Cerence Announces Fourth Quarter and Fiscal Year 2021 Results

Fourth Quarter and Fiscal Year Highlights

• Strong bookings of $590M in FY21 - increases backlog to approximately $2 billion

• Momentum for new products leads to orders representing nearly 20% of total bookings

• Won first major customer in the building mobility market for the connected elevator of the future

• VinFast, Vietnam’s first domestic car company and a leader in electric vehicle innovation worldwide, selected Cerence to power conversational AI across its lineup of smart EVs

• Cerence Pay receives coveted Automotive News PACE Award, the industry benchmark for innovation

• Quarterly revenue grew 7.5% year over year, full year revenue grew 17%

• Met or exceeded nearly all profitability metrics for the quarter and fiscal year

BURLINGTON, Mass., Nov. 22, 2021 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its fourth quarter and fiscal year 2021 results for the year ended September 30, 2021.

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

Three Months Ended

Twelve Months Ended

September 30,

September 30,

2021

2020

2021

2020

GAAP Revenue $98.1  $91.2  $387.2  $331.0GAAP Gross Margin 75.4%  72.0%  73.9%  67.4%Non-GAAP Gross Margin 78.1%  75.8%  77.3%  71.6%GAAP Operating Margin 11.0%  17.8%  15.7%  6.8%Non-GAAP Operating Margin 37.2%  42.1%  37.8%  32.3%GAAP Net Income (Loss) $8.0  $8.2  $45.9  $(18.3)Non-GAAP Net Income $28.4  $26.0  $107.2  $65.3Adjusted EBITDA $38.8  $40.7  $155.9  $116.2Adjusted EBITDA Margin 39.6%  44.6%  40.3%  35.1%GAAP Net Income (Loss) per Share - diluted $0.20  $0.21  $1.17  $(0.50)Non-GAAP Net Income per Share - diluted $0.66  $0.62  $2.53  $1.70

(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 finished the year strong, especially considering the production challenges our customers are facing due to semiconductor shortages. Our total company revenue grew 17% compared to the auto production growth of 9% over the same time-period, which is testament to the secular tailwinds, as well as, the innovative products and services we continue to bring to market.”

Dhawan continued, “We had another strong year for bookings at $590 million of which 20% were for our new products. These bookings included some key strategic wins, such as VinFast, and included multiple competitive takeaways. We also signed a contract with one of the top elevator manufacturers in the world to deliver voice AI technology and connected services creating the elevator of the future. This represents a key opportunity for us to expand into a new market with the potential to be a strong revenue contributor to our FY24 target for the new mobility market.”

“As we look to fiscal year 2022, accounting for the industry headwinds due to semiconductor shortages and notwithstanding the approximately $23 million revenue reduction from the “legacy*” contract, we still expect to grow above the IHS auto production forecast. We expect to grow the business by continuing to deliver innovative products and world-class services for our customers. This focus on innovation and customer service allows us to maintain our market leading position in conversational AI and connected services for the transportation and mobility industries.” Dhawan concluded.

* Legacy contract is a connected services contract with Toyota acquired by Nuance through a 2013 acquisition

Cerence Key Performance Indicators

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

Key Performance Indicator

1

Q4FY21

 Percent of worldwide auto production with Cerence Technology (TTM)   53%Average contract duration - years (TTM):   7.9 Repeatable software contribution (TTM):    81%Change in number of Cerence connected cars shipped2 (TTM over prior year TTM)   20%Growth in billings per car (TTM over prior year TTM) (excludes legacy contract)   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 9% over the same time period ended September 30, 2021.

First Quarter and Full Year Fiscal 2022 Outlook
For the fiscal quarter ending December 31, 2021, revenue is expected to be in the range of $91M to $96M which is flat year-over-year at the midpoint, while IHS auto production forecast is expected to be down 21% for the same period. Adjusted EBITDA is expected to be in the range of approximately $31M to $35M. 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 $400M to $425M representing a 7% increase at the midpoint compared to the prior year. The guidance reflects an expected reduction of $23M in revenue related to our “legacy” contract. Adjusting for the “legacy” decline, our revenue is expected to increase 12% year-over-year at the midpoint, while IHS auto production forecast is expected to be flat for the same period. Adjusted EBITDA for the full year is expected to be in the range of approximately $144M to $163M. Additional details regarding guidance will be provided on the earnings call.

