,680 $ 39,611 $ 143,219 $ 107,769 GAAP net income (loss) $ 1,533 $ (2,721) $ (2,033) $ (5,353) Stock-based compensation* 7,515 6,345 19,615 17,084 Amortization of intangible assets — 578 — 1,668 Restructuring and other costs, net* 1,259 850 9,180 14,744 Depreciation 2,847 2,140 7,822 6,844 Total other expense (income), net 327 (159) 112 2,824 Provision for income taxes 15 1,932 30,664 2,000 Adjusted EBITDA $ 13,496 $ 8,966 $ 65,360 $ 39,811 GAAP net cash provided by operating activities $ 19,960 $ 23,700 $ 71,961 $ 48,421 Capital expenditures (340) (7,649) (3,071) (11,353) Free cash flow $ 19,620 $ 16,051 $ 68,890 $ 37,068 *-$3.0 million in stock-based compensation is included in Restructuring and other costs, net for the nine months ended June 30, 2025. Free cash flow is net cash provided by operating activities determined in accordance with GAAP less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures. Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
CERENCE INC. Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.) (unaudited - in thousands, except per share data) Q4 2026 FY2026 Low High Low High GAAP revenue $ 61,145 $ 65,145 $ 310,000 $ 314,000 GAAP gross profit $ 43,719 $ 48,691 $ 243,252 $ 248,252 GAAP gross margin 72% 75% 78% 79% GAAP total operating expenses $ 53,603 $ 54,603 $ 224,421 $ 225,421 Stock-based compensation 6,921 6,921 25,340 25,340 Restructuring and other costs, net 100 100 9,279 9,279 Non-GAAP total operating expenses $ 46,582 $ 47,582 $ 189,802 $ 190,802 GAAP net (loss) income $ 981 $ 4,953 $ (1,080) $ 2,920 Stock-based compensation 7,625 7,625 27,240 27,240 Restructuring and other costs, net 100 100 9,279 9,279 Depreciation 3,188 3,188 11,010 11,010 Total other expense (income), net (305) (305) (193) (193) (Benefit from) provision for income taxes (10,560) (10,560) 20,104 20,104 Adjusted EBITDA $ 1,029 $ 5,001 $ 66,360 $ 70,360 GAAP net (loss) income per share: Basic $ 0.02 $ 0.11 $ (0.02) $ 0.06 Diluted $ 0.02 $ 0.10 $ (0.02) $ 0.06 Weighted-average common shares outstanding: Basic 45,237 45,237 45,050 45,050 Diluted 48,677 48,677 45,050 47,661 GAAP net cash provided by operating activities $ 80,500 $ 85,000 Capital expenditures (4,500) (3,000) Free cash flow $ 76,000 $ 82,000 Cerence Media Relations | press@cerence.com Cerence Investor Relations | cerence@pondel.com
Cerence Q3 August 6, 2026 Brian Krzanich, Chief Executive Officer Tony Rodriquez, Chief Financial Officer
Forward-Looking Statements Statements in this presentation as well as oral statements made by Cerence management from time to time, regarding: Cerence’s future performance, results and financial condition; expected growth, profitability and cash flow; outlook and momentum; Cerence's business model; transformation plans and cost efficiency initiatives; stock repurchase program including, but not limited to, the amount and timing;strategy; opportunities; business, industry and market trends; plans and expectations regarding fixed license contracts and the impact on financial results; revenue visibility; backlog; revenue timing and mix; demand for Cerence products; innovation and new product offerings, including AI technology and Cerence xUI; expansion into adjacent markets; expected benefits of technology partnerships; IP licensing, enforcement, and protection efforts; and management’s future expectations, anticipations, intentions, estimates, assumptions, beliefs, goals, objectives, targets, plans, outlook or prospects constitute forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “goal,” “objective,” “anticipates,” “projects,” “forecasts,” “expects,” “intends,” “continues,” “will,” “may,” or “estimates” or similar expressions) should also be considered to be forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions as of the date of this press release, such statements involve known and unknown risk, uncertainties and other factors, which may cause actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements including but not limited to: the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry or the global economy more generally; volatility in the political, legal and regulatory environment in which we operate, including trade, tariffs and other policies implemented by the United States, actions taken by other countries in response or other changes in law and regulation applicable to us; the ongoing conflicts in Ukraine and the Middle East; risks of international operations, including in China; automotive production curtailment or delays; changes in customer forecasts and the timing and receipt of royalty reports; our inability to control and successfully manage our expenses and cash position; our inability to deliver improved financial results from process optimization efforts and cost reduction actions; pricing pressures from our