管理層發言
Good day. Thank you for standing by. Welcome to the Cerence Third Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-11 on your telephone. You would then hear an automated message advising that your hand is raised. To withdraw your question, please press star-11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kate Hickman, Vice President, Corporate Communications and Investor Relations. Please go ahead.
Hello, everyone, and welcome to Cerence's Third Quarter 26 Conference Call. Before we begin, I would like to remind you that this call may involve certain forward-looking statements. Any statements that are not statements of historical fact, including statements related to our expectations, anticipation, intentions, estimates, assumptions, beliefs, outlook, strategies, goals, priorities, objectives, targets, and plans are forward-looking statements. Cerence makes no representations to update those statements after today. These statements are subject to risks and uncertainties, which may cause actual results to differ materially from such statements and expectations as described in our SEC filings, including the Form 8-K with the press release preceding today's call, our most recent Form 10-Q, and our Form 10-K filed on 11/20/2025. In addition, the company may refer to certain non-GAAP measures, key performance indicators, and pro forma financial information during this call. Please refer to today's press release for further details of the definitions, limitations, and uses of those measures and reconciliations of non-GAAP measures to the closest GAAP equivalent. The press release is available in the Investors section of our website. Joining me on today's call are Brian Matthew Krzanich, Chief Executive Officer, and Tony Rodriguez, Chief Financial Officer. Please note that slides with further context are available in the Investors section of our website. Before handing the call over to Brian, I would like to mention that we will be participating in a Raymond James 26 Industrial Showcase on August 13 and the Needham Virtual Semiconductor and Semi Cap Conference on August 19. Now onto the call. Brian?
Thank you, Kate, and good afternoon, everyone. Now before we dig in, I would like to briefly reflect on Cerence's progress as I approach my two-year anniversary as CEO in October. When I stepped into the role, we established a clear roadmap. The first year was about strengthening the foundation of the business: improving our financial profile, restoring profitability, generating cash flow, and reducing debt. I believe we delivered on those commitments. We said the second year would be about execution. As we approach the end of fiscal year 26, I believe we have delivered there as well. We advanced our technology roadmap by bringing xUI from concept to production. We improved free cash flow, and we are continuing to create value for customers and shareholders. Most importantly, we are now beginning to see the early stages of our next chapter. xUI is entering commercialization, our Agentic AI portfolio is gaining traction, and our non-automotive initiatives are beginning to move from proof points toward revenue contribution. We believe that our fiscal third quarter results demonstrate execution against this strategy: delivering strong financial performance and positioning us for future growth. In Q3, we delivered another strong quarter with revenue of approximately $70 million, in line with our guidance; adjusted EBITDA above the high end of our guidance at $13.5 million; and free cash flow of $20 million. Importantly, we continue to grow our recurring connected services business, with revenue up more than 20% year-over-year. This growth further increases the recurring portion of our revenue mix, enhancing visibility into future performance and demonstrating the value of the connected platform we built across our installed base. Looking ahead to the rest of the fiscal year, we are again raising our fiscal year 2026 free cash flow guidance now to $76 million to $82 million, and narrowing most of our remaining forecast as we approach the end of fiscal year 2026. Given the continued cash-generating strength of our business, I would like to give an update on our capital allocation strategy. As mentioned in the past, we have several core capital allocation priorities, all focused on delivering returns to our shareholders: investing organically to support growth, reducing debt, managing equity dilution, and selectively pursuing inorganic opportunities that can enhance our long-term growth and strategic position. We evaluate these priorities based on the opportunities available to us, the strength of our balance sheet, and where we believe capital can generate attractive risk-adjusted returns for shareholders. With that, I am pleased to share that our board has authorized Cerence's first-ever share repurchase program. This reflects our confidence in the business, the progress we have made in improving profitability and cash generation, and our commitment to disciplined capital allocation. The stock repurchase program adds another tool to that approach, while preserving our flexibility to continue investing in growth and reducing