Fourth Quarter Conference Call
The company will host a live conference call and webcast with slides to discuss the results today at 10:00 a.m. Eastern Time/7:00 a.m. Pacific Time. 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 6829375. 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 November 29, 2021. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 6829375. 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 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, 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 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 organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure, which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

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

(i)  Transition and integration costs. Transition and integration costs include retention payments, transitional employee costs, and earn-out payments treated as compensation expense, as well as the costs of integration-related activities, including services provided by third-parties.

(ii) Professional service fees and expenses. Professional service fees and expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities.

(iii) Acquisition-related adjustments. Acquisition-related adjustments include adjustments to acquisition-related items that are required to be marked to fair value each reporting period, such as contingent consideration, and other items related to acquisitions for which the measurement period has ended, such as gains or losses on settlements of pre-acquisition contingencies.

Amortization of acquired intangible assets.
We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results “as-if” the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets.

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

(i) Stock-based compensation. Because of varying valuation methodologies, subjective assumptions and the variety of award types, we exclude stock-based compensation from our operating results. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and awards granted are influenced by the Company’s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods.

(ii) Non-cash interest. We exclude non-cash interest because we believe that excluding this expense provides management, as well as other users of the financial statements, with a valuable perspective on the cash-based performance and health of the business, including the current near-term projected liquidity. Non-cash interest expense will continue in future periods.

Other expenses.
We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, in order to measure operating performance and current and future liquidity both with and without these expenses. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as other charges (credits), net, losses from extinguishment of debt, and changes in indemnification assets corresponding with the release of pre-spin liabilities for uncertain tax positions.

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, 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 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.

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

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

Three Months Ended

Twelve Months Ended

September 30,

September 30,

2021

2020

2021

2020

 Revenues:                License $51,418  $46,425  $202,183  $164,268 Connected service  25,585   25,360   109,534   97,469 Professional service  21,073   19,457   75,465   69,230 Total revenues  98,076   91,242   387,182   330,967 Cost of revenues:                License  826   439   3,544   2,783 Connected service  5,767   7,026   25,727   31,768 Professional service  15,655   16,190   64,287   64,963 Amortization of intangible assets  1,879   1,929   7,516   8,337 Total cost of revenues  24,127   25,584   101,074   107,851 Gross profit  73,949   65,658   286,108   223,116 Operating expenses:                Research and development  28,705   22,001   112,070   88,899 Sales and marketing  10,586   8,569   38,683   33,398 General and administrative  18,416   12,930   56,979   49,386 Amortization of intangible assets  3,169   3,168   12,690   12,544 Restructuring and other costs, net  2,315   2,733   5,092   16,458 Total operating expenses  63,191   49,401   225,514   200,685 Income from operations  10,758   16,257   60,594   22,431 Interest income  41   22   109   585 Interest expense  (3,428)  (3,694)  (13,997)  (22,737)Other income (expense), net  131   (2,953)  1,563   (23,319)Income (loss) before income taxes  7,502   9,632   48,269   (23,040)Provision for (benefit from) income taxes  (489)  1,425   2,376   (4,724)Net income (loss) $7,991  $8,207  $45,893  $(18,316)Net income (loss) per share:                Basic  0.21   0.22   1.22   (0.50)Diluted  0.20   0.21   1.17   (0.50)Weighted-average common share outstanding:                Basic  38,015   36,765   37,752   36,428 Diluted  39,748   39,041   39,289   36,428 

CERENCE INC.
Consolidated Balance Sheets
(in thousands, except per share amounts)

