crnc-8k_20200331.htm

 

 

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): May 7, 2020

 

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.)

 

 

 

 

 

15 Wayside Road

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 May 7, 2020, Cerence Inc. (the "Company") announced its financial results for the quarter ended March 31, 2020. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Also on May 7, 2020, the Company used a presentation on its call with investors, discussing its financial results for the quarter ended March 31, 2020, 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 May 7, 2020

99.2

 

Earnings Release Presentation dated May 7, 2020

 

 


 

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.

 

 

 

Company Name

 

 

 

 

Date: May 7, 2020

 

By:

  /s/ Mark Gallenberger

 

 

 

  Name: Mark Gallenberger

 

 

 

  Title: Chief Financial Officer

 

 

crnc-ex991_7.htm

Exhibit 99.1

 

 

 

 

Press Release

May 7, 2020

 

 

Cerence Announces Second Quarter 2020 Results

Second Quarter Highlights

 

First-half of fiscal year bookings reach a record of $533M exceeding FY2019 full year bookings

 

Record quarterly GAAP revenue at $86.5M increased approximately 23% year over year

 

Strong financial performance with GAAP EPS of $0.33 and non-GAAP EPS of $0.43

 

Adjusted EBITDA of $29.0M increased 55%, and adjusted EBITDA margin of 33.6% increased 26% compared to Q2FY19

 

Several strategic wins including Geely, FCA and Bean Tech

BURLINGTON, Mass., May 7, 2020Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its second fiscal quarter 2020 results for the quarter ended March 31, 2020.

 

Results Summary (1)

(in millions, except per share data)

 

 

Three Months

 

 

Three Months

 

 

Six Months

 

 

Six Months

 

 

 

Ended

 

 

Ended

 

 

Ended

 

 

Ended

 

 

 

March 31, 2020

 

 

March 31, 2019

 

 

March 31, 2020

 

 

March 31, 2019

 

GAAP Revenue

 

$

86.5

 

 

$

70.3

 

 

$

164.0

 

 

$

142.8

 

GAAP Gross Margin%

 

 

66.8

%

 

 

65.2

%

 

 

66.7

%

 

 

65.9

%

Non-GAAP Gross Margin%

 

 

70.1

%

 

 

69.2

%

 

 

70.4

%

 

 

69.7

%

GAAP Operating Margin%

 

 

13.9

%

 

 

0.2

%

 

 

6.0

%

 

 

2.1

%

Non-GAAP Operating Margin%

 

 

31.0

%

 

 

23.6

%

 

 

28.3

%

 

 

24.3

%

Adjusted EBITDA

 

$

29.0

 

 

$

18.7

 

 

$

50.8

 

 

$

38.8

 

GAAP net income margin

 

 

14.4

%

 

 

0.6

%

 

 

0.4

%

 

 

1.9

%

Adjusted EBITDA margin

 

 

33.6

%

 

 

26.6

%

 

 

31.0

%

 

 

27.2

%

GAAP net income

 

$

12.5

 

 

$

0.5

 

 

$

0.7

 

 

$

2.7

 

Non-GAAP net income

 

$

16.1

 

 

$

11.3

 

 

$

26.5

 

 

$

24.8

 

GAAP net income per share - diluted

 

$

0.33

 

 

$

0.01

 

 

$

0.02

 

 

$

0.07

 

Non-GAAP net income per share - diluted

 

$

0.43

 

 

$

0.31

 

 

$

0.72

 

 

$

0.68

 

 

(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 delivered excellent financial results for our second fiscal quarter, exceeding most of our guidance metrics despite the initial impact of COVID-19 on the global economy in general, and the automotive market specifically. We had several significant wins in the quarter, including a major European OEM that represented the two largest contracts in the company’s history, one for license and one for cloud-connected services; Geely’s selection of Cerence ARK across all their auto brands; FCA’s adoption of Cerence technology for the all new Uconnect 5 global infotainment platform; and, Bean Tech’s adoption of Cerence ARK for Great Wall Motors.”

