8-K
0001768267false00017682672022-11-292022-11-29

 

 

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): November 29, 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.

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On November 29, 2022, Cerence Inc. (the "Company") announced its financial results for the fiscal year ended September 30, 2022. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release.

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 November 29, 2022.

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 


 

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: November 29, 2022

 

By:

  /s/ Thomas L. Beaudoin

 

 

 

  Name: Thomas L. Beaudoin

 

 

 

  Title: Executive Vice President and Chief Financial Officer

 

 


EX-99.1

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Exhibit 99.1

Cerence Announces Fourth Quarter and Fiscal Year 2022 Results

Headlines

Delivered strong full fiscal new bookings at $684M, up 16% year over year
Record fiscal year revenue for Professional Services
Awarded strategic win-back program from big tech
Cerence technology in 51% of global auto production
 

BURLINGTON, Mass., November 29, 2022Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its fourth quarter and fiscal year 2022 results for the year ended September 30, 2022.

 

Results Summary (1)

(in millions, except per share data)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

GAAP revenue

 

$

58.1

 

 

$

98.1

 

 

$

327.9

 

 

$

387.2

 

GAAP gross margin

 

 

58.1

%

 

 

75.4

%

 

 

70.4

%

 

 

73.9

%

Non-GAAP gross margin

 

 

58.9

%

 

 

78.1

%

 

 

72.4

%

 

 

77.3

%

GAAP operating margin

 

 

-394.4

%

 

 

11.0

%

 

 

-56.2

%

 

 

15.7

%

Non-GAAP operating margin

 

 

-9.8

%

 

 

37.2

%

 

 

23.5

%

 

 

37.8

%

GAAP net (loss) income (2)(3)

 

$

(230.1

)

 

$

8.0

 

 

$

(310.8

)

 

$

45.9

 

Non-GAAP net (loss) income

 

$

(5.5

)

 

$

28.4

 

 

$

50.4

 

 

$

107.2

 

Adjusted EBITDA

 

$

(3.1

)

 

$

38.8

 

 

$

86.4

 

 

$

155.9

 

Adjusted EBITDA margin

 

 

-5.3

%

 

 

39.6

%

 

 

26.3

%

 

 

40.3

%

GAAP net (loss) income per share - diluted

 

$

(5.84

)

 

$

0.20

 

 

$

(7.93

)

 

$

1.17

 

Non-GAAP net (loss) income per share - diluted

 

$

(0.14

)

 

$

0.66

 

 

$

1.24

 

 

$

2.53

 

 

(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.
(2)
During the third quarter of fiscal 2022, we established a valuation allowance of $107.6 million against our deferred tax assets in the Netherlands, which consist of tax amortizable intellectual property and net operating loss carryforwards. This provision is a non-cash event.
(3)
During the fourth quarter of fiscal 2022, the company reported a Goodwill impairment of $213.7 million. This provision is a non-cash event.

 


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Stefan Ortmanns, Chief Executive Officer at Cerence, commented, “Our fourth quarter operating results were better than expected, and as committed, included no contribution from fixed contracts. Most importantly, our bookings at $684M represent an increase of 16% compared to fiscal 2021 and include a number of key program wins for some of our latest product offerings, indicating continued innovation partnerships with the world's leading automakers and transportation OEMs as they continue to adopt new technologies from Cerence.”

Ortmanns continued, “As we look to the future, we see significant opportunities for growth as we expand our focus from the driver-centric cockpit to the fully immersive digital cabin. During our investor day presentation, we are excited to share with investors our organic growth strategy, the technology roadmap to support it, and the accompanying multi-year plan that will drive long-term sustainable growth.”

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:

Key Performance Indicator1

 

Q4FY22

 

Percent of worldwide auto production with Cerence Technology (TTM)

 

 

51

%

Average contract duration - years (TTM):

 

 

7.2

 

Repeatable software contribution (TTM):

 

 

74

%

Change in number of Cerence connected cars shipped2 (TTM over prior year TTM)

 

 

(13

%)

Growth in billings per car (TTM over prior year TTM) (excludes legacy contract)3

 

 

8

%

 

(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 increased 2% over the same time period ended on September 30, 2022.
(3)
Legacy contract is a connected services contract with Toyota acquired by Nuance through a 2013 acquisition.

