Cerence Inc. announced that it will buy back $30 million of its 1.50% Convertible Senior Notes due 2028 at a cash price equal to 92 % of principal, plus accrued interest. The repurchase is being completed privately with note holders and is expected to close shortly, allowing the company to reduce its debt load and lower future interest expense.
The repurchase comes on the heels of a strong Q4 2025 earnings report in which Cerence posted revenue of $60.64 million, up 10.6 % year‑over‑year, and a net loss of $13.36 million, a narrowing from $20.42 million in the same quarter a year earlier. Gross margin improved to 72.74 % from 72.6 % in the prior quarter, driven by a higher mix of high‑margin license revenue and disciplined cost management. The company’s free cash flow of $9.7 million in Q4 and $46.8 million for the full fiscal year underpins the ability to fund the repurchase.
Revenue growth was largely powered by license revenue of $32.26 million, connected services of $14.16 million, and professional services of $14.21 million. The license segment, which benefits from long‑term contracts and recurring revenue, grew faster than the services segments, offsetting modest headwinds in professional services that faced increased competition. The stronger mix contributed to the margin expansion and helped the company beat earnings expectations by $0.02 per share, with EPS of –$0.24 versus the consensus of –$0.26.
By repurchasing the notes at 92 % of principal, Cerence will reduce its debt by $27.6 million and lower its interest expense by roughly $0.5 million annually, given the 1.50 % coupon. The transaction also improves leverage ratios, as the company’s debt‑to‑EBITDA metric will decline, enhancing financial flexibility for future growth initiatives. The use of free cash flow for the buyback signals management’s confidence in the company’s cash‑generating capacity and its commitment to shareholder value.
Management has raised its FY26 revenue guidance to $300–$320 million, reflecting an expected 8 % growth in its core technology business. CEO Brian Krzanich emphasized that the repurchase is part of a “new phase of growth” for Cerence AI, underscoring the company’s focus on expanding automotive AI partnerships, exploring non‑automotive opportunities, and protecting its intellectual property. The move positions Cerence to capitalize on a market where its technology is embedded in more than 525 million vehicles worldwide, while maintaining a strong balance sheet to support future investments.
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