September 30,

September 30,

2021

2020

ASSETS

   Current assets:        Cash and cash equivalents $128,428  $136,067 Marketable securities  30,435   11,662 Accounts receivable, net of allowances of $395 and $1,394 at September 30, 2021 and September 30, 2020, respectively  45,560   50,900 Deferred costs  6,095   7,256 Prepaid expenses and other current assets  76,530   44,220 Total current assets  287,048   250,105 Long-term marketable securities  7,339   - Property and equipment, net  31,505   29,529 Deferred costs  31,702   38,161 Operating lease right of use assets  14,901   20,096 Goodwill  1,128,511   1,128,198 Intangible assets, net  25,348   45,616 Deferred tax assets  159,293   160,974 Other assets  20,081   14,938 Total assets $1,705,728  $1,687,617 

LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:        Accounts payable $11,636  $8,447 Deferred revenue  78,394   112,156 Short-term operating lease liabilities  4,562   5,700 Short-term debt  6,250   6,250 Accrued expenses and other current liabilities  64,467   66,078 Total current liabilities  165,309   198,631 Long-term debt, net of discounts and issuance costs  265,093   266,872 Deferred revenue, net of current portion  198,343   212,573 Long-term operating lease liabilities  12,216   17,821 Other liabilities  32,822   31,649 Total liabilities  673,783   727,546 Stockholders' Equity:        Common stock, $0.01 par value, 560,000 shares authorized as of September 30, 2021; 38,025 shares issued and outstanding as of September 30, 2021  381   369 Accumulated other comprehensive income  1,634   3,711 Additional paid-in capital  1,002,353   974,307 Retained earnings (accumulated deficit)  27,577   (18,316)Total stockholders' equity  1,031,945   960,071 Total liabilities and stockholders' equity $1,705,728  $1,687,617 

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

Twelve Months Ended

September 30,

2021

2020

Cash flows from operating activities:

   Net income (loss) $45,893  $(18,316)Adjustments to reconcile net income (loss) to net cash provided by

operating activities:        Depreciation and amortization  29,661   30,041 (Benefit from) provision for doubtful accounts  (415)  704 Stock-based compensation expense  60,555   47,285 Non-cash interest expense  5,013   5,286 Loss on debt extinguishment  -   19,279 Deferred tax benefit  (4,419)  (10,568)Other  (606)  - Changes in operating assets and liabilities:        Accounts receivable  5,751   15,154 Prepaid expenses and other assets  (30,661)  (30,311)Deferred costs  6,984   (1,381)Accounts payable  3,411   (2,430)Accrued expenses and other liabilities  (1,125)  26,040 Deferred revenue  (45,653)  (35,994)Net cash provided by operating activities  74,389   44,789 

Cash flows from investing activities:

   Capital expenditures  (12,047)  (19,012)Purchases of marketable securities  (42,471)  (11,663)Sale and maturities of marketable securities  16,350   - Purchase of debt securities  (2,000)  - Payments for equity securities  (2,563)  - Other investing activities  1,100   - Net cash used in investing activities  (41,631)  (30,675)

Cash flows from financing activities:

   Net transactions with Parent  -   12,964 Distributions to Parent  -   (152,978)Proceeds from long-term debt, net of discount  -   547,719 Payments for long-term debt issuance costs  (520)  (6,402)Principal payments of long-term debt  (6,252)  (271,563)Common stock repurchases for tax withholdings for net settlement of equity awards  (45,769)  (9,369)Principal payments of lease liabilities arising from a finance lease  (486)  (136)Proceeds from the issuance of common stock  11,522   1,318 Net cash (used in) provided by financing activities  (41,505)  121,553 Effects of exchange rate changes on cash and cash equivalents  1,108   400 Net change in cash and cash equivalents  (7,639)  136,067 Cash and cash equivalents at the beginning of the period  136,067   - Cash and cash equivalents at the end of the period $128,428  $136,067 

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

Three Months Ended

Twelve Months Ended

September 30,

September 30,

2021

2020

2021

2020

GAAP revenue

$

98,076

$

91,242

$

387,182

$

330,967

GAAP gross profit

$

73,949

$

65,658

$

286,108

$

223,116

 Stock-based compensation  815   1,588   5,760   5,573 Amortization of intangible assets  1,879   1,929   7,516   8,337 