First Quarter and Full Year Fiscal 2023 Outlook

First quarter and full fiscal 2023 guidance will be provided during the investor day presentation.

Cerence Investor Day Webcast

The company is hosting a live investor day in New York City and will also webcast the event, starting at 9:00 a.m. Eastern Time / 6:00 a.m. Pacific Time on November 29, 2022. The agenda for the investor day will include a review of Q4 and full fiscal year 2022 results and fiscal 2023 guidance. Additionally, the company will share Cerence’s market and growth strategy, a deeper dive into its technology roadmap and competitive position supporting our strategy, and the multi-year financial targets.

All interested investors and analysts are invited to join the live webcast by registering here.

 

 


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Cerence intends to use the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

 

Webcast access, along with related materials, will also be available on the Investor Information section of the company’s website at https://www.cerence.com/investors/events-and-resources.

 

A replay of the webcast can be accessed by visiting the company’s website 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; multi-year targets; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial results; backlog; demand for Cerence products; innovation and new product offerings; cost efficiency initiatives; and 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: the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry, the related supply chain and semiconductor shortage, or the global economy more generally; the impacts of the COVID-19 pandemic on our and our customers’ businesses; the impact of the war in Ukraine on our and our customers’ businesses; our ability to control and successfully manage our expenses and cash position; escalating pricing pressures from our customers; the impact on our business of the transition to a lower level of fixed contracts, including the failure to achieve such a transition; our failure to win, renew or implement service contracts; the cancellation or postponement of existing 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; our strategy to increase cloud offerings; the inability to recruit and retain qualified personnel; disruptions arising from transitions in management personnel; cybersecurity and data privacy incidents; fluctuating currency rates and interest rates; inflation; and the other factors discussed in our most recent Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and other filings with the Securities and Exchange Commission. Further, the inclusion of Cerence’s multi-year plan in this presentation should not be regarded as predictive of actual future events, and such targets, which were based on numerous variables and assumptions that necessarily involve judgments, should not be relied upon as such or construed as financial guidance. Such plan covers multiple years, and thus, by their nature, the targets included in the plan become subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that any of the targets set forth in the multi-year plan will be realized, and actual results may vary materially from those targets. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

 


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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 and twelve months ended September 30, 2022 and 2021, 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 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

 


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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 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.

 


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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.

Adjustments to income tax provision.

 


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Adjustments to our GAAP income tax provision to arrive at non-GAAP net income is determined based on our non-GAAP pre-tax income. Additionally, as our non-GAAP profitability is higher based on the non-GAAP adjustments, we adjust the GAAP tax provision to remove valuation allowances and related effects based on the higher level of reported non-GAAP profitability. We also exclude from our non-GAAP tax provision certain discrete tax items as they occur.

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 September 30, 2022, 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.

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

 


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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 vehicles, 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 450 million cars shipped with Cerence technology. Whether it’s connected cars, autonomous driving, e-vehicles, or two-wheelers, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

 

Contact Information

Rich Yerganian

Senior Vice President of Investor Relations

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 

 


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CERENCE INC.

Consolidated Statements of Operations

(in thousands, except per share data)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

19,000

 

 

$

51,418

 

 

$

158,610

 

 

$

202,183

 

Connected service

 

 

18,096

 

 

 

25,585

 

 

 

85,571

 

 

 

109,534

 

Professional service

 

 

21,048

 

 

 

21,073

 

 

 

83,710

 

 

 

75,465

 

Total revenues

 

 

58,144

 

 

 

98,076

 

 

 

327,891

 

 

 

387,182

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

1,006

 

 

 

826

 

 

 

2,698

 

 

 

3,544

 

Connected service

 

 

5,956

 

 

 

5,767

 

 

 

22,722

 

 