Dhawan added, “Our year-over-year revenue growth, led by strong growth in the cloud-connected and professional services businesses, reflects strong momentum for our products and services. While the business environment in the near term will be challenging, the largest first-half fiscal year bookings in the company’s history is a strong indication of Cerence’s long-term growth potential. These bookings and the strategic wins in

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

the quarter give us confidence that we will emerge a stronger company once the automobile industry begins its recovery.”

Dhawan continued, “In the current environment, our first priority is protecting the health and safety of our employees. There is a team that meets daily to monitor developments, keep our employees informed and plan for the eventual return to the office in accordance with government guidelines. We have made adjustments to our business in response to the challenging conditions and believe the changes we have made will continue to support the long term growth of the company while seeking to minimize the negative impact of the virus on our operations.”

 

Statement on Guidance

Because of the uncertainty in Cerence’s served markets and that most of the company’s customers and partners are no longer providing guidance for the remainder of the year due to the global economic impact of COVID-19, the company is unable to provide guidance for its fiscal Q3 and is withdrawing its previous guidance for the fiscal year.

 

Second 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 2859818. 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 May 14, 2020. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 2859818. 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 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: the expected impacts COVID-19 pandemic on our business, the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry or the global economy more generally; our ability to control and successfully manage our expenses and cash position; our strategy to increase cloud; 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; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents; fluctuating currency rates; and the other factors

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

in our Annual Report on our most recent Form 10-K  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 and six months ended March 31, 2020 and 2019, our management has either included or excluded items in five 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 other operating gains, and excluding acquisition-related costs, amortization of purchased intangible assets, stock-based compensation, and restructuring and other costs 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, investment income (loss), equity in net income (losses) of investees, and other income (expense), net (as stated in our Consolidated Statement of Income). 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. 

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

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

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.

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

 

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 restructuring charges, asset impairments and other charges (credits), net. Other items such as consulting and professional services fees related to separation costs directly attributable to the Cerence business becoming a standalone public company.

 

Backlog.

Revenue backlog consists of the following categories: (i) fixed backlog, (ii) variable backlog, and (iii) adjusted backlog. These categories are further discussed as follows:

 

(i)

Fixed backlog. Future revenue related to remaining performance obligations and contractual commitments which have not been invoiced.

 

(ii)

Variable backlog. Estimated future revenue from variable forecasted royalties related to our embedded and connected businesses. Our estimation of forecasted royalties is based on our royalty rates for embedded and connected technologies from expected car shipments under our existing contracts over the term of the programs. Anticipated shipments are based on historical shipping experience and current customer projections that management believes are reasonable. Both our embedded and connected technologies are priced and sold on a per-vehicle or device basis, where we receive a single fee for either or both the embedded license and the connected service term.

 

(iii)

Adjusted backlog. The total of fixed backlog and variable backlog.

Our fixed and variable backlog may not be indicative of our actual future revenue. The revenue we actually recognize is subject to several factors, including the number and timing of vehicles our customers ship, potential terminations or changes in scope of customer contracts and currency fluctuations.

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 automotive world. As an innovation partner to the world’s leading automakers, it is helping transform how a car feels, responds and learns. Its track record is built on more than 20 years of knowledge and more than 325 million cars on the road today. Whether it’s connected cars, autonomous driving or e-vehicles, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

 

Contact Information

Rich Yerganian

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

CERENCE INC.

Consolidated and Combined Statements of Operations

(unaudited - in thousands, except share and per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

44,622

 

 

$

39,324

 

 

$

85,389

 

 

$

83,326

 

Connected services

 

 

23,131

 

 

 

18,858

 

 

 

46,152

 

 

 

36,113

 

Professional services

 

 

18,742

 

 

 

12,122

 

 

 

32,413

 

 

 

23,349

 

Total revenues

 

 

86,495

 

 

 

70,304

 

 

 

163,954

 

 

 

142,788

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

843

 

 

 

567

 

 

 

1,524

 

 

 

907

 

Connected services

 

 

8,876

 

 

 

9,130

 

 

 

17,551

 

 

 

20,359

 

Professional services

 

 

16,753

 

 

 

12,726

 

 

 

31,244

 

 

 

23,189

 

Amortization of intangible assets

 

 

2,258

 

 

 

2,021

 

 

 

4,345

 

 

 

4,196

 