customers; the impact on our business of the transition to a lower level of fixed license contracts, including the failure to achieve such a transition; our failure to win, renew or implement service contracts; the cancellation or postponement of existing contracts; the loss of business from any of our largest customers; effects of customer defaults; a decrease in the level of professional services projects; fluctuations in our financial and operating results, including as a result of licensing transactions and litigation settlements or judgments; our inability to successfully introduce and drive customer adoption of new products, applications and services; our strategies to increase cloud offerings and deploy generative AI and large language models (LLMs) and shift to more recurring revenue streams; the inability to expand into adjacent or non-auto markets; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents and compliance with global privacy and data security requirements; failure to protect our intellectual property; adverse developments related to our intellectual property enforcement litigation, the outcome of such litigation, or remedies that could be awarded in connection with such litigation; risks and challenges posed by the development and use of artificial intelligence; the evolving regulatory landscape governing artificial intelligence; defects or interruptions in service with respect to our products; supply chain interruptions; fluctuating currency rates and interest rates; inflation; financial and credit market volatility; restrictions on our current and future operations under the terms of our debt; the use of cash to service or repay our debt; the use of cash to repurchase shares under our stock repurchase program; the ability to repurchase shares of our common stock under our repurchase program at favorable prices or at all; and our inability to generate sufficient cash from our operations; and the other factors discussed in our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document. 2
3 Q3 FY26
Q3 FY26 Results 4 Q3FY25 Q3FY26 Q3FY26 Guidance Total Revenue $62.2M $69.6M $68M - $72M Gross Margin 73.7% 76.0% 75% - 76% Net (Loss) income $(2.7)M $1.5M $(0.8M) - $3.2M EPS – diluted $(0.06) $0.03 $(0.02) - $0.07 Adjusted EBITDA(a,b) $9.0 $13.5 $8M - $12M Cash Provided by Operating Activities $23.7M $20.0M Cash Balance & Marketable Securities $73.7M $127.6M a) Adjusted EBITDA excludes goodwill impairment, amortization of acquired intangible assets, stock-based compensation, restructuring and other costs. b) Refer to the Appendix for more information on GAAP to non-GAAP reconciliations and related definitions.
In millions Q3FY25 Q4FY25 Q1FY26 Q2FY26 Q3FY26 Total License: $34.2 $32.3 $87.8 $37.6 $41.6 Variable(a) $34.2 $31.6 $30.5 $31.8 $29.1 Total Fixed(b) $— $0.7 $7.8 $5.8 $12.5 IP License(c) $— $— $49.5 $— $— Connected Services: $12.8 $14.2 $14.5 $15.3 $15.5 Professional Services $15.2 $14.2 $12.8 $11.3 $12.5 Total Revenue $62.2 $60.6 $115.1 $64.2 $69.6 a) Based on volume shipments of licenses net of the consumption of fixed contracts. b) Fixed license revenue consists of prepaid deals. c) IP license revenue in Q1FY26 consists of $49.5 million of revenue reflecting the successful resolution of our patent litigation with Samsung. Detailed Revenue Breakdown 5
In millions FY25 FY26 Operational Metrics: Q3 Q4 Q1 Q2 Q3 Pro Forma Royalties(a) $43.2 $40.1 $39.3 $40.3 $37.8 Consumption of Fixed Contracts(b) $9.1 $8.5 $8.8 $8.5 $8.7 Variable License Revenue $34.2 $31.6 $30.5 $31.8 $29.1 IHS Production (units) 22.9 23.1 24.8 21.9 22.5 a) Pro forma Royalties is an operating measure representing total value of licenses shipped in a quarter. It includes the consumption of fixed contracts. b) Licenses shipped in the quarter associated with fixed contracts. Operational Metrics and Variable License Revenue 6
• Adjusted Total Billings TTM(a) of $240.0 million, an increase of 6.3% compared to the same period last year. • Percent of worldwide auto production with Cerence Technology – 50% (TTM) • Approximately 11.4 million units shipped with Cerence technology in Q3 ◦ a decrease of 8.1% YoY (IHS down 1.8% YoY) ◦ an increase of 0.9% QoQ (IHS up 2.9% QoQ) • Change in number of Cerence connected cars shipped up 4% (TTM)(b) • Connected attach rate increased to 34.1% versus 31.0% a year ago(c) Q3 FY26 KPI(d) Performance 7 a) Adjusted Total Billings excludes professional services and fixed license contracts and is adjusted for fixed license consumption. Trailing Twelve Months (“TTM”) over prior year TTM. b) Based on IHS Markit data, global auto production increased 1.2% TTM over prior year TTM. c) TTM units connected divided by TTM units embedded. This indicates our penetration of connected technology. d) Please refer to the appendix for KPI definitions.