 

25,727

 

Professional service

 

 

17,316

 

 

 

15,655

 

 

 

68,764

 

 

 

64,287

 

Amortization of intangible assets

 

 

105

 

 

 

1,879

 

 

 

2,984

 

 

 

7,516

 

Total cost of revenues

 

 

24,383

 

 

 

24,127

 

 

 

97,168

 

 

 

101,074

 

Gross profit

 

 

33,761

 

 

 

73,949

 

 

 

230,723

 

 

 

286,108

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

25,308

 

 

 

28,705

 

 

 

107,116

 

 

 

112,070

 

Sales and marketing

 

 

8,611

 

 

 

10,586

 

 

 

31,098

 

 

 

38,683

 

General and administrative

 

 

10,712

 

 

 

18,416

 

 

 

42,653

 

 

 

56,979

 

Amortization of intangible assets

 

 

2,365

 

 

 

3,169

 

 

 

11,516

 

 

 

12,690

 

Restructuring and other costs, net

 

 

2,379

 

 

 

2,315

 

 

 

8,965

 

 

 

5,092

 

Goodwill impairment

 

 

213,720

 

 

 

 

 

 

213,720

 

 

 

 

Total operating expenses

 

 

263,095

 

 

 

63,191

 

 

 

415,068

 

 

 

225,514

 

(Loss) income from operations

 

 

(229,334

)

 

 

10,758

 

 

 

(184,345

)

 

 

60,594

 

Interest income

 

 

591

 

 

 

41

 

 

 

1,007

 

 

 

109

 

Interest expense

 

 

(3,792

)

 

 

(3,428

)

 

 

(14,394

)

 

 

(13,997

)

Other (expense) income, net

 

 

(255

)

 

 

131

 

 

 

(1,019

)

 

 

1,563

 

(Loss) income before income taxes

 

 

(232,790

)

 

 

7,502

 

 

 

(198,751

)

 

 

48,269

 

(Benefit from) provision for income taxes

 

 

(2,663

)

 

 

(489

)

 

 

112,075

 

 

 

2,376

 

Net (loss) income

 

$

(230,127

)

 

$

7,991

 

 

$

(310,826

)

 

$

45,893

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

(5.84

)

 

 

0.21

 

 

 

(7.93

)

 

 

1.22

 

Diluted

 

 

(5.84

)

 

 

0.20

 

 

 

(7.93

)

 

 

1.17

 

Weighted-average common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,407

 

 

 

38,015

 

 

 

39,187

 

 

 

37,752

 

Diluted

 

 

39,407

 

 

 

39,748

 

 

 

39,187

 

 

 

39,289

 

 

 

 

 


https://cdn.kscope.io/c9bc276d9acc7574d0a870ee42904ee7-img86656129_0.jpg 

 

CERENCE INC.

Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

94,847

 

 

$

128,428

 

Marketable securities

 

 

20,317

 

 

 

30,435

 

Accounts receivable, net of allowances of $157 and $395 at September 30, 2022 and September 30, 2021, respectively

 

 

45,073

 

 

 

45,560

 

Deferred costs

 

 

7,098

 

 

 

6,095

 

Prepaid expenses and other current assets

 

 

60,184

 

 

 

76,530

 

Total current assets

 

 

227,519

 

 

 

287,048

 

Long-term marketable securities

 

 

11,584

 

 

 

7,339

 

Property and equipment, net

 

 

37,707

 

 

 

31,505

 

Deferred costs

 

 

22,451

 

 

 

31,702

 

Operating lease right of use assets

 

 

14,702

 

 

 

14,901

 

Goodwill

 

 

890,802

 

 

 

1,128,511

 

Intangible assets, net

 

 

9,700

 

 

 

25,348

 

Deferred tax assets

 

 

51,989

 

 

 

159,293

 

Other assets

 

 

52,039

 

 

 

20,081

 

Total assets

 

$

1,318,493

 

 

$

1,705,728

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,372

 

 

$

11,636

 

Deferred revenue

 

 

72,662

 