debt, and helping to offset dilution. Tony will provide further details on the program. Now turning to updates and highlights from the quarter. We continue to see strong investment in next-generation AI-powered user experiences. Automakers increasingly view AI not as a discretionary investment, but as a strategic priority that reinforces their competitive position. As vehicles become more software-defined, automakers are seeing differentiated user experiences that reinforce their brand, improve customer satisfaction, and create opportunities for recurring revenue. That is where we believe Cerence AI continues to be uniquely positioned and why we continue to win. We combine decades of automotive expertise with leading AI capabilities, enabling OEMs to bring powerful conversational experiences to market while reducing complexity, cost, and execution risk. As a result, despite the dynamic industry that OEMs are navigating, customer engagement remains strong. Our pipeline continues to develop interest in our next-generation platform. xUI, which is now available in nearly 20 languages, remains the center of our automotive strategy. In Q3, we signed a new xUI deal with Stellantis, which expects to deploy our platform across multiple brands and regions with initial production having recently started. Throughout the quarter, we continued to advance our xUI programs with JLR, a VW Group brand, BYD, Geely, and a major Japanese automaker. Several of these programs have started production or are expected to start production in fiscal Q4. Today, we have approximately 100 thousand xUI-powered cars on the road—an important milestone in bringing this technology to market and consistent with what we have said in the past. xUI will begin its ramp at the end of fiscal 26 and impact revenue during fiscal year 27 and beyond as additional programs enter production and vehicle volumes pick up. We continue to expect xUI deployments to support higher average price per unit reflecting its broader functionality, increased software content, and expanding Agentic capabilities—a testament to the value we are bringing to our customers. Cerence AI was recognized at JLR's Global Supplier Excellence Award in June. JLR honored us with their Exceptional Creator recognition, a special category they introduced specifically to highlight truly outstanding partners. In their nomination, the JLR team highlighted how we fast-tracked our partnership into a true AI-era collaboration. They specifically called out Cerence's flexibility as a key enabler in their ability to adopt new AI capabilities faster and innovate with confidence. That expectation, paired with our disciplined delivery and sharp roadmap alignment, is now their blueprint for future-facing technology. We believe this recognition validates not only our technology but also our ability to serve as a trusted strategic partner as OEMs transition to next-generation AI platforms. During the quarter, we also advanced our Agentic AI roadmap with prospect parking, dining, and other task-oriented experiences. Our goal is to evolve the in-vehicle assistant from a system that primarily responds to requests into an agentic experience that can take action and help users complete tasks in context. Of note, we reached an important milestone by signing the first customer for our mobile work agent, developed in collaboration with Microsoft. The customer is a global, premium automaker and an existing Cerence customer, with rollout expected to begin in fiscal Q4. We believe this win is significant for two reasons. First, it demonstrates our ability to quickly deploy a complex agent that turns the car into a managed, trusted device with compliant access to enterprise tools in the Microsoft 365 suite. Second, it validates our strategy to sell and deploy agents on a standalone basis. These agents can be deployed within new xUI programs, integrated into non-xUI programs, and even integrated into competitive stacks. This expands our addressable opportunity and gives OEMs a flexible path to introduce Agentic capabilities. We are in talks with several other automakers to deploy our mobile work agent in the near future. Beyond xUI and our agent roadmap, we continue to win business across our broader technology portfolio. During the quarter, we signed our first customer for exterior vehicle interaction, which extends the reach of the vehicle's voice assistant outside the cabin, allowing drivers to use their voice to perform authenticated vehicle actions like unlocking doors or opening the trunk. We also secured wins across our stack with Subaru, HKMC, and GM. We signed an emergency vehicle detection program with a Chinese robotaxi company and a Cerence assistant program with Stellantis for vehicles that will not initially use xUI. These programs have the potential to generate recurring business, maintain our seat at the table within the OEM technology stack, and create opportunities to expand our role over time, even when customers use multiple technology providers. We are also making progress in extending our voice AI and agentic capability beyond the vehicle. We continue to focus on complex environments similar to the car, including