Non-GAAP gross profit

$

76,643

$

69,175

$

299,384

$

237,026

GAAP gross margin

75.4

%

72.0

%

73.9

%

67.4

%

Non-GAAP gross margin

78.1

%

75.8

%

77.3

%

71.6

%

GAAP operating income

$

10,758

$

16,257

$

60,594

$

22,431

 Stock-based compensation  18,376   14,331   60,555   47,285 Amortization of intangible assets  5,048   5,097   20,206   20,881 Restructuring and other costs, net  2,315   2,733   5,092   16,458 

Non-GAAP operating income

$

36,497

$

38,418

$

146,447

$

107,055

GAAP operating margin

11.0

%

17.8

%

15.7

%

6.8

%

Non-GAAP operating margin

37.2

%

42.1

%

37.8

%

32.3

%

GAAP net income (loss)

$

7,991

$

8,207

$

45,893

$

(18,316

)

Stock-based compensation  18,376   14,331   60,555   47,285 Amortization of intangible assets  5,048   5,097   20,206   20,881 Restructuring and other costs, net  2,315   2,733   5,092   16,458 Depreciation  2,337   2,240   9,455   9,160 Total other income (expense), net  (3,256)  (6,625)  (12,325)  (45,471)Provision for (benefit from) income taxes  (489)  1,425   2,376   (4,724)

Adjusted EBITDA

$

38,834

$

40,658

$

155,902

$

116,215

GAAP net income (loss) margin

8.1

%

9.0

%

11.9

%

-5.5

%

Adjusted EBITDA margin

39.6

%

44.6

%

40.3

%

35.1

%

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,

2021

2020

2021

2020

GAAP net income (loss)

$

7,991

$

8,207

$

45,893

$

(18,316

)

Stock-based compensation  18,376   14,331   60,555   47,285 Amortization of intangible assets  5,048   5,097   20,206   20,881 Restructuring and other costs, net  2,315   2,733   5,092   16,458 Loss on debt extinguishment  -   -   -   19,279 Non-cash interest expense  1,283   1,261   5,013   5,286 Indemnification asset release  -   1,215   -   1,215 Adjustments to income tax expense  (6,599)  (6,841)  (29,582)  (26,742)

Non-GAAP net income

$

28,414

$

26,003

$

107,177

$

65,346

Adjusted EPS:

GAAP Numerator:

   Net income (loss) attributed to common shareholders 

$

7,991

$

8,207

$

45,893

$

(18,316

)

Non-GAAP Numerator:

   Net income attributed to common shareholders $28,414  $26,003  $107,177  $65,346 Interest on Convertible Senior Notes, net of tax  1,019   998   4,043   1,323 Net income attributed to common shareholders - diluted 

$

29,433

$

27,001

$

111,220

$

66,669

GAAP Denominator:

   Weighted-average common shares outstanding - basic  38,015   36,765   37,752   36,428 Adjustment for diluted shares  1,733   2,276   1,537   - Weighted-average common shares outstanding - diluted  

39,748

39,041

39,289

36,428

Non-GAAP Denominator:

   Weighted-average common shares outstanding- basic  38,015   36,765   37,752   36,428 Adjustment for diluted shares  6,410   6,952   6,214   2,747 Weighted-average common shares outstanding - diluted  

44,425

43,717

43,966

39,175

GAAP net income (loss) per share - diluted

$

0.20

$

0.21

$

1.17

$

(0.50

)

Non-GAAP net income per share - diluted

$

0.66

$

0.62

$

2.53

$

1.70

GAAP net cash provided by operating activities

$

23,321

$

26,212

$

74,389

$

44,789

 Capital expenditures  (3,992)  (2,937)  (12,047)  (19,012)