 

 

78,394

 

Short-term operating lease liabilities

 

 

5,071

 

 

 

4,562

 

Short-term debt

 

 

10,938

 

 

 

6,250

 

Accrued expenses and other current liabilities

 

 

47,990

 

 

 

64,467

 

Total current liabilities

 

 

147,033

 

 

 

165,309

 

Long-term debt, net of discounts and issuance costs

 

 

259,436

 

 

 

265,093

 

Deferred revenue, net of current portion

 

 

165,972

 

 

 

198,343

 

Long-term operating lease liabilities

 

 

11,375

 

 

 

12,216

 

Other liabilities

 

 

21,727

 

 

 

32,822

 

Total liabilities

 

 

605,543

 

 

 

673,783

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 560,000 shares authorized as of September 30, 2022; 39,430 and 38,025 shares issued and outstanding as of September 30, 2022 and September 30, 2021, respectively

 

 

394

 

 

 

381

 

Accumulated other comprehensive (loss) income

 

 

(33,737

)

 

 

1,634

 

Additional paid-in capital

 

 

1,029,542

 

 

 

1,002,353

 

(Accumulated deficit) Retained earnings

 

 

(283,249

)

 

 

27,577

 

Total stockholders' equity

 

 

712,950

 

 

 

1,031,945

 

Total liabilities and stockholders' equity

 

$

1,318,493

 

 

$

1,705,728

 

 

 


https://cdn.kscope.io/c9bc276d9acc7574d0a870ee42904ee7-img86656129_0.jpg 

 

CERENCE INC.

Consolidated Statements of Cash Flows

(in thousands)

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(310,826

)

 

$

45,893

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

23,939

 

 

 

29,661

 

(Benefit from) provision for credit loss reserve

 

 

(413

)

 

 

(415

)

Stock-based compensation

 

 

28,076

 

 

 

60,555

 

Non-cash interest expense

 

 

5,281

 

 

 

5,013

 

Deferred tax provision (benefit)

 

 

97,287

 

 

 

(4,419

)

Goodwill impairment

 

 

213,720

 

 

 

-

 

Other

 

 

6,115

 

 

 

(606

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(6,590

)

 

 

5,751

 

Prepaid expenses and other assets

 

 

(33,756

)

 

 

(30,661

)

Deferred costs

 

 

4,654

 

 

 

6,984

 

Accounts payable

 

 

157

 

 

 

3,411

 

Accrued expenses and other liabilities

 

 

(1,479

)

 

 

(1,125

)

Deferred revenue

 

 

(28,303

)

 

 

(45,653

)

Net cash (used in) provided by operating activities

 

 

(2,138

)

 

 

74,389

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(17,446

)

 

 

(12,047

)

Purchases of marketable securities

 

 

(31,757

)

 

 

(42,471

)

Sale and maturities of marketable securities

 

 

37,203

 

 

 

16,350

 

Purchase of debt securities

 

 

-

 

 

 

(2,000

)

Payments for equity securities

 

 

(584

)

 

 

(2,563

)

Other investing activities

 

 

2,019

 

 

 

1,100

 

Net cash used in investing activities

 

 

(10,565

)

 

 

(41,631

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments for long-term debt issuance costs

 

 

-

 

 

 

(520

)

Principal payments of long-term debt

 

 

(6,250

)

 

 

(6,252

)

Common stock repurchases for tax withholdings for net settlement of equity awards

 

 

(49,003

)

 

 

(45,769

)

Principal payments of lease liabilities arising from a finance leases

 

 

(415

)

 

 

(486

)

Proceeds from the issuance of common stock

 

 

36,062

 

 

 

11,522

 

Net cash used in financing activities

 

 

(19,606

)

 

 

(41,505

)

Effects of exchange rate changes on cash and cash equivalents

 

 

(1,272

)

 

 

1,108

 

Net change in cash and cash equivalents

 

 

(33,581

)

 

 

(7,639

)

Cash and cash equivalents at beginning of year

 

 

128,428

 

 

 