commercial and industrial operations, robotics, and select IoT applications. We believe our products can serve as the trusted interaction layer across a broad range of verticals where our edge AI reliability, security, and domain-specific integration translate well and provide a meaningful competitive advantage. One example of our progress is the launch of our dealer assistant agent, live at Infiniti of Grand Rapids, Michigan, targeting a real pain point for dealerships—missed and after-hours sales and service calls that can translate into lost leads and revenue. Our AI agent provides an always-on instant response, serving as a virtual expert on vehicle features, scheduling test drives, and booking service appointments while freeing staff from routine, repetitive calls. Since the program went live, the dealer assistant agent has delivered measurable business impact to the customer: 100% of after-hours calls are now being captured, there has been a 20% increase in sales opportunities driven by always-on lead engagement and qualification, and nearly a 30% increase in service appointments booked—improving utilization and capturing additional service revenue. While this is an early deployment, we believe it demonstrates the impact our Agentic solutions can deliver. With tens of thousands of car dealerships worldwide, we see this as a promising growth opportunity. Consistent with our prior outlook, we expect approximately $7 million to $9 million in non-auto revenue forecasted for full fiscal 26, with a larger opportunity ahead in fiscal year 27 and beyond. On our next earnings call, we look forward to providing additional details on our fiscal year 27 roadmap, forecast, and strategy for building a meaningful business beyond automotive. In terms of our intellectual property strategy and ongoing enforcement efforts, we continue to actively protect our technology and investments as part of the ordinary course of business. While the timing of IP-related outcomes can be difficult to predict, on a quarterly basis we believe these efforts support our broader commitment to innovation and long-term shareholder value, and we will continue to keep you posted as additional progress is made. As we approach the end of fiscal 26, I want to close with the four drivers that underpin our belief in Cerence's long-term value. First, Cerence occupies an important position in the automotive AI stack, supported by deep OEM relationships, a large install base, and durable recurring revenue. Second, our xUI and Agentic AI wins provide an opportunity for ongoing growth and higher revenue per vehicle as these programs enter production and scale. Third, we continue to deliver strong free cash flow while maintaining our focus on disciplined capital allocation. We believe that our business model supports debt reduction, balance sheet strength, inorganic growth, and the strategic and operational flexibility necessary to make key decisions like our stock repurchase program. Fourth, our expansion outside of automotive and our IP enforcement efforts provide additional sources of potential long-term value. With that, I will turn it over to Tony.
Thank you, Brian. Good afternoon, everyone, and thank you for joining us today. We appreciate your continued interest in Cerence. Today I will review our third quarter fiscal 26 results, highlight the key drivers of the quarter, and then provide guidance for our fourth quarter and the resulting full fiscal year. For the quarter, total revenue was approximately $70 million, within our guidance range of $68 million to $72 million and up 12% from $62 million in the prior year period. The increase was led by higher license revenue, including the timing of fixed license contract execution, and a positive shift to recurring connected service revenue. Total license revenue was $41.6 million, up 22% year-over-year, reflecting the higher fixed license contribution this quarter. Fixed license revenue was $12.5 million this quarter compared to no fixed license revenue in the prior year period and above the approximately $10 million contemplated in our Q3 guidance. As we have discussed, fixed license revenue can vary quarter to quarter based on the timing of contract execution. We do not expect any additional fixed license revenue for the remainder of the fiscal year. Variable license for the quarter was $29.1 million, down 15% year-over-year. Two factors drove the decrease. First, the comparison was against an exceptionally strong prior-year quarter that benefited from higher-than-normal production. Some manufacturers built ahead of anticipated tariff impacts and benefited from favorable foreign exchange rates. Second, our unit volumes came in below the broader market this quarter. Production of vehicles with Cerence technology was down 8% year-over-year while global light vehicle production declined roughly 2%. Based on the customer production data available to us, the difference relative to the broader market primarily reflects our specific OEM and regional mix. Much of the global market's relative resilience came from regions where we have limited presence, such as South America and South Asia, while the OEMs and regions