Total cost of revenues

 

 

28,730

 

 

 

24,444

 

 

 

54,664

 

 

 

48,651

 

Gross profit

 

 

57,765

 

 

 

45,860

 

 

 

109,290

 

 

 

94,137

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,346

 

 

 

22,561

 

 

 

44,857

 

 

 

46,369

 

Sales and marketing

 

 

7,706

 

 

 

9,799

 

 

 

15,649

 

 

 

19,244

 

General and administrative

 

 

10,712

 

 

 

5,689

 

 

 

22,195

 

 

 

11,410

 

Amortization of intangible assets

 

 

3,125

 

 

 

3,132

 

 

 

6,256

 

 

 

6,264

 

Restructuring and other costs, net

 

 

2,870

 

 

 

4,329

 

 

 

10,424

 

 

 

7,456

 

Acquisition-related costs

 

 

 

 

 

182

 

 

 

 

 

 

417

 

Total operating expenses

 

 

45,759

 

 

 

45,692

 

 

 

99,381

 

 

 

91,160

 

Income from operations

 

 

12,006

 

 

 

168

 

 

 

9,909

 

 

 

2,977

 

Interest income

 

 

244

 

 

 

 

 

 

525

 

 

 

 

Interest expense

 

 

(6,699

)

 

 

 

 

 

(13,497

)

 

 

 

Other income (expense), net

 

 

226

 

 

 

266

 

 

 

80

 

 

 

250

 

Income (loss) before income taxes

 

 

5,777

 

 

 

434

 

 

 

(2,983

)

 

 

3,227

 

(Benefit from) provision for income taxes

 

 

(6,718

)

 

 

(20

)

 

 

(3,716

)

 

 

518

 

Net income

 

$

12,495

 

 

$

454

 

 

$

733

 

 

$

2,709

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.01

 

 

$

0.02

 

 

$

0.07

 

Diluted

 

$

0.33

 

 

$

0.01

 

 

$

0.02

 

 

$

0.07

 

Weighted-average common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

36,441,350

 

 

 

36,391,445

 

 

 

36,218,143

 

 

 

36,391,445

 

Diluted

 

 

37,391,720

 

 

 

36,391,445

 

 

 

36,693,328

 

 

 

36,391,445

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

CERENCE INC.

Consolidated and Combined Balance Sheets

(unaudited - in thousands, except share data)

 

 

March 31,

 

 

September 30,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

95,584

 

 

$

-

 

Accounts receivable, net of allowances of $1,315 and $865 at March 31, 2020 and September 30, 2019, respectively

 

 

92,272

 

 

 

65,787

 

Deferred costs

 

 

7,220

 

 

 

9,195

 

Prepaid expenses and other current assets

 

 

27,779

 

 

 

17,343

 

Total current assets

 

 

222,855

 

 

 

92,325

 

Property and equipment, net

 

 

26,206

 

 

 

20,113

 

Deferred costs

 

 

36,142

 

 

 

32,428

 

Operating lease right of use assets

 

 

18,593

 

 

 

-

 

Goodwill

 

 

1,117,577

 

 

 

1,119,329

 

Intangible assets, net

 

 

55,107

 

 

 

65,561

 

Deferred tax assets

 

 

161,943

 

 

 

150,629

 

Other assets

 

 

14,867

 

 

 

3,444

 

Total assets

 

$

1,653,290

 

 

$

1,483,829

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

18,786

 

 

$

16,687

 

Deferred revenue

 

 

113,111

 

 

 

88,233

 

Short-term operating lease liabilities

 

 

5,270

 

 

 

-

 

Short-term debt

 

 

9,450

 

 

 

-

 

Accrued expenses and other current liabilities

 

 

42,581

 

 

 

24,194

 

Total current liabilities

 

 

189,198

 

 

 

129,114

 

Long-term debt

 

 

237,925

 

 

 

-

 

Deferred revenue, net of current portion

 

 

234,981

 

 

 

265,051

 

Long-term operating lease liabilities

 

 

15,669

 

 

 

-

 

Other liabilities

 

 

39,138

 

 

 

21,536

 

Total liabilities

 

 

716,911

 

 

 