Fiscal Q4 and FY26 Guidance(d) 8 Q4FY26 Guidance FY26 Guidance In millions except per share amounts Low High Low High Revenue $61 $65 $310 $314 Gross Margin 72% 75% 78% 79% Net Income (Loss) $1 $5 ($1) $3 EPS – diluted $0.02 $0.10 $(0.02) $0.06 Adjusted EBITDA (a,b) $1 $5 $66 $70 Cash Provided by Operating Activities $81 $85 Free Cash Flow (c) $76 $82 a) Adjusted EBITDA excludes goodwill impairment, amortization of acquired intangible assets, restructuring expense, and stock-based compensation. b) Refer to the Appendix for more information on GAAP to non-GAAP reconciliations and related definitions. c) Free Cash Flow is net cash provided by operating activities determined in accordance with GAAP less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures. d) Based on currently available information, for fiscal 2026, we continue to assume minimal impact from tariffs; however, it is important to note that the situation remains fluid and may evolve over the remainder of the year.
9 Appendix
License Business Revenue Recognition Type of Contract Description GAAP Revenue Recognition Cash Receipt Variable License applied at production Quarter car is produced. Based on volume Quarter following GAAP revenue recognition Fixed (Prepaid) Bulk inventory purchase ($ based) Full value of contract at signing. Volume independent Standard payment terms for full value (upfront payment) Intellectual Property Terms and conditions drive accounting treatment. Accounting treatment depends on contract structure and performance obligations. When recognized as revenue, treatment is consistent with other license arrangements. Dependent on terms and conditions. 10 The fixed contracts only apply to the license business. If a car is also using our connected services, it will follow the normal billing and revenue recognition process regardless of whether a variable or fixed license was applied. The fixed contracts typically provide the customer with a price discount and can include the conversion of a variable contract that is already in our variable backlog.
Connected and Professional Services Revenue Recognition Connected Services Typical Period GAAP Revenue Recognition Cash Receipt Subscription Term 1 – 5 years Amortized evenly over subscription period Billed/collected full amount at start of subscription period (value added to deferred revenue) Usage Contract(a) 1 – 5 years Recognized at same time of billing based on actual usage Billed every quarter based on actual usage Customer Hosted(b) License Quarter in which license is delivered to customer Upon delivery 11 (a) Usage can be defined by number of active users or number of monthly transactions. (b) Customer Hosted is a software license that allows the customer to take possession of the software and enable hosting by the customer or a third-party. Professional Services Period GAAP Revenue Recognition Cash Receipt Custom Design Services Ongoing Revenue is recognized over time based upon the progress towards completion of the project Billed/collected on milestone completion
KPI Measures – Definitions We believe that providing key performance indicators (“KPIs”) allows investors to gain insight into the way management views the performance of the business as well as a potentially new KPI, Average PPU. We further believe that providing KPIs allows investors to better understand information used by management to evaluate and measure such performance. KPIs should not be considered superior to, or a substitute for, operating results prepared in accordance with GAAP. In assessing the performance of the business during the three and nine months ended June 30, 2026, our management has reviewed the following KPIs, each of which is described below: • Percent of worldwide auto production with Cerence Technology (TTM): The number of Cerence enabled cars shipped on a TTM basis as compared to IHS Markit car production data. • Change in number of Cerence connected cars shipped: The year-over-year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis. • Change in Adjusted total billings YoY (TTM): The year over year change in total billings excluding Professional Services and fixed license billings and adjusted for fixed license consumption. Amounts calculated on a TTM over prior year TTM basis. • Connected Attached Rate: the percentage of vehicles shipped with connected technology, calculated as TTM units connected divided by TTM units embedded. • Average PPU: This represents the average technology price per vehicle shipped, including both the embedded license fee and the connected services subscription. Although PPU is not immediately recognized as revenue at the time of shipment, it reflects the average per-vehicle value that is expected to ultimately be recognized. 12
Non-GAAP Financial Measures – Definitions Discussion of Non-GAAP Financial Measures We believe that providing the non-GAAP information, in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP. We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and nine months ended June 30, 2026 and 2025, our management has either included or excluded the following items in general categories, each of which is described below. 13