that represent the majority of our volume saw softer production. This was compounded by a period of program life-cycle transition with some programs winding down faster than their replacements are ramping. That said, we have not seen a change in pricing or economics to our existing programs, and we have continued to experience recent design-win activity. Connected services revenue was $15.5 million, up 20% year-over-year, driven by continued expansion of our connected installed base and a higher attach rate. We believe this growth underscores the increasing importance of connected service revenue within our business model and provides improved visibility into future performance. Professional services revenue was $12.5 million, down 18% year-over-year, reflecting our continued focus on standardization and higher-margin implementations, as well as the impact of revenue deferrals when services are bundled with license arrangements. Gross margin for the quarter was 76% compared to 74% in the prior year period and in line with the high end of our guidance range of 75% to 76%. The improvement over prior year was driven primarily by favorable revenue mix including the higher fixed license contribution, along with continued discipline across cost of revenue. Adjusted EBITDA for the quarter was $13.5 million, an increase of $4.5 million or 51% year-over-year and ahead of the high end of our guidance range of $8 million to $12 million. With revenue finishing near the midpoint of our range, this outperformance was driven by favorable margin mix and operating expenses below plan. A portion of the expense variance was timing-related and is expected to normalize in the fourth quarter, while the remainder reflects our continued cost discipline. Total non-GAAP operating expenses were $43 million compared to $40 million in the prior year period. Non-GAAP R&D expense was $26.5 million, up from $24.4 million, reflecting lower capitalization of internally developed software rather than an increase in overall investment. Total technology spending remains stable. Non-GAAP sales and marketing expense was $4.6 million, down year-over-year by about 8% but consistent with continued investment to support our customer base and long-term growth initiatives. Non-GAAP G&A expense was $11.5 million, up from $10.1 million, reflecting normalized general operating costs as well as additional legal expenses associated with our ongoing efforts to protect, enforce, and license our IP portfolio. Excluding the one-time legal costs incurred in Q1 to secure our patent license agreement with Samsung, we expect full year fiscal 26 IP-related legal costs of approximately $9 million. From a GAAP profitability perspective, Q3 net income was $1.5 million with diluted EPS of $0.03, versus a net loss of $2.7 million and a net loss per share of $0.06 a year ago. On taxes, the Samsung-related withholding tax is spread across the year through our estimated annual effective tax rate, so it is not confined to the quarter in which it was incurred. That front-loaded our tax expense in Q1 above the expected full-year total and impacts taxes even in quarters with little or no pretax income, like here in Q3. We continue to model full-year tax expense of approximately $20 million consistent with our prior projection range, with a significant tax benefit expected in Q4. During Q3, we generated $20 million of cash from operations and $20 million of free cash flow, continuing our strong cash conversion performance. We ended the quarter with $128 million in cash and cash equivalents, which we believe provides significant flexibility to invest in our strategic priorities while further strengthening the balance sheet. As we evaluate capital allocation, we continue to maintain a strong financial position and invest in the business while deploying excess capital toward opportunities that offer the highest risk-adjusted returns. In the current environment, that may include discounted debt repurchases, share repurchases, and selective strategic investments that support our long-term growth objectives. Earlier this fiscal year we repurchased a portion of our 2028 convertible notes at a discount to par, reducing interest expense and leverage. Building on that, as Brian mentioned, today we announced that our board has approved our first share repurchase program, authorizing the repurchase of up to $30 million of our common stock over the next 12 months. We intend to execute through open-market purchases funded from cash on hand and free cash flow while preserving the flexibility to keep investing in the business and to address our remaining outstanding convertible notes. The program does not obligate us to repurchase any specific amount and we expect to stay disciplined as we consider our capital allocation priorities. From a metric standpoint for Q3, production of vehicles with Cerence technology totaled 11.4 million in the quarter compared to 12.4 million a year ago. Connected cars shipped increased 4% on a trailing 12-month basis, while recurring connected services revenue grew 20%, reflecting higher attach rates and per-unit economics. Adjusted total billings were $240 million, up 