Free Cash Flow

$

19,329

$

23,275

$

62,342

$

25,777

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

Q4FY21

Q3FY21

Q2FY21

Q1FY21

GAAP revenues

$

98,076

$

96,801

$

98,662

$

93,643

 Less: Professional services revenue  21,073   16,538   16,555   21,299 

Non-GAAP Repeatable revenues

$

77,003

$

80,263

$

82,107

$

72,344

GAAP revenues TTM

$

387,182

   Less: Professional services revenue TTM  75,465             

Non-GAAP Repeatable revenues TTM

$

311,717

Repeatable software contribution

81

%

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

Q1 2022

FY2022

Low

High

Low

High

GAAP revenue

$

91,000

$

96,000

$

400,000

$

425,000

GAAP gross profit

$

66,000

$

71,000

$

298,000

$

321,000

 Stock-based compensation  1,300   1,300   5,600   5,600 Amortization of intangible assets  1,900   1,900   3,000   3,000 

Non-GAAP gross profit

$

69,200

$

74,200

$

306,600

$

329,600

GAAP gross margin

73

%

74

%

75

%

76

%

Non-GAAP gross margin

76

%

77

%

77

%

78

%

GAAP operating income

$

11,800

$

15,300

$

67,400

$

86,300

 Stock-based compensation  10,900   10,900   48,200   48,200 Amortization of intangible assets  5,000   5,000   14,700   14,700 Restructuring and other costs, net  1,100   1,100   2,300   2,300 

Non-GAAP operating income

$

28,800

$

32,300

$

132,600

$

151,500

GAAP operating margin

13

%

16

%

17

%

20

%

Non-GAAP operating margin

32

%

34

%

33

%

36

%

GAAP net income

$

8,000

$

10,200

$

33,900

$

43,000

 Stock-based compensation  10,900   10,900   48,200   48,200 Amortization of intangible assets  5,000   5,000   14,700   14,700 Restructuring and other costs, net  1,100   1,100   2,300   2,300 Depreciation  2,300   2,300   11,400   11,400 Total other income (expense), net  (3,400)  (3,400)  (13,500)  (13,500)Provision for income taxes  400   1,700   20,000   29,800 

Adjusted EBITDA

$

31,100

$

34,600

$

144,000

$

162,900

GAAP net income margin

9

%

11

%

8

%

10

%

Adjusted EBITDA margin

34

%

36

%

36

%

38

%

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

Q1 2022

FY2022

Low

High

Low

High

GAAP net income

$

8,000

$

10,200

$

33,900

$

43,000

 Stock-based compensation  10,900   10,900   48,200   48,200 Amortization of intangible assets  5,000   5,000   14,700   14,700 Restructuring and other costs, net  1,100   1,100   2,300   2,300 Non-cash interest expense  1,300   1,300   5,300   5,300 Income tax impact of Non-GAAP adjustments  (6,400)  (6,000)  (11,100)  (5,100)

Non-GAAP net income

$

19,900

$

22,500

$

93,300

$

108,400

Adjusted EPS:

GAAP Numerator:

   Net income attributed to common shareholders 

$

8,000

$

10,200

$

33,900

$

43,000

Non-GAAP Numerator:

   Net income attributed to common shareholders $19,900  $22,500  $93,300  $108,400 Interest on Convertible Senior Notes, net of tax  1,000   1,000   4,000   4,000 Net income attributed to common shareholders - diluted 

$

20,900

$

23,500

$

97,300

$

112,400

GAAP Denominator:

   Weighted-average common shares outstanding - basic  38,800   38,800   39,200   39,200 Adjustment for diluted shares  900   900   900   900 Weighted-average common shares outstanding - diluted  

39,700

39,700

40,100

40,100

Non-GAAP Denominator:

   Weighted-average common shares outstanding- basic  38,800   38,800   39,200   39,200 Adjustment for diluted shares  5,600   5,600   5,600   5,600 Weighted-average common shares outstanding - diluted  

44,400

44,400

44,800

44,800

GAAP net income per share - diluted

$

0.20

$

0.26

$

0.85

$

1.07

Non-GAAP net income per share - diluted

$

0.47

$

0.53

$

2.17

$

2.51