Cerence Announces Record First Quarter 2021 Results

February 08, 2021

Cerence First Quarter Highlights

  • Won back a major European OEM’s next generation infotainment design for cars starting production in 2023
  • First major bookings for new applications including Cerence Pay
  • Revenue grew by 23% compared to the same period last fiscal year, setting a new quarterly record
  • Exceeded company quarterly guidance on all GAAP and non-GAAP financial metrics
  • Continued to deliver strong GAAP Net Income and Adjusted EBITDA performance
  • Growth in billings per car continues its upward trend

BURLINGTON, Mass., Feb. 08, 2021 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its first fiscal quarter 2021 results for the quarter ended December 31, 2020.

Results Summary (1)
(in millions, except per share data)

    Three Months Ended
    December 31,
    2020     2019
GAAP Revenue   $95.0     $77.5
GAAP Gross Margin   71.7%     66.5%
Non-GAAP Gross Margin   75.3%     70.8%
GAAP Operating Margin   21.3%     -2.7%
Non-GAAP Operating Margin   39.7%     25.4%
GAAP Net (loss) Income   $21.6     $(11.8)
Non-GAAP Net Income   $24.6     $10.3
Adjusted EBITDA   $40.3     $21.8
Adjusted EBITDA Margin   42.4%     28.1%
GAAP Net (loss) Income per Share - diluted   $0.54     $(0.33)
Non-GAAP Net Income per Share - diluted   $0.59     $0.29

(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 our use of non-GAAP financial measures.
 

Sanjay Dhawan, Chief Executive Officer of Cerence, stated, “We had a stronger than expected start to the fiscal year as auto production continued to recover from the impact of Covid-19. Our 23% revenue growth, compared to the same quarter last year, reflects our strong competitive position enabled by our continued focus on innovation and speed of execution.”

Dhawan continued, “We received multiple contract awards for our new applications in the quarter. We won back a major European OEM for both our core technology and new connected services and applications. This was a significant win that will start production in 2023. Another highlight was our agreement with Xevo, a Lear Company, to supply Cerence Pay conversational-AI powered voice technology to Xevo Marketplace consumers. With this contract, along with the launch of our latest application, Cerence TourGuide, we are building a solid foundation to achieve our FY24 target revenue for this category of products.”

Dhawan concluded, “We expect continued year-over-year revenue growth in our second quarter as the auto industry recovers from Covid-19. However, our second quarter guidance accounts for the expected impact of semiconductor shortages on auto production in the first half of the calendar year. According to IHS Markit’s current forecast, these shortages should be resolved by mid-year resulting in auto production growth of 13.7% for the 2021 calendar year. Overall the company is progressing well in all directions; introducing a steady stream of new products, winning new customers, successfully entering adjacent markets, and increasing revenue and profitability.”

Cerence Key Performance Indicators
To help investors gain further insight into Cerence’s business and its performance, management provides a set of key performance indicators that includes:

Key Performance Indicator1   Q1FY21
Percent of worldwide auto production with Cerence Technology (TTM)   54%
Average contract duration (TTM):   6.0
Repeatable software contribution (TTM):   78%
Change in number of Cerence connected cars shipped2 (TTM over prior year TTM)   -17%
Growth in billings per car (TTM over prior year TTM) (excludes legacy contract)3   20%

(1) Please refer to the “Key Performance Indicators” included elsewhere in this release for more information regarding the definition and our use of key performance indicators.
(2) Based on IHS Markit data, global auto production declined 16% over the same time period ending December 31, 2020. Compared to the same quarter in the prior year, the change in the number of Cerence connected cars shipped was +11%.
(3) The calculation for this KPI was modified from comparing fiscal year-to-date versus previous fiscal year, to trailing twelve months (“TTM”) versus prior year TTM.

 

Second Quarter Fiscal 2021 and Full Year Outlook
For the fiscal quarter ending March 31, 2021, revenue is expected to be in the range of $92M to $95M representing a 6% to 10% increase compared to the same period in the prior year. GAAP Net Income is expected to be in the range of $5M to $6M, and Adjusted EBITDA is expected to be in the range of $34M to $37M.  

For the fiscal year ending September 30, 2021, we are updating our guidance to reflect our stronger than expected first quarter revenue and margin performance, and also in consideration of the risks and uncertainties surrounding the semiconductor device shortages. Therefore, the lower end of the revenue range was increased and is now expected to be in the range of $370M to $380M, representing a 12% to 15% increase compared to the prior year. GAAP Net Income for the fiscal year is expected to be in the range of $33 to $39M. Adjusted EBITDA for the full year is expected to be in the range of $131M to $140M, which is up from our original guidance of $122M to $135M due to better than expected profitability and the updated revenue guidance. The Adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs. Additional details regarding guidance are included in the tables in this press release.