6% year-over-year. Pro forma royalties were $38 million compared to $43 million in the prior year period, reflecting the lower production volumes. Fixed license consumption within that quarter totaled $8.7 million. Before turning to guidance, let me put the xUI wins Brian discussed into financial context. From an accounting perspective, we recognize revenue as licenses are shipped and as connected services are delivered. So new program wins flow through our reported results in stages rather than all at once. For multi-year platform transitions such as xUI, that cycle plays out over several years. As a result, the wins we have announced are not fully reflected in our current revenue run rate, and for connected services, the near-term impact will show up first in billings with more meaningful revenue contribution phasing in during fiscal 27 and beyond. These programs carry attractive per-unit economics that we expect to support both revenue growth and margin as they scale. Also, consistent with Brian's comments, our current outlook continues to assume only modest initial contribution from non-automotive programs as we exit FY 2026, with the larger opportunity remaining primarily a fiscal 27 and beyond growth driver. Turning to the fourth quarter, with respect to the sequential progression there are two dynamics to keep in mind. First, our third quarter results included $12.5 million of fixed license revenue, and consistent with the timing-driven nature of these arrangements, we are not contemplating any fixed license revenue in the fourth quarter. Second, we expect normal seasonality with production volumes often stepping down a bit from the third quarter to the fourth. Together, this means we expect fourth quarter revenue to be lower on a sequential basis. For the fourth quarter, we expect revenue between $61 million and $65 million, gross margin between 72% and 73%, adjusted EBITDA between $1 million and $5 million, net income in the range of $1 million to $5 million, and diluted EPS between $0.02 and $0.10. I want to be clear that this guidance reflects the timing of fixed license revenue and ordinary seasonal patterns, not a change in the health of the underlying business. Excluding the fixed license revenue recognized in Q3, the midpoint of our fourth quarter revenue outlook is higher than our underlying Q3 revenue level. Our per-unit economics have remained intact, our recurring connected services revenue up 20% year-over-year has continued to grow, and our design-win momentum is expected to support future volume. A couple of further notes on the fourth quarter: first, because the fourth quarter does not carry the high-margin contribution from fixed license, we expect gross margin to normalize below the 76% we reported in the third quarter. Second, as we discussed previously, the Samsung IP license resulted in an unusually high tax expense earlier in the year, particularly in the first quarter. The expected fourth quarter tax benefit is incorporated into our Q4 and full-year outlook. Taken together with our year-to-date results, this Q4 outlook is contemplated within the full-year guidance I will walk through next and reflects the same disciplined execution we have delivered through the first three quarters of the year. For the full fiscal year, we now expect revenue of $310 million to $314 million, gross margin of 78% to 79%, GAAP profitability in the range of a net loss of $1.1 million to net income of $2.9 million, diluted EPS of a loss of $0.02 to income of $0.06, adjusted EBITDA of $66 million to $70 million, and free cash flow of $76 million to $82 million—an increase from our prior outlook of $66 million to $76 million. In closing, we delivered solid execution this third quarter with growth in total revenue, gross margin ahead of guidance, continued strength in our recurring connected services, and year-over-year profitability growth. As we look to the remainder of fiscal 26, we remain focused on disciplined execution, strong cash flow generation, and maintaining the financial flexibility to support long-term profitable growth. On our next call, we expect to provide our initial fiscal 27 guidance and an update on our strategic priorities. With that, I will turn it back to Brian.
Thanks, Tony. In closing, we are proud of our performance as we approach the end of fiscal 26. We believe our results reflect strong execution, solid cash generation, and continued customer momentum. Together with a disciplined approach to capital allocation, we believe the underlying trajectory of the business remains strong. Connected services continues to be an excellent growth engine. The economics of our recent wins have been attractive, and the xUI and agent programs discussed today are expected to position us well for growth as they scale. The story of fiscal 26 has been one of execution. We believe the story of fiscal 27 will be one of growth, powered by the foundation we have built, the customer commitments we have delivered, and the opportunities we see ahead with xUI and outside of automotive. We remain confident in our strategy and execution, and we are excited about the path ahead. With that, we will open up the line for questions.
