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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 7, 2022

 

CERENCE INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware		001-39030		83-4177087
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)
1 Burlington Woods Drive, Suite 301A Burlington, Massachusetts				01803
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s Telephone Number, Including Area Code: (857) 362-7300

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.01 par value		CRNC		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02 Results of Operations and Financial Condition.

On February 7, 2022, Cerence Inc. (the "Company") announced its financial results for the quarter ended December 31, 2021. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Also on February 7, 2022, the Company used a presentation on its call with investors, discussing its financial results for the quarter ended December 31, 2021, and such earnings release presentation is furnished herewith as Exhibit 99.2. The press release and earnings release presentation include certain non-GAAP financial measures. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release and earnings release presentation.

The information in this Item 2.02 and the exhibit attached hereto are being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number		Description
99.1		Press Release announcing financial results dated February 7, 2022
99.2		Earnings Release Presentation dated February 7, 2022
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Cerence Inc.
Date: February 7, 2022		By:	/s/ Mark Gallenberger
			Name: Mark Gallenberger
			Title: Chief Financial Officer

 

 

Exhibit 99.1

 

Cerence Announces First Quarter Fiscal Year 2022 Results

Headlines

BURLINGTON, Mass., February 7, 2022 – Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its first quarter fiscal year 2022 results for the quarter ended December 31, 2021.

 

Results Summary ⁽¹⁾

(in millions, except per share data)

 

Stefan Ortmanns, Chief Executive Officer at Cerence commented, “We had a strong start to the fiscal year. Our results underscore the strength of our business and reinforces Cerence as the global leader in unique, moving experiences for the mobility world. We’ve delivered important innovations and leading AI mobility solutions to customers in key markets, and our employees have demonstrated great commitment to supporting our customers and each other.”

Ortmanns continued, “We remain focused on the markets, customers, and products that will deliver long-term sustainable growth and that everything we do reinforces our vision of leadership in AI for mobility. We are intensely focused on bold innovation and executing at speed for our customers.”

 

 

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Cerence Key Performance Indicators

To help investors gain further insight into the Cerence business and its performance, management provides a set of key performance indicators that includes:

Second Quarter and Full Year Fiscal 2022 Outlook

With recent changes in leadership, year-to-date performance, and further analysis of the business and market conditions, the company is providing guidance for Q2 2022 and updated guidance for the full fiscal year.

 

Key factors include:

For the fiscal quarter ending March 31, 2022, revenue is expected to be in the range of $82 million to $86 million.  Adjusted EBITDA is expected to be in the range of approximately $22 million to $26 million.  The adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs.

 

The full-year guidance is for revenue to be in the range of $365 million to $385 million representing a 9% decrease at the midpoint compared to the initial FY22 guidance provided on November 22, 2021, and a 3% decrease at the mid-point compared to last year’s actual revenue of $387 million. Adjusted EBITDA for the full year is expected to be in the range of approximately $119 million to $139 million. The adjusted EBITDA

 

 

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guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs.

 

Additional details regarding guidance will be provided on the earnings call.

 

First Quarter Conference Call

The company will host a live conference call and webcast with slides to discuss the results today at 8:30 a.m. Eastern Time/5:30 a.m. Pacific Time. Interested investors and analysts are invited to dial into the conference call by using 844.467.7116 (domestic) or +1.409.983.9838 (international) and entering the pass code 8094176. Webcast access will be available on the Investor Information section of the company’s website at https://www.cerence.com/investors/events-and-resources.

 

The teleconference replay will be available through February 14, 2022. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 8094176. A replay of the webcast can be accessed by visiting our web site 90 minutes following the conference call at https://www.cerence.com/investors/events-and-resources.

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

 

 

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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, 2021 and 2020, 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 the past, 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

 

 

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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:

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:

 

 

 

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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.

 

Bookings.

Bookings is defined as the amount of revenue we expect to earn from an agreement with our customers for products and services. To count as a booking, we expect there to be persuasive evidence of an arrangement, which may be evidenced by a legally binding document or documents, and that the collectability of the amounts payable under the arrangement are reasonably assured. The revenue we may actually recognize from our estimated bookings is subject to multiple factors, including but not limited to the timing of satisfying performance obligations, potential terminations, or changes in the scope of programs utilizing our technology and currency fluctuations. There is no comparable GAAP financial measure.

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, 2021, our management has reviewed the following KPIs, each of which is described below:

 

 

 

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

To learn more about Cerence, visit www.cerence.com, and follow the company on LinkedIn and Twitter.

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 400 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

 

 

 

 

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CERENCE INC.

Condensed Consolidated Statements of Operations

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CERENCE INC.

Condensed Consolidated Balance Sheets

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CERENCE INC.