First Quarter Conference Call
The company will host a live conference call and webcast with slides to discuss the results at 10:00 a.m. Eastern Time/7:00 a.m. Pacific Time today. Interested investors and analysts are invited to dial into the conference call by using 1.844.467.7116 (domestic) or +1.409.983.9838 (international) and entering the pass code 8889146. Webcast access will be available on the Investor Information section of the company’s website at https://investors.cerence.com/news-and-events/events-and-presentations.

The teleconference replay will be available through February 15, 2021. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 8889146. A replay of the webcast can be accessed by visiting our web site 90 minutes following the conference call at https://investors.cerence.com/news-and-events/events-and-presentations.

Forward Looking Statements
Statements in this presentation regarding Cerence’s future performance, results and financial condition, expected growth, business and market trends, and innovation and our management’s future expectations, beliefs, goals, plans 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,” “anticipates,” “expects,” “intends” 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, 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: impacts of the COVID-19 pandemic on our and our customer’s businesses; the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry, the related supply chain, or the global economy more generally; our ability to control and successfully manage our expenses and cash position; our strategy to increase cloud offerings; escalating pricing pressures from our customers; our failure to win, renew or implement service contracts; the loss of business from any of our largest customers; effects of customer defaults; our inability to successfully introduce new products, applications and services; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents; fluctuating currency rates; 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 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 months ended December 31, 2020 and 2019, 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 acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs, net or 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 (such as significant legal settlements) 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 charges, 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, costs for consolidating duplication facilities, and separation costs directly attributable to the Cerence business becoming a standalone public company.

Acquisition-related costs, net.
In recent years, we have completed a number of acquisitions, which result in operating expenses, which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure, which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

These acquisition-related costs fall into the following categories: (i) transition and integration costs; (ii) professional service fees and expenses; and (iii) acquisition-related adjustments. Although these expenses are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions. These categories are further discussed as follows:

(i) Transition and integration costs. Transition and integration costs include retention payments, transitional employee costs, and earn-out payments treated as compensation expense, as well as the costs of integration-related activities, including services provided by third-parties.
(ii) Professional service fees and expenses. Professional service fees and expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities.
(iii) Acquisition-related adjustments. Acquisition-related adjustments include adjustments to acquisition-related items that are required to be marked to fair value each reporting period, such as contingent consideration, and other items related to acquisitions for which the measurement period has ended, such as gains or losses on settlements of pre-acquisition contingencies.

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.

Non-cash expenses.
We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; and (ii) non-cash interest. These items are further discussed as follows:
        
(i) 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.

(ii) Non-cash interest. We exclude non-cash interest because we believe that excluding this expense provides management, as well as other users of the financial statements, with a valuable perspective on the cash-based performance and health of the business, including the current near-term projected liquidity. Non-cash interest expense 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, losses from extinguishment of debt, and changes in indemnification assets corresponding with the release of pre-spin liabilities for uncertain tax positions.

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 December 31, 2020 and 2019, our management has reviewed the following KPIs, each of which is described below:

  • Percent of worldwide auto production with Cerence Technology: The number of Cerence enabled cars shipped as compared to IHS Markit car production data.
  • Average contract duration: The weighted average annual period over which we expect to recognize the estimated revenues from new license and connected contracts signed during the quarter, calculated on a trailing twelve months (“TTM”) basis and presented in years.
  • Repeatable software contribution: The percentage of repeatable revenues as compared to total GAAP revenue in the quarter on a TTM basis. Repeatable revenues are defined as the sum of License and Connected Services revenues.
  • 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.
  • Growth in billings per car: The rate of growth calculated from the average billings per car based on a TTM basis, excluding legacy contract and adjusted for prepay usage.

See the tables at the end of this press release for non-GAAP reconciliations to the most directly comparable GAAP measures.