136,067

 

Cash and cash equivalents at end of year

 

$

94,847

 

 

$

128,428

 

 

 


https://cdn.kscope.io/c9bc276d9acc7574d0a870ee42904ee7-img86656129_0.jpg 

 

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

(unaudited - in thousands)

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

GAAP revenue

 

$

58,144

 

 

$

98,076

 

 

$

327,891

 

 

$

387,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

33,761

 

 

$

73,949

 

 

$

230,723

 

 

$

286,108

 

Stock-based compensation

 

 

382

 

 

 

815

 

 

 

3,766

 

 

 

5,760

 

Amortization of intangible assets

 

 

105

 

 

 

1,879

 

 

 

2,984

 

 

 

7,516

 

Non-GAAP gross profit

 

$

34,248

 

 

$

76,643

 

 

$

237,473

 

 

$

299,384

 

GAAP gross margin

 

 

58.1

%

 

 

75.4

%

 

 

70.4

%

 

 

73.9

%

Non-GAAP gross margin

 

 

58.9

%

 

 

78.1

%

 

 

72.4

%

 

 

77.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating (loss) income

 

$

(229,334

)

 

$

10,758

 

 

$

(184,345

)

 

$

60,594

 

Stock-based compensation*

 

 

5,056

 

 

 

18,376

 

 

 

24,076

 

 

 

60,555

 

Amortization of intangible assets

 

 

2,470

 

 

 

5,048

 

 

 

14,500

 

 

 

20,206

 

Restructuring and other costs, net*

 

 

2,379

 

 

 

2,315

 

 

 

8,965

 

 

 

5,092

 

Goodwill impairment

 

 

213,720

 

 

 

-

 

 

 

213,720

 

 

 

-

 

Non-GAAP operating (loss) income

 

$

(5,709

)

 

$

36,497

 

 

$

76,916

 

 

$

146,447

 

GAAP operating margin

 

 

-394.4

%

 

 

11.0

%

 

 

-56.2

%

 

 

15.7

%

Non-GAAP operating margin

 

 

-9.8

%

 

 

37.2

%

 

 

23.5

%

 

 

37.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net (loss) income

 

$

(230,127

)

 

$

7,991

 

 

$

(310,826

)

 

$

45,893

 

Stock-based compensation*

 

 

5,056

 

 

 

18,376

 

 

 

24,076

 

 

 

60,555

 

Amortization of intangible assets

 

 

2,470

 

 

 

5,048

 

 

 

14,500

 

 

 

20,206

 

Restructuring and other costs, net*

 

 

2,379

 

 

 

2,315

 

 

 

8,965

 

 

 

5,092

 

Goodwill impairment

 

 

213,720

 

 

 

-

 

 

 

213,720

 

 

 

-

 

Depreciation

 

 

2,616

 

 

 

2,337

 

 

 

9,439

 

 

 

9,455

 

Total other (expense) income, net

 

 

(3,456

)

 

 

(3,256

)

 

 

(14,406

)

 

 

(12,325

)

(Benefit from) provision for income taxes

 

 

(2,663

)

 

 

(489

)

 

 

112,075

 

 

 

2,376

 

Adjusted EBITDA

 

$

(3,093

)

 

$

38,834

 

 

$

86,355

 

 

$

155,902

 

GAAP net (loss) income margin

 

 

-395.8

%

 

 

8.1

%

 

 

-94.8

%

 

 

11.9

%

Adjusted EBITDA margin

 

 

-5.3

%

 

 

39.6

%

 

 

26.3

%

 

 

40.3

%

* - $4.0 million in stock-based compensation is included in Restructuring and other costs, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


https://cdn.kscope.io/c9bc276d9acc7574d0a870ee42904ee7-img86656129_0.jpg 

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

 

Twelve Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

GAAP net (loss) income

 

$

(230,127

)

 

$

7,991

 

 

$

(310,826

)

 

$

45,893

 

Stock-based compensation*

 

 

5,056

 

 

 

18,376

 

 

 

24,076

 

 