415,701

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 600,000,000 shares authorized as of March 31, 2020; 36,457,914 shares issued and outstanding as of March 31, 2020

 

 

365

 

 

 

-

 

Net parent investment

 

 

-

 

 

 

1,097,127

 

Accumulated other comprehensive loss

 

 

(14,635

)

 

 

(28,999

)

Additional paid-in capital

 

 

949,916

 

 

 

-

 

Accumulated earnings

 

 

733

 

 

 

-

 

Total stockholders' equity

 

 

936,379

 

 

 

1,068,128

 

Total liabilities and stockholders' equity

 

$

1,653,290

 

 

$

1,483,829

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

CERENCE INC.

Consolidated and Combined Statements of Cash Flows

(unaudited - in thousands)

 

 

Six Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

733

 

 

$

2,709

 

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

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,971

 

 

 

14,574

 

Provision for doubtful accounts

 

 

446

 

 

 

-

 

Stock-based compensation expense

 

 

15,529

 

 

 

13,367

 

Non-cash interest expense

 

 

2,646

 

 

 

-

 

Deferred tax benefit

 

 

(4,615

)

 

 

(2,898

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(26,692

)

 

 

5,584

 

Prepaid expenses and other assets

 

 

(13,605

)

 

 

(6,848

)

Deferred costs

 

 

(1,079

)

 

 

2,020

 

Accounts payable

 

 

6,384

 

 

 

849

 

Accrued expenses and other liabilities

 

 

13,028

 

 

 

832

 

Deferred revenue

 

 

(8,481

)

 

 

12,062

 

Net cash (used in) provided by operating activities

 

 

(735

)

 

 

42,251

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,145

)

 

 

(2,472

)

Net cash used in investing activities

 

 

(10,145

)

 

 

(2,472

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net transactions with Parent

 

 

13,513

 

 

 

(39,779

)

Distributions to Parent

 

 

(152,978

)

 

 

-

 

Proceeds from long-term debt, net of discount

 

 

249,705

 

 

 

-

 

Payments for long-term debt issuance costs

 

 

(515

)

 

 

-

 

Principal payments of long-term debt

 

 

(2,363

)

 

 

-

 

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

 

 

(919

)

 

 

-

 

Principal payments of lease liabilities arising from a finance lease

 

 

(67

)

 

 

-

 

Net cash provided by (used in) financing activities

 

 

106,376

 

 

 

(39,779

)

Effects of exchange rate changes on cash and cash equivalents

 

 

88

 

 

 

-

 

Net change in cash and cash equivalents

 

 

95,584

 

 

 

-

 

Cash and cash equivalents at the beginning of the period

 

 

-

 

 

 

-

 

Cash and cash equivalents at the end of the period

 

$

95,584

 

 

$

-

 

 

 

 

 

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP revenue

 

$

86,495

 

 

$

70,304

 

 

$

163,954

 

 

$

142,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

57,765

 

 

$

45,860

 

 

$

109,290

 

 

$

94,137

 

Stock-based compensation

 

 

621

 

 

 

753

 

 

 

1,844

 

 

 

1,133

 

Amortization of intangible assets

 

 

2,258

 

 

 

2,021

 

 

 

4,345

 

 

 

4,196

 

Non-GAAP gross profit

 

$

60,644

 

 

$

48,634

 

 

$

115,479

 

 

$

99,466

 

GAAP gross margin

 

 

66.8

%

 

 

65.2

%

 

 

66.7

%

 

 

65.9

%

Non-GAAP gross margin

 

 

70.1

%

 

 

69.2

%

 

 

70.4

%

 

 

69.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

12,006

 

 

$

168

 

 

$

9,909

 

 

$

2,977

 

Amortization of intangible assets

 

 

5,383

 

 

 

5,153

 

 

 

10,601

 

 

 

10,460

 

Stock-based compensation

 

 

6,560

 

 

 

6,793

 

 

 

15,529

 

 

 

13,367

 

Restructuring and other costs, net

 

 

2,870

 

 

 

4,329

 

 

 

10,424

 

 

 

7,456

 

Acquisition-related costs

 

 

-

 

 

 

182

 

 

 

-

 

 

 

417

 