About Cerence Inc.
Cerence (NASDAQ: CRNC) is the global industry leader in creating unique, moving experiences for the mobility world. As an innovation partner to the world’s leading automakers and mobility OEMs, it is helping advance the future of connected mobility through intuitive, powerful interaction between humans and their cars, two-wheelers, and even elevators, connecting consumers’ digital lives to their daily journeys no matter where they are. Cerence’s track record is built on more than 20 years of knowledge and more than 350 million cars shipped with Cerence technology. Whether it’s connected cars, autonomous driving, e-vehicles, or buildings, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

Contact Information
Rich Yerganian
Cerence Inc.
Tel: 617-987-4799
Email: richard.yerganian@cerence.com

 

CERENCE INC.
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share data)

    Three Months Ended  
    December 31,  
    2020     2019  
Revenues:                
License   $ 46,414     $ 40,767  
Connected services     27,251       23,021  
Professional services     21,299       13,671  
Total revenues     94,964       77,459  
Cost of revenues:                
License     674       681  
Connected services     7,013       8,675  
Professional services     17,315       14,491  
Amortization of intangible assets     1,879       2,087  
Total cost of revenues     26,881       25,934  
Gross profit     68,083       51,525  
Operating expenses:                
Research and development     24,091       23,511  
Sales and marketing     8,898       7,943  
General and administrative     11,617       11,483  
Amortization of intangible assets     3,158       3,131  
Restructuring and other costs, net     47       7,554  
Total operating expenses     47,811       53,622  
Income (loss) from operations     20,272       (2,097 )
Interest income     18       281  
Interest expense     (3,799 )     (6,798 )
Other income (expense), net     (2,237 )     (146 )
Income (loss) before income taxes     14,254       (8,760 )
(Benefit from) provision for income taxes     (7,384 )     3,002  
Net income (loss)   $ 21,638     $ (11,762 )
Net income (loss) per share:                
Basic   $ 0.58     $ (0.33 )
Diluted   $ 0.54     $ (0.33 )
Weighted-average common share outstanding:                
Basic     37,180       35,995  
Diluted     43,363       35,995  
 
 

CERENCE INC.
Condensed Consolidated Balance Sheets
(unaudited - in thousands, except per share data)

    December 31,     September 30,  
    2020     2020  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 110,360       136,067  
Marketable securities     17,088       11,662  
Accounts receivable, net of allowances of $579 and $1,394     60,426       49,943  
Deferred costs     7,748       7,256  
Prepaid expenses and other current assets     43,703       44,220  
Total current assets     239,325       249,148  
Property and equipment, net     29,708       29,529  
Deferred costs     36,913       38,161  
Operating lease right of use assets     20,630       20,096  
Goodwill     1,136,356       1,128,198  
Intangible assets, net     41,070       45,616  
Deferred tax assets     180,166       161,759  
Other assets     16,580       14,938  
Total assets   $ 1,700,748     $ 1,687,445  
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
Accounts payable   $ 4,806     $ 8,447  
Deferred revenue     104,577       112,520  
Short-term operating lease liabilities     6,259       5,700  
Short-term debt     6,250       6,250  
Accrued expenses and other current liabilities     52,200       67,857  
Total current liabilities     174,092       200,774  
Long-term debt     266,019       266,872  
Deferred revenue, net of current portion     215,692       212,573  
Long-term operating lease liabilities     16,823       17,821  
Other liabilities     34,994       31,649  
Total liabilities     707,620       729,689  
Stockholders' Equity:                
Common stock, $0.01 par value, 560,000 shares authorized; 37,685 shares issued and outstanding as of December 31, 2020; 36,842 shares issued and outstanding as of September 30, 2020.     378       369  
Accumulated other comprehensive income     17,851       3,711  
Additional paid-in capital     973,892       974,307  
Retained earnings (accumulated deficit)     1,007       (20,631 )
Total stockholders' equity     993,128       957,756  
Total liabilities and stockholders' equity   $ 1,700,748     $ 1,687,445  
 
 

CERENCE INC.
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)

    Three Months Ended  
    December 31,  
    2020     2019  
Cash flows from operating activities:                
Net income (loss)   $ 21,638     $ (11,762 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     7,624       7,359  
Benefit from credit loss reserve     (410 )     -  
Stock-based compensation expense     12,351       8,969  
Non-cash interest expense     1,230       1,332  
Deferred tax benefit     (14,106 )     (4,928 )
Changes in operating assets and liabilities:                
     Accounts receivable     (8,112 )     1,691  
     Prepaid expenses and other assets     1,025       (18,193 )
     Deferred costs     2,051       (192 )
     Accounts payable     (3,655 )     905  
     Accrued expenses and other liabilities     (1,960 )     22,210  
     Deferred revenue     (6,867 )     2,065  
Net cash provided by operating activities     10,809       9,456  
Cash flows from investing activities:                
Capital expenditures     (2,369 )     (3,612 )
Purchases of marketable securities     (6,358 )     -  
Net cash used in investing activities     (8,727 )     (3,612 )
Cash flows from financing activities:                
Net transactions with Parent     -       11,384  
Distributions to Parent     -       (152,978 )
Proceeds from long-term debt, net of discount     -       249,705  
Payments for long-term debt issuance costs     (520 )     (515 )
Principal payments of long-term debt     (1,563 )     -  
Common stock repurchases for tax withholdings for net settlement of equity awards     (30,258 )     (141 )
Principal payments of lease liabilities arising from a finance lease     (101 )     (55 )
Proceeds from the issuance of common stock     3,663       -  
Net cash (used in) provided by financing activities     (28,779 )     107,400  
Effects of exchange rate changes on cash and cash equivalents     990       152  
Net change in cash and cash equivalents     (25,707 )     113,396  
Cash and cash equivalents at the beginning of the period     136,067       -  
Cash and cash equivalents at the end of the period   $ 110,360     $ 113,396  
 