分析師問答
Thank you. To withdraw your question, please press star-11 again. The first question comes from the line of Mark Delaney with Goldman Sachs. Your line is now open.
Yes, good afternoon. Thank you very much for taking the questions. Congratulations on the xUI win with Stellantis. I am hoping to better understand the financial implications of the xUI backlog, including the recent win, and now I think you have six in total. Understood the comment around that taking time to ramp up, but maybe you can help investors to better understand what those existing wins will mean for the business for both revenue and profits when they do fully ramp, and how long that may take to occur.
Sure. I can start, and then Tony can jump in with some of the more detailed financial comments. We said there are about 100 thousand vehicles on the road right now with xUI, which is pretty good considering production started just a little over a month ago. So the ramp is off and going. We have several more OEMs that should start production at the end of Q4 or beginning of Q1. We do not actually control exactly when—there are many partners that have to come together to deliver an on-time launch—but I think that number is going to go up significantly as we go into 02/2027. If I looked at 2027 in total, I think you should see a couple million cars on the road with xUI versus the roughly 100 thousand we have today. Financially, we get paid the same way we do with prior products: we get the license fee when the car ships from the factory and then the connected fee over the life of the connection. What we are seeing is these licenses for connected vehicles are actually lasting longer. We said in the past that our average connection was around three years; the average xUI deals are closer to seven years. So we are seeing much longer terms. For 2027, xUI and connected will be the growth engines in automotive for us. We have not provided a detailed 2027 forecast yet, so I expect initial contribution to still be relatively minimal as programs ramp up. As they ramp in 2027, they will fuel growth along with connected services. All the xUI models are connected, so it is a double benefit: you get paid more for xUI, and they are all connected. We have not given an exact price per unit for xUI deals because it varies depending on the feature set, but they are significantly higher than the current price per unit we quote for our current product.
Yeah, and to summarize, Brian is exactly right. The impact of xUI is that it is a growth driver for both revenue and profitability, but it does take time to ramp old programs down and new programs up. Over time, it will result in higher price per unit as those ramp. With a higher per-unit economics, we expect the operating leverage we have discussed to kick in. Our goal is to have a growing business that is increasingly profitable, and we have shown that over the last several quarters. xUI supports revenue growth and increasing profitability.
Very helpful context. My other question was about the revenue trajectory into next year. I very much recognize your comments around waiting for next quarter for quantitative guidance. I do think last call the company suggested that revenue next year could grow high-single to low-double digits. If you could speak a little bit qualitatively on how you think about the top-line trajectory into 2027, any early thoughts there and any key puts and takes? Thank you.
Sure. I can start again, and Tony can give a bit more financial perspective. We tried to give a grounding this quarter by saying there are about 100 thousand xUI vehicles on the road and that non-auto revenue is expected to be $7 million to $9 million for this year. By the time Q4 ends, expect the xUI number to be significantly higher than 100 thousand; we will probably give you that number again at the end of the year to set the baseline. If I look into 2027, overall I think you will see high-single to low-double-digit growth. What you will see is strong growth in connected because xUI vehicles will be a driver of many of those connected vehicle connections. You will see growth in price per unit as xUI becomes a larger part of the product base. We also plan for significant growth in non-automotive next year; I expect non-automotive to grow faster percentage-wise than automotive for next year. Put those together and that's how you get to high-single to low-double-digit growth. I expect the growth to be increasingly better as we go through the year and to be accelerating as we exit 2027 because more of our revenue will be connected and more will be non-automotive. We have not given firm numbers yet due to our forecasting process, but that is the qualitative shape.
A couple of caveats: when we talk about growth rates for our core technology, professional services will likely decrease as a percentage of mix as we standardize and become more efficient. Professional services remain important but are a base number and not the growth engine. Non-automotive will be a growth engine but from a smaller base initially.
And to add, none of our forecasts include any potential IP monetization upside. We have ongoing efforts and discussions with several parties in that space. We don't forecast those outcomes because timing can be unpredictable—court dates and schedules can shift—so any IP monetization would be incremental to the core technology outlook we've discussed.