 

60,555

 

Amortization of intangible assets

 

 

2,470

 

 

 

5,048

 

 

 

14,500

 

 

 

20,206

 

Restructuring and other costs, net*

 

 

2,379

 

 

 

2,315

 

 

 

8,965

 

 

 

5,092

 

Goodwill impairment

 

 

213,720

 

 

 

-

 

 

 

213,720

 

 

 

-

 

Non-cash interest expense

 

 

1,359

 

 

 

1,283

 

 

 

5,281

 

 

 

5,013

 

Indemnification asset release

 

 

-

 

 

 

-

 

 

 

1,302

 

 

 

-

 

Adjustments to income tax expense

 

 

(362

)

 

 

(6,599

)

 

 

93,405

 

 

 

(29,582

)

Non-GAAP net (loss) income

 

$

(5,505

)

 

$

28,414

 

 

$

50,423

 

 

$

107,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributed to common shareholders

 

$

(230,127

)

 

$

7,991

 

 

$

(310,826

)

 

$

45,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributed to common shareholders

 

$

(5,505

)

 

$

28,414

 

 

$

50,423

 

 

$

107,177

 

Interest on Convertible Senior Notes, net of tax

 

 

-

 

 

 

1,019

 

 

 

4,068

 

 

 

4,043

 

Net (loss) income attributed to common shareholders - diluted

 

$

(5,505

)

 

$

29,433

 

 

$

54,491

 

 

$

111,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic

 

 

39,407

 

 

 

38,015

 

 

 

39,187

 

 

 

37,752

 

Adjustment for diluted shares

 

 

-

 

 

 

1,733

 

 

 

-

 

 

 

1,537

 

Weighted-average common shares outstanding - diluted

 

 

39,407

 

 

 

39,748

 

 

 

39,187

 

 

 

39,289

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding- basic

 

 

39,407

 

 

 

38,015

 

 

 

39,187

 

 

 

37,752

 

Adjustment for diluted shares

 

 

-

 

 

 

6,410

 

 

 

4,912

 

 

 

6,214

 

Weighted-average common shares outstanding - diluted

 

 

39,407

 

 

 

44,425

 

 

 

44,099

 

 

 

43,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net (loss) income per share - diluted

 

$

(5.84

)

 

$

0.20

 

 

$

(7.93

)

 

$

1.17

 

Non-GAAP net (loss) income per share - diluted

 

$

(0.14

)

 

$

0.66

 

 

$

1.24

 

 

$

2.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net cash (used in) provided by operating activities

 

$

(4,953

)

 

$

23,321

 

 

$

(2,138

)

 

$

74,389

 

Capital expenditures

 

 

(3,028

)

 

 

(3,992

)

 

 

(17,446

)

 

 

(12,047

)

Free Cash Flow

 

$

(7,981

)

 

$

19,329

 

 

$

(19,584

)

 

$

62,342

 

* - $4.0 million in stock-based compensation is included in Restructuring and other costs, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 


https://cdn.kscope.io/c9bc276d9acc7574d0a870ee42904ee7-img86656129_0.jpg 

 

CERENCE INC.

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

(unaudited - in thousands)

 

 

Q4FY22

 

 

Q3FY22

 

 

Q2FY22

 

 

Q1FY22

 

GAAP revenues

 

$

58,144

 

 

$

89,041

 

 

$

86,280

 

 

$

94,426

 

Less: Professional services revenue

 

 

21,048

 

 

 

22,599

 

 

 

20,646

 

 

 

19,417

 

Non-GAAP Repeatable revenues

 

$

37,096

 

 

$

66,442

 

 

$

65,634

 

 

$

75,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP revenues TTM

 

$

327,891

 

 

 

 

 

 

 

 

 

 

Less: Professional services revenue TTM

 

 

83,710

 

 

 

 

 

 

 

 

 

 

Non-GAAP Repeatable revenues TTM

 

$

244,181

 

 

 

 

 

 

 

 

 

 

Repeatable software contribution

 

 

74

%