Cerence Posts Upbeat Q4 Results; Street Says Buy


Cerence Inc. (CRNC), a software company that specializes in providing AI solutions to the automotive industry, has reported better-than-expected results for the fourth quarter ended September 30, 2021. The results were driven by strong growth in revenues.

Following the results, shares of the company plummeted 20.6% on Monday. The stock, however, pared its losses slightly to close at $83.25 in the extended trading session.

Revenue & Earnings

Quarterly revenues of $98.1 million jumped 7.6% year-over-year and surpassed the consensus estimate of $97.92 million. License revenues (up 10.8% year-over-year) and professional service revenues (up 8.3% year-over-year) drove the overall growth in revenues.

Meanwhile, quarterly earnings of $0.66 per share jumped 6.5% year-over-year and surpassed the consensus estimate of $0.56 per share.

In other operating metrics, while the company’s average contract duration at the end of the fourth quarter stood at 7.9 years, repeatable software contribution stood at 81%.

CRNC’s adjusted EBITDA declined to $38.8 million from $40.7 million in the year-ago period. Meanwhile, adjusted EBITDA margin declined from 44.6% to 39.6%.

Outlook

For Fiscal Year 2022, the company expects revenue to be in the range of $400 million to $425 million against the consensus estimate of $388 million.

Management Commentary

The CEO of Cerence, Sanjay Dhawan, said, “We finished the year strong, especially considering the production challenges our customers are facing due to semiconductor shortages. Our total company revenue grew 17% compared to the auto production growth of 9% over the same time-period, which is testament to the secular tailwinds, as well as, the innovative products and services we continue to bring to market.”

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Price Target

Recently, Needham analyst Rajvindra Gill reiterated a Buy rating on the stock with a price target of $165, which implies upside potential of 99.8% from current levels.

Consensus among analysts is a Strong Buy based on 4 Buys and 1 Hold. The average Cerence price target of $127.20 implies upside potential of 54% from current levels.

Smart Score

Cerence scores a 7 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with the market expectations. Shares have declined 0.6% over the past year.

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