Cerence: Elevating The Intersection Between Automobiles And Technology

Summary

• Cerence transforms how a car feels, responds, and learns.
• Signed big contracts with Audi on implementation of future Audi cars and Visa as a payment partner.
• Beat recent earning estimates impressively with lucrative deals and comprehensive innovation.

Cerence, (CRNC),  builds automotive cognitive assistance solutions to power interactions between cars, drivers, and passengers. In a world where Tesla is comprehensively the leader in the EV sector, Cerence offers companies technology services such as connected cars, autonomous driving, and e-vehicles. Not every automobile company has the resources and capital to put into research and development to come out with great results. Lucky for them, Cerence offers these products. 

History of Cerence

Cerence became a company as a spin-off from publicly traded Nuance which created, through an aggressive acquisition strategy, the largest voice recognition technology portfolio and customer base in the industry. A big part of the company’s success over two decades came in serving the world’s leading automakers. Nuance only dealt with the voice technology sector and merged under Cerernce to offer more services under its name with an increased capital structure for research and development. 

Deals in the Past year

Cerence went public in September, 2019 and has already seen some groundbreaking results including a massive deal with Audi. 

“This is a tremendous milestone for Cerence and further evidence of strong momentum in our business,” said Sanjay Dhawan, CEO of Cerence Inc.

Audi’s upcoming voice assistant will be built on its Cerence Drive automobile voice AI technology. The Audi Connect platform will use Cerence Drive to provide a voice assistant capable of conversing with a driver and carrying out their commands. Cerence's voice assistant mixes local and cloud-based services to carry out its duties. The hybrid approach aims to make the voice assistant quicker and more flexible in its responses, but still able to operate where there’s no internet connection.

Cerence also signed a global contract with a valuation of $125 million with a large European car manufacturer for its industry-leading voice- and AI-based automotive assistants.

Innovation

Cerence introduced Cerence Pay on July 30th for Voice powered payments in the car. It combined Nuance's voice technology with Cerence's partnership with Visa to create this revolutionary product. The added fact of the Coronavirus makes this innovation even more impressive. Cerence Pay is designed to anticipate drivers’ needs and provide a seamless payment transaction from intent to authentication via voice and facial biometrics and through to purchase. Cerence pay partners include Arrive, a seamless mobility experience that leverages AI to predict and recommend the best parking solution for your destination and Parkopedia, the world’s leading parking service provider used by millions of drivers and organizations to find and pay for parking. Parkopedia already has connected cars in 15,000 cities across 89 countries covering over 70 million parking spaces

Key Financials 

Cerence (CRNC) current trading price on the stock market is 49.83, up 149% YTD, and 186% since it was first traded on the market which was exactly a year ago after the spin-off with nuance. The growth has mainly been due to consumer optimism in the EV market with Tesla sky-rocketing as well as the Coronavirus which has made contactless services ever so important. Moreover the innovation and deals with Visa and Parkopedia are a great addition to Cerence's arsenal. Sales and net income are both positive and have jumped more than 50% in the last year. The P/E ratio is 26.7 which is double than the S&P median however it is much less than the automotive sector with 30, thus making Cerence undervalued. 

Rishabh's Take 

I firmly believe that Cerence will be a success. The products which it offers which combine Artificial Intelligence for a smoother driving process is revolutionary. Automobiles would have to adapt due to Tesla's existence and the "no-gas" promise it offers. Currently, Cerence only has 2 big deals with car manufacturers including Audi. A lot depends on Audi's results with the introduction of Cerence's technology. However with the growth and optimism we see in Tesla, I am optimistic that Cerence will grow too. 

To learn more about Cerence, visit www.cerence.com

For more about Cerence Pay, visit www.cerence.com/solutions/cerence-pay