Non-GAAP operating income

 

$

26,819

 

 

$

16,625

 

 

$

46,463

 

 

$

34,677

 

GAAP operating margin

 

 

13.9

%

 

 

0.2

%

 

 

6.0

%

 

 

2.1

%

Non-GAAP operating margin

 

 

31.0

%

 

 

23.6

%

 

 

28.3

%

 

 

24.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

12,495

 

 

$

454

 

 

$

733

 

 

$

2,709

 

Total other income (expense), net

 

 

(6,229

)

 

 

266

 

 

 

(12,892

)

 

 

250

 

(Benefit from) provision for income taxes

 

 

(6,718

)

 

 

(20

)

 

 

(3,716

)

 

 

518

 

Depreciation

 

 

2,224

 

 

 

2,076

 

 

 

4,365

 

 

 

4,113

 

Amortization of intangible assets

 

 

5,383

 

 

 

5,153

 

 

 

10,601

 

 

 

10,460

 

Stock-based compensation

 

 

6,560

 

 

 

6,793

 

 

 

15,529

 

 

 

13,367

 

Restructuring and other costs, net

 

 

2,870

 

 

 

4,329

 

 

 

10,424

 

 

 

7,456

 

Acquisition-related costs

 

 

-

 

 

 

182

 

 

 

-

 

 

 

417

 

Adjusted EBITDA

 

$

29,043

 

 

$

18,701

 

 

$

50,828

 

 

$

38,790

 

GAAP net income margin

 

 

14.4

%

 

 

0.6

%

 

 

0.4

%

 

 

1.9

%

Adjusted EBITDA margin

 

 

33.6

%

 

 

26.6

%

 

 

31.0

%

 

 

27.2

%

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

May 7, 2020

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP net income

 

$

12,495

 

 

$

454

 

 

$

733

 

 

$

2,709

 

Amortization of intangible assets

 

 

5,383

 

 

 

5,153

 

 

 

10,601

 

 

 

10,460

 

Stock-based compensation

 

 

6,560

 

 

 

6,793

 

 

 

15,529

 

 

 

13,367

 

Restructuring and other costs, net

 

 

2,870

 

 

 

4,329

 

 

 

10,424

 

 

 

7,456

 

Acquisition-related costs

 

 

-

 

 

 

182

 

 

 

-

 

 

 

417

 

Non-cash interest expense

 

 

1,314

 

 

 

-

 

 

 

2,646

 

 

 

-

 

Income tax impact of Non-GAAP adjustments

 

 

(12,473

)

 

 

(5,571

)

 

 

(13,449

)

 

 

(9,612

)

Non-GAAP net income

 

$

16,149

 

 

$

11,340

 

 

$

26,484

 

 

$

24,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - diluted

 

 

37,392

 

 

 

36,391

 

 

 

36,693

 

 

 

36,391

 

GAAP net income per share - diluted

 

$

0.33

 

 

$

0.01

 

 

$

0.02

 

 

$

0.07

 

Non-GAAP net income per share - diluted

 

$

0.43

 

 

$

0.31

 

 

$

0.72

 

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net cash (used in) provided by operating activities

 

$

(10,191

)

 

$

25,551

 

 

$

(735

)

 

$

42,251

 

Capital expenditures

 

 

(6,533

)

 

 

(1,974

)

 

 

(10,145

)

 

 

(2,472

)

Free Cash Flow

 

$

(16,724

)

 

$

23,577

 

 

$

(10,880

)

 

$

39,779

 

 

 

 

 

Cerence. All rights reserved

 

crnc-ex992_69.pptx.htm

Slide 1

Q2FY20 Earnings Conference Call Sanjay Dhawan, CEO Mark Gallenberger, CFO May 7, 2020 Exhibit 99.2

Slide 2

Forward Looking Statements and Non-GAAP Financial Measures Statements in this presentation regarding Cerence’s future performance 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. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including but not limited to: the expected impacts COVID-19 pandemic on our business, the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry or the global economy more generally; our ability to control and successfully manage our expenses and cash position; our strategy to increase cloud; escalating pricing pressures from our customers; our failure to win, renew or implement service contracts; the loss of business from any of our largest cu