Non-GAAP Financial Measures – Definitions Adjusted EBITDA. Adjusted EBITDA is defined as net income attributable to Cerence Inc. before net income (loss) attributable to income tax (benefit) expense, other income (expense) items, net, depreciation and amortization expense, and excluding amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs, net and impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets, if any. From time to time we may exclude from Adjusted EBITDA the impact of events, gains, losses or other charges that affect the period-to-period comparability of our operating performance. Other income (expense) items, net include interest expense, interest income, and other income (expense), net (as stated in our Condensed Consolidated Statement of Operations). Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs. Restructuring and other costs, net. Restructuring and other costs, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business such as employee severance costs, consulting costs relating to our transformation initiatives, and costs for consolidating duplicate facilities. Amortization of acquired intangible assets. We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets. 14
Non-GAAP Financial Measures – Definitions Stock-based compensation. Because of varying valuation methodologies, subjective assumptions and the variety of award types, we exclude stock-based compensation from our operating results. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and awards granted are influenced by the Company’s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods. Other expenses. We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, in order to measure operating performance and current and future liquidity both with and without these expenses. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as other charges (credits), net (gains) losses from extinguishment of debt, net (gains) losses from foreign currency translation, and changes in indemnification assets corresponding with the release of pre-spin liabilities for uncertain tax positions. Non-GAAP total operating expenses. Non-GAAP total operating expenses reflect GAAP operating expenses excluding stock-based compensation, intangible asset amortization, and restructuring and other costs. Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs. 15
Q3 FY26 Reconciliations of GAAP to Non-GAAP Results 16 Free cash flow is net cash provided by operating activities determined in accordance with GAAP less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures. (unaudited - in thousands) (unaudited - in thousands) Three Months Ended June 30, Nine Months Ended June 30, 2026 2025 2026 2025 GAAP revenue $ 69,587 $ 62,236 $ 248,855 $ 191,142 GAAP gross profit $ 52,914 $ 45,888 $ 199,560 $ 139,141 GAAP gross margin 76.0% 73.7% 80.2% 72.8% GAAP total operating expenses $ 51,039 $ 46,836 $ 170,817 $ 139,670 Stock-based compensation* 7,100 5,796 18,418 15,488 Amortization of intangible assets — 578 — 1,668 Restructuring and other costs, net* 1,259 850 9,180 14,744 Goodwill impairment — — — — Non-GAAP total operating expenses $ 42,680 $ 39,611 $ 143,219 $ 107,769 GAAP net income (loss) $ 1,533 $ (2,721) $ (2,033) $ (5,353) Stock-based compensation* 7,515 6,345 19,615 17,084 Amortization of intangible assets — 578 — 1,668 Restructuring and other costs, net* 1,259 850 9,180 14,744 Goodwill impairment — — — — Depreciation 2,847 2,140 7,822 6,844 Total other expense (income), net 327 (159) 112 2,824 Provision for income taxes 15 1,932 30,664 2,000 Adjusted EBITDA $ 13,496 $ 8,966 $ 65,360 $ 39,811 GAAP net cash provided by operating activities $ 19,960 $ 23,700 $ 71,961 $ 48,421 Capital expenditures (340) (7,649) (3,071) (11,353) Free cash flow $ 19,620 $ 16,051 $ 68,890 $ 37,068 *-$3.0 million in stock-based compensation is included in Restructuring and other costs, net for the nine months ended June 30, 2025. Free cash flow is net cash provided by operating activities determined in accordance with GAAP less capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures. * - $3.0 million in stock-based compensation is included in Restructuring and other costs, net for Q1'25.
Q4 FY26 and Full Year FY26 Reconciliations of GAAP to Non-GAAP Guidance 17 (unaudited - in thousands, except per share data) Q4 2026 FY2026 Low High Low High GAAP revenue $ 61,145 $ 65,145 $ 310,000 $ 314,000 GAAP gross profit $ 43,719 $ 48,691 $ 243,252 $ 248,252 GAAP gross margin 72 % 75 % 78 % 79 % GAAP total operating expenses $ 53,603 $ 54,603 $ 224,421 $ 225,421 Stock-based compensation 6,921 6,921 25,340 25,340 Restructuring and other costs, net 100 100 9,279 9,279 Non-GAAP total operating expenses $ 46,582 $ 47,582 $ 189,802 $ 190,802 GAAP net (loss) income $ 981 $ 4,953 $ (1,080) $ 2,920 Stock-based compensation 7,625 7,625 27,240 27,240 Restructuring and other costs, net 100 100 9,279 9,279 Depreciation 3,188 3,188 11,010 11,010 Total other expense (income), net (305) (305) (193) (193) (Benefit from) provision for income taxes (10,560) (10,560) 20,104 20,104 Adjusted EBITDA $ 1,029 $ 5,001 $ 66,360 $ 70,360 GAAP net (loss) income per share: Basic $ 0.02 $ 0.11 $ (0.02) $ 0.06 Diluted $ 0.02 $ 0.10 $ (0.02) $ 0.06 Weighted-average common shares outstanding: Basic 45,237 45,237 45,050 45,050 Diluted 48,677 48,677 45,050 47,661 GAAP net cash provided by operating activities $ 80,500 $ 85,000 Capital expenditures (4,500) (3,000) Free cash flow $ 76,000 $ 82,000