 

CERENCE INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures
(unaudited - in thousands)

    Three Months Ended  
    December 31,  
    2020     2019  
GAAP revenue   $ 94,964     $ 77,459  
                 
GAAP gross profit   $ 68,083     $ 51,525  
Stock-based compensation     1,585       1,223  
Amortization of intangible assets     1,879       2,087  
Non-GAAP gross profit   $ 71,547     $ 54,835  
GAAP gross margin     71.7 %     66.5 %
Non-GAAP gross margin     75.3 %     70.8 %
                 
GAAP operating (loss) income   $ 20,272     $ (2,097 )
Stock-based compensation     12,351       8,969  
Amortization of intangible assets     5,037       5,218  
Restructuring and other costs, net     47       7,554  
Non-GAAP operating income   $ 37,707     $ 19,644  
GAAP operating margin     21.3 %     -2.7 %
Non-GAAP operating margin     39.7 %     25.4 %
                 
GAAP net income (loss)   $ 21,638     $ (11,762 )
Stock-based compensation     12,351       8,969  
Amortization of intangible assets     5,037       5,218  
Restructuring and other costs, net     47       7,554  
Depreciation     2,587       2,141  
Total other income (expense), net     (6,018 )     (6,663 )
(Benefit from) provision for income taxes     (7,384 )     3,002  
Adjusted EBITDA   $ 40,294     $ 21,785  
GAAP net income margin     22.8 %     -15.2 %
Adjusted EBITDA margin     42.4 %     28.1 %
                 
                 

CERENCE INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)
(unaudited - in thousands, except per share data)

    Three Months Ended  
    December 31,  
    2020     2019  
GAAP net income (loss)   $ 21,638     $ (11,762 )
Stock-based compensation     12,351       8,969  
Amortization of intangible assets     5,037       5,218  
Restructuring and other costs, net     47       7,554  
Non-cash interest expense     1,230       1,332  
Adjustments to income tax expense     (15,710 )     (976 )
Non-GAAP net income   $ 24,593     $ 10,335  
                 
Adjusted EPS:                
GAAP Numerator:                
Net income (loss) attributed to common shareholders   $ 21,638     $ (11,762 )
Interest on Convertible Senior Notes, net of tax     1,831       -  
Net income (loss) attributed to common shareholders - diluted   $ 23,469     $ (11,762 )
                 
Non-GAAP Numerator:                
Net income attributed to common shareholders   $ 24,593     $ 10,335  
Interest on Convertible Senior Notes, net of tax     1,005       -  
Net income attributed to common shareholders - diluted   $ 25,598     $ 10,335  
                 
GAAP Denominator:                
Weighted-average common shares outstanding - basic     37,180       35,995  
Adjustment for diluted shares     6,183       -  
Weighted-average common shares outstanding - diluted     43,363       35,995  
                 
Non-GAAP Denominator:                
Weighted-average common shares outstanding- basic     37,180       35,995  
Adjustment for diluted shares     6,183       -  
Weighted-average common shares outstanding - diluted     43,363       35,995  
                 
GAAP net income (loss) per share - diluted   $ 0.54     $ (0.33 )
Non-GAAP net income per share - diluted   $ 0.59     $ 0.29  
                 
GAAP net cash provided by operating activities   $ 10,809     $ 9,456  
Capital expenditures     (2,369 )     (3,612 )
Free Cash Flow   $ 8,440     $ 5,844  
 
 

CERENCE INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)
(unaudited - in thousands)

    Q1FY21     Q4FY20     Q3FY20     Q2FY20  
GAAP revenues   $ 94,964     $ 90,882     $ 74,810     $ 86,495  
Less: Professional services revenue     21,299       19,457       17,360       18,742  
Non-GAAP Repeatable revenues   $ 73,665     $ 71,425     $ 57,450     $ 67,753  
                                 