Thank you. I will pass it on.
The next question comes from the line of Itay Michaeli with TD Cowen. Your line is now open.
Hey, great. This is Justin on for Itay. How's everyone doing?
Good.
Quick question. Tony, maybe the first one for you. I appreciate you highlighting Q4 seasonality. Anything outside of normal seasonality that you might be seeing—at least in current production schedules—that could be hitting Q4 on the licensing side? Or have things been relatively stable? Obviously, second-half production can be a little more volatile, so just trying to get a better understanding of what you might be seeing there.
I think we highlighted this a bit on the call. From a volume standpoint, Q3 over Q3 a year ago saw some declines primarily because there were some volume ramp in Q3 a year ago given tariff-related positions. As we think about Q3 to Q4, I do not see major movement off those volumes other than the typical slight decrease we often see in Q4. There is nothing material we are currently seeing beyond normal seasonal patterns. Remember, our license revenue is volume-driven on the variable side, so volumes matter, but I don't see anything changing materially from Q3 to Q4.
Perfect. Appreciate the color there. And then, Brian, maybe any update you can share on the BYD xUI launch? How are things progressing there? And maybe double-click a little on the Stellantis win—what were the key parameters and benchmarks you were compared against and what was the competitive environment like?
When we said 100 thousand vehicles on the road, BYD is a part of that, and there is another OEM included as well—so more than one OEM is in that 100 thousand. Launches are often phased by geography, language, and model. From BYD's perspective, it is going well. We are adding geographies and languages; we are up to 20 languages now and add them as required based on production ramp. Feedback has been very positive on xUI from an end-user standpoint and on our ability to deploy the software in production. We think the ramp is going quite well.
Very helpful. Appreciate it.
The next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group. Your line is open.
Hey, Brian, Tony. This is Daniel on for Jeff. Maybe if you could characterize how a typical sales cycle for xUI looks: how long are these conversations, what is the competition like? Maybe you could use the Stellantis win as an example but walk through a typical xUI sales cycle.
The sales cycles are not short. They typically start with an OEM producing an RFQ, and if we are already involved with the OEM we often help them generate the RFQ to define features and capabilities. From there, you submit a proposal that includes the technology and hardware requirements. We often bring a vehicle running the technology for OEM stakeholders to experience capabilities firsthand; I have brought vehicles to a large OEM headquarters to show executives the product. Then you get into pricing and timing. Integration support is often very important because the software integration is complex: it involves the OEM, Tier 1 suppliers, hardware providers, and other software providers. We often have engineers embedded with the OEM to help develop the product, and that all takes time—on average at least six months, sometimes longer depending on the OEM's process. From a competitive standpoint, many vendors participate early, and the process usually narrows to one or two finalists. It typically isn't a price war; the decisive factors are features and support—can you support the interconnects they want, the third-party integrations to personalize the vehicle, and the level of support you will provide to get the product to production. There is some price consideration, but we've not seen a race to the bottom. The prices we are achieving for xUI are quite a bit higher than our current quoted price per unit for legacy products.
The only other thing to add is that we do see some non-automotive activity increasing as well, but I won't get into specific details. There is some uptick in that area, which is encouraging.
Okay, that is helpful. Thanks, guys.
I am currently showing no further questions at this time. I would now like to hand the call back over to Brian Krzanich for closing remarks.
I would like to say thank you to everyone for joining our third quarter earnings call. We look forward to our fourth quarter where we will present our 2027 roadmap and forecast. We are excited about the work we are already doing in preparation for 2027. As we said, it should be a year of growth with xUI helping to fuel that growth, an increasing percentage of connected vehicles, and accelerating non-automotive expansion. We expect non-automotive to grow at a faster rate than the automotive portion of our business. We look forward to seeing you in December for the fourth quarter results and our 2027 forecast. Thank you for joining, and I want to thank the whole Cerence team for a great quarter—really great execution and great results. Good evening.
This concludes today's conference. Thank you for your participation. You may now disconnect.