Condensed Consolidated Statements of Cash Flows

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CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

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CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

(unaudited - in thousands, except per share data)

 

 

 

 

 

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CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

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CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

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CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

(unaudited - in thousands, except per share data)

 

 

 

 

 

 

 

 

Cerence Q1FY22 Earnings Call Presentation February 7, 2022 Stefan Ortmanns, CEO Mark Gallenberger, CFO Rich Yerganian, SVP of IR Exhibit 99.2

Forward-Looking Statements This material and any oral statements made in connection with this material include "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Statements made which provide the Company’s or management’s intentions, beliefs, expectations or predictions for the future are forward-looking statements and are inherently uncertain. The opinions, forecasts, projections or other statements other than statements of historical fact, including, without limitation, plans and objectives of management of the Company are forward-looking statements. It is important to note that actual results could differ materially from those discussed in such forward-looking statements. Important factors that could cause actual results to differ materially include the risk factors and other cautionary statements contained from time to time in the Company’s SEC filings, which may be obtained by contacting the Company or the SEC. These filings are also available through the Company’s web site at http://www.cerence.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

Executive Summary

Automotive Industry at a Tipping Point More cars powered by electricity will accelerate the transition to a fully digital cockpit and cabin, transforming the driver and passenger experience

Positioned to Lead the Dynamic Field of Conversational AI Critical part of the connected car ecosystem Work with incumbent car makers and new electric vehicle makers Industry-leading technology Global delivery team helping customers create unique experiences World-class employees

Cerence Delivers Strong Q1FY22 NOTE: Refer to the Appendix for more information on GAAP to non-GAAP reconciliations $0.47 74.3% $19.0M $94.4M $5.1M (1) CFFO equals GAAP net cash provided by operating activities Revenue GAAP Gross Margin GAAP Net Income GAAP EPS -diluted CFFO1 $0.59 77.5% $36.9M 1% Year Over Year Growth Non-GAAP Gross Margin 39.1% Adjusted EBITDA Non-GAAP EPS-diluted Exceeded quarterly guidance on most profitability metrics despite industry headwinds

Largest contract in company history Second highest bookings quarter in company history Initial contribution from fitness, a new mobility market Won a new China-based two-wheeler customer Building a Strong Foundation for Growth

Financial Summary

Footnote: Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations Q1 Exceeded Guidance on Most Profitability Metrics

Detailed Revenue Breakdown 1Fixed license revenue includes prepaid and minimum commitment deals. 2Excluding a one-time accounting adjustment of $1.7M to correct an amortization schedule. YoY variable license decline was caused by increase in consumption of Fixed1 licenses. Other Markets revenue in Q1 is a 1-time volume commit of $5.2M with a fitness customer. Q4 revenue of $5.2M was with a big tech giant. New connected revenue was up +23% YoY, including a $0.9m on-premise deal. Excluding on-premise, new connected was up 14% YoY. New connected revenue was up +28% QoQ. Excluding the $0.9M on-premise deal in Q1 and the $1.7M accounting adjustment in Q4, QoQ growth was +1%.

Cerence Guidance Considerations Analysis of each BU suggests bookings to revenue conversion for new products will take longer than expected. Offerings provide compelling revenue streams and can contribute to future growth, but will take longer than expected to recognize revenue. Rapidly evolving conditions in automotive, including supply chain challenges, semiconductor shortage and ongoing impact of Covid-19 / Omicron affecting delivery of vehicles, factory shutdowns and labor shortages. Prior guidance assumed a number of one-time technology license opportunities in fiscal 2022. Although attractive opportunities remain, these may not all be realized during our fiscal year as previously expected. Bookings to Revenue Macro Conditions License Deals 3 2 1

FY22 Full Year Guidance Update Footnote: (a) Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations

Q2FY22 Guidance Footnote: Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations

Long-Term Goal | Key Provider of AI for Mobility Road Cabin Driver

Thank you.

Appendix

Adoption KPIs on a Strong Positive Trend Initial Covid-19 Impact Transactions are defined as the number of initiated user interactions with the Company's cloud computing platforms.

Non-GAAP Financial Measures – Definitions 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 December 31, 2021 and 2020, 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.  

Non-GAAP Financial Measures – Definitions 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: 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. 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. 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.

Non-GAAP Financial Measures – Definitions 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 follow: (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.

KPI Measures – Definitions 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, 2021, 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 trailing twelve month comparison while excluding legacy contract and adjusted for prepay usage.