GAAP revenues TTM   $ 347,151                          
Less: Professional services revenue TTM     76,858                          
Non-GAAP Repeatable revenues TTM   $ 270,293                          
Repeatable software contribution     78 %                        
                                 
                                 

CERENCE INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)
(unaudited - in thousands)

    Q2 2021     FY2021  
    Low     High     Low     High  
GAAP revenue   $ 92,000     $ 95,000     $ 370,000     $ 380,000  
                                 
GAAP gross profit   $ 64,900     $ 68,100     $ 259,200     $ 270,900  
Stock-based compensation     1,600       1,600       6,300       6,300  
Amortization of intangible assets     1,900       1,900       7,500       7,500  
Non-GAAP gross profit   $ 68,400     $ 71,600     $ 273,000     $ 284,700  
GAAP gross margin     71 %     72 %     70 %     71 %
Non-GAAP gross margin     74 %     75 %     74 %     75 %
                                 
GAAP operating income   $ 12,900     $ 15,900     $ 52,500     $ 62,500  
Stock-based compensation     11,500       11,500       46,300       46,300  
Amortization of intangible assets     5,000       5,000       20,100       20,100  
Restructuring and other costs, net     2,000       2,000       2,400       2,400  
Non-GAAP operating income   $ 31,400     $ 34,400     $ 121,300     $ 131,300  
GAAP operating margin     14 %     17 %     14 %     16 %
Non-GAAP operating margin     34 %     36 %     33 %     35 %
                                 
GAAP net income   $ 4,600     $ 6,200     $ 32,900     $ 39,100  
Stock-based compensation     11,500       11,500       46,300       46,300  
Amortization of intangible assets     5,000       5,000       20,100       20,100  
Restructuring and other costs, net     2,000       2,000       2,400       2,400  
Depreciation     2,100       2,100       9,900       9,000  
Total other income (expense), net     (4,200 )     (4,200 )     (18,100 )     (17,100 )
Provision for income taxes     4,100       5,500       1,500       6,300  
Adjusted EBITDA   $ 33,500     $ 36,500     $ 131,200     $ 140,300  
GAAP net income margin     5 %     7 %     9 %     10 %
Adjusted EBITDA margin     36 %     38 %     35 %     37 %
                                 
                                 

CERENCE INC.
Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)
(unaudited - in thousands, except per share data)

    Q2 2021     FY2021  
    Low     High     Low     High  
GAAP net income   $ 4,600     $ 6,200     $ 32,900     $ 39,100  
Stock-based compensation     11,500       11,500       46,300       46,300  
Amortization of intangibles     5,000       5,000       20,100       20,100  
Restructuring and other costs, net     2,000       2,000       2,400       2,400  
Non-cash interest expense     1,200       1,200       5,000       5,000  
Adjustments to income tax expense     (3,400 )     (2,800 )     (26,800 )     (24,900 )
Non-GAAP net income   $ 20,900     $ 23,100     $ 79,900     $ 88,000  
                                 
Adjusted EPS:                                
GAAP Numerator:                                
Net income attributed to common shareholders   $ 4,600     $ 6,200     $ 32,900     $ 39,100  
Interest on Convertible Senior Notes, net of tax     -       -       -       -  
Net income attributed to common shareholders - diluted   $ 4,600     $ 6,200     $ 32,900     $ 39,100  
                                 
Non-GAAP Numerator:                                
Net income attributed to common shareholders   $ 20,900     $ 23,100     $ 79,900     $ 88,000  
Interest on Convertible Senior Notes, net of tax     1,000       1,000       4,000       4,000  
Net income attributed to common shareholders - diluted   $ 21,900     $ 24,100     $ 83,900     $ 92,000  
                                 
GAAP Denominator:                                
Weighted-average common shares outstanding - basic     37,700       37,700       37,700       37,700  
Adjustment for diluted shares     1,400       1,400       1,500       1,500  
Weighted-average common shares outstanding - diluted     39,100       39,100       39,200       39,200  
                                 
Non-GAAP Denominator:                                
Weighted-average common shares outstanding- basic     37,700       37,700       37,700       37,700  
Adjustment for diluted shares     6,100       6,100       6,200       6,200  
Weighted-average common shares outstanding - diluted     43,800       43,800       43,900       43,900  
                                 
GAAP net income per share - diluted   $ 0.12     $ 0.16     $ 0.84     $ 1.00  
Non-GAAP net income per share - diluted   $ 0.50     $ 0.55     $ 1.91     $ 2.10  

 

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