Q1FY22 Reconciliations of GAAP to non-GAAP Results (unaudited - in thousands, except per share data) (unaudited - in thousands, except per share data) Three Months Ended December 31, 2021 2020 GAAP revenue $94,426 $93,643 GAAP gross profit $70,199 $66,755 Stock-based compensation 1,092 1,592 Amortization of intangible assets 1,879 1,879 Non-GAAP gross profit $73,170 $70,226 GAAP gross margin 74.3% 71.3% Non-GAAP gross margin 77.5% 75.0% GAAP operating income $22,932 $17,544 Stock-based compensation* 1,841 13,325 Amortization of intangible assets 5,033 5,037 Restructuring and other costs, net* 4,915 480 Non-GAAP operating income $34,721 $36,386 GAAP operating margin 24.3% 18.7% Non-GAAP operating margin 36.8% 38.9% GAAP net income $19,044 $20,941 Stock-based compensation* 1,841 13,325 Amortization of intangible assets 5,033 5,037 Restructuring and other costs, net* 4,915 480 Depreciation 2,177 2,587 Total other income (expense), net (3,589) (6,018) Provision for (benefit from) income taxes 299 (9,415) Adjusted EBITDA $36,898 $38,973 GAAP net income margin 20.2% 22.4% Adjusted EBITDA margin 39.1% 41.6% Three Months Ended December 31, 2021 2020 GAAP net income $19,044 $20,941 Stock-based compensation* 1,841 13,325 Amortization of intangible assets 5,033 5,037 Restructuring and other costs, net* 4,915 480 Non-cash interest expense 1,301 1,230 Indemnification asset release 1,302 - Adjustments to income tax expense (8,108) (17,416) Non-GAAP net income $25,328 $23,597 Adjusted EPS: GAAP Numerator: Net income attributed to common shareholders $19,044 $20,941 Interest on Convertible Senior Notes, net of tax 1,911 1,831 Net income attributed to common shareholders - diluted $20,955 $22,772 Non-GAAP Numerator: Net income attributed to common shareholders $25,328 $23,597 Interest on Convertible Senior Notes, net of tax 1,019 1,005 Net income attributed to common shareholders - diluted $26,347 $24,602 GAAP Denominator: Weighted-average common shares outstanding - basic 38,839 37,180 Adjustment for diluted shares 5,531 6,183 Weighted-average common shares outstanding - diluted 44,370 43,363 Non-GAAP Denominator: Weighted-average common shares outstanding- basic 38,839 37,180 Adjustment for diluted shares 5,531 6,183 Weighted-average common shares outstanding - diluted 44,370 43,363 GAAP net income per share - diluted $0.47 $0.53 Non-GAAP net income per share - diluted $0.59 $0.57 GAAP net cash provided by operating activities $5,145 $10,809 Capital expenditures (4,410) (2,369) Free Cash Flow $735 $8,440

Q2FY22 and FY22 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands, except per share data) Q2 2022 FY2022 Low High Low High GAAP revenue $82,000 $86,000 $365,000 $385,000 GAAP gross profit $58,400 $62,400 $267,900 $287,900 Stock-based compensation 1,200 1,200 4,700 4,700 Amortization of intangible assets 900 900 3,000 3,000 Non-GAAP gross profit $60,500 $64,500 $275,600 $295,600 GAAP gross margin 71% 73% 73% 75% Non-GAAP gross margin 74% 75% 76% 77% GAAP operating income $5,400 $9,400 $59,300 $79,300 Stock-based compensation 9,000 9,000 28,400 28,400 Amortization of intangible assets 4,100 4,100 14,700 14,700 Restructuring and other costs, net 500 500 6,300 6,300 Non-GAAP operating income $19,000 $23,000 $108,700 $128,700 GAAP operating margin 7% 11% 16% 21% Non-GAAP operating margin 23% 27% 30% 33% GAAP net income $1,300 $3,700 $34,400 $49,200 Stock-based compensation 9,000 9,000 28,400 28,400 Amortization of intangible assets 4,100 4,100 14,700 14,700 Restructuring and other costs, net 500 500 6,300 6,300 Depreciation 2,500 2,500 10,000 10,000 Total other income (expense), net (3,300) (3,300) (13,500) (13,500) Provision for income taxes 800 2,400 11,400 16,600 Adjusted EBITDA $21,500 $25,500 $118,700 $138,700 GAAP net income margin 2% 4% 9% 13% Adjusted EBITDA margin 26% 30% 33% 36%

Q2FY22 and FY22 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands) Q2 2022 FY2022 Low High Low High GAAP net income $1,300 $3,700 $34,400 $49,200 Stock-based compensation 9,000 9,000 28,400 28,400 Amortization of intangibles 4,100 4,100 14,700 14,700 Restructuring and other costs, net 500 500 6,300 6,300 Non-cash interest expense 1,300 1,300 5,300 5,300 Adjustments to income tax expense (3,400) (2,800) (13,100) (12,100) Non-GAAP net income $12,800 $15,800 $76,000 $91,800 Adjusted EPS: GAAP Numerator: Net income attributed to common shareholders $1,300 $3,700 $34,400 $49,200 Non-GAAP Numerator: Net income attributed to common shareholders $12,800 $15,800 $76,000 $91,800 Interest on Convertible Senior Notes, net of tax 1,000 1,000 4,000 4,000 Net income attributed to common shareholders - diluted $13,800 $16,800 $80,000 $95,800 GAAP Denominator: Weighted-average common shares outstanding - basic 39,200 39,200 39,100 39,100 Adjustment for diluted shares 600 600 700 700 Weighted-average common shares outstanding - diluted 39,800 39,800 39,800 39,800 Non-GAAP Denominator: Weighted-average common shares outstanding- basic 39,200 39,200 39,100 39,100 Adjustment for diluted shares 5,200 5,200 5,300 5,300 Weighted-average common shares outstanding - diluted 44,400 44,400 44,400 44,400 GAAP net income per share - diluted $0.03 $0.09 $0.86 $1.24 Non-GAAP net income per share - diluted $0.31 $0.38 $1.80 $2.16