crnc-8k_20210208.htm
false 0001768267 0001768267 2021-02-08 2021-02-08

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

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

Date of Report (Date of earliest event reported): February 8, 2021

 

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 February 8, 2021, Cerence Inc. (the "Company") announced its financial results for the quarter ended December 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 February 8, 2021, the Company used a presentation on its call with investors, discussing its financial results for the quarter ended December 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 February 8, 2021

99.2

 

Earnings Release Presentation dated February 8, 2021

 

 


 

 

SIGNATURES

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

 

 

 

Cerence Inc.

 

 

 

 

Date: February 8, 2021

 

By:

  /s/ Mark Gallenberger

 

 

 

  Name: Mark Gallenberger

 

 

 

  Title: Chief Financial Officer

 

 

crnc-ex991_6.htm

Exhibit 99.1

 

 

 

 

Press Release

February 8, 2021

 

 

Cerence Announces Record First Quarter 2021 Results

Cerence First Quarter Highlights

 

Won back a major European OEM’s next generation infotainment design for cars starting production in 2023

 

First major bookings for new applications including Cerence Pay

 

Revenue grew by 23% compared to the same period last fiscal year, setting a new quarterly record

 

Exceeded company quarterly guidance on all GAAP and non-GAAP financial metrics

 

Continued to deliver strong GAAP Net Income and Adjusted EBITDA performance

 

Growth in billings per car continues its upward trend

BURLINGTON, Mass., February 8, 2021Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its first fiscal quarter 2021 results for the quarter ended December 31, 2020.

 

Results Summary (1)

(in millions, except per share data)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

GAAP Revenue

 

$

95.0

 

 

$

77.5

 

GAAP Gross Margin

 

 

71.7

%

 

 

66.5

%

Non-GAAP Gross Margin

 

 

75.3

%

 

 

70.8

%

GAAP Operating Margin

 

 

21.3

%

 

 

-2.7

%

Non-GAAP Operating Margin

 

 

39.7

%

 

 

25.4

%

GAAP Net Income (loss)

 

$

21.6

 

 

$

(11.8

)

Non-GAAP Net Income

 

$

24.6

 

 

$

10.3

 

Adjusted EBITDA

 

$

40.3

 

 

$

21.8

 

Adjusted EBITDA Margin

 

 

42.4

%

 

 

28.1

%

GAAP Net Income (loss) per Share - diluted

 

$

0.54

 

 

$

(0.33

)

Non-GAAP Net Income per Share - diluted

 

$

0.59

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Please refer to the “Discussion of Non-GAAP Financial Measures” and “Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures” included elsewhere in this release for more information regarding our use of non-GAAP financial measures.

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

Dhawan continued, “We received multiple contract awards for our new applications in the quarter. We won back a major European OEM for both our core technology and new connected services and applications. This was a significant win that will start production in 2023. Another highlight was our agreement with Xevo, a Lear Company, to supply Cerence Pay conversational-AI powered voice technology to Xevo Marketplace

 

 

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Press Release

February 8, 2021

 

consumers. With this contract, along with the launch of our latest application, Cerence TourGuide, we are building a solid foundation to achieve our FY24 target revenue for this category of products.”

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

Cerence Key Performance Indicators

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

Key Performance Indicator1

 

Q1FY21

 

Percent of worldwide auto production with Cerence Technology (TTM)

 

 

54

%

Average contract duration (TTM):

 

 

6.0

 

Repeatable software contribution (TTM):

 

 

78

%

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

 

 

-17

%

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

 

 

20

%

 

(1)

Please refer to the “Key Performance Indicators” included elsewhere in this release for more information regarding the definition and our use of key performance indicators.

 

(2)

Based on IHS Markit data, global auto production declined 16% over the same time period ending December 31, 2020. Compared to the same quarter in the prior year, the change in the number of Cerence connected cars shipped was +11%.

 

(3)

The calculation for this KPI was modified from comparing fiscal year-to-date versus previous fiscal year, to trailing twelve months (“TTM”) versus prior year TTM.

Second Quarter Fiscal 2021 and Full Year Outlook

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

 

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

 

 

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Press Release

February 8, 2021

 

intangible assets, stock-based compensation, and restructuring and other costs. Additional details regarding guidance are included in the tables in this press release.

 

First Quarter Conference Call

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

 

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

Forward Looking Statements

Statements in this presentation regarding Cerence’s future performance, results and financial condition, expected growth, business and market trends, and innovation and our management’s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words “believes,” “plans,” “anticipates,” “expects,” “intends” or “estimates” or similar expressions) should also be considered to be forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risk, uncertainties and other factors, which may cause actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements including but not limited to: impacts of the COVID-19 pandemic on our and our customer’s businesses; the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry, the related supply chain, or the global economy more generally; our ability to control and successfully manage our expenses and cash position; our strategy to increase cloud offerings; escalating pricing pressures from our customers; our failure to win, renew or implement service contracts; the loss of business from any of our largest customers; effects of customer defaults; our inability to successfully introduce new products, applications and services; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents; fluctuating currency rates; and the other factors discussed in our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

 

Discussion of Non-GAAP Financial Measures

We believe that providing the non-GAAP information in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate

 

 

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Press Release

February 8, 2021

 

and measure such performance. The non-GAAP information should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

 

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements.

Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three months ended December 31, 2020 and 2019, our management has either included or excluded the following items in general categories, each of which is described below.

Adjusted EBITDA

Adjusted EBITDA is defined as net income attributable to Cerence Inc. before net income (loss) attributable to income tax (benefit) expense, other income (expense) items, net, depreciation and amortization expense, and excluding acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs, net or impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets, if any. From time to time we may exclude from Adjusted EBITDA the impact of events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance. Other income (expense) items, net include interest expense, interest income, and other income (expense), net (as stated in our Condensed Consolidated Statement of Operations). Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs. 

Restructuring and other costs, net.

Restructuring and other charges, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business such as employee severance costs, costs for consolidating duplication facilities, and separation costs directly attributable to the Cerence business becoming a standalone public company.

 

Acquisition-related costs, net.
In recent years, we have completed a number of acquisitions, which result in operating expenses, which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or

 

 

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Press Release

February 8, 2021

 

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:

 

 

 

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February 8, 2021

 

 

(i)

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

 

ii)

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

Other expenses.

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

Key performance indicators

We believe that providing key performance indicators (“KPIs”), allows investors to gain insight into the way management views the performance of the business. We further believe that providing KPIs allows investors to better understand information used by management to evaluate and measure such performance. KPIs should not be considered superior to, or a substitute for, operating results prepared in accordance with GAAP. In assessing the performance of the business during the three months ended December 31, 2020 and 2019, our management has reviewed the following KPIs, each of which is described below:

 

 

Percent of worldwide auto production with Cerence Technology: The number of Cerence enabled cars shipped as compared to IHS Markit car production data.

 

Average contract duration: The weighted average annual period over which we expect to recognize the estimated revenues from new license and connected contracts signed during the quarter, calculated on a trailing twelve months (“TTM”) basis and presented in years.

 

Repeatable software contribution: The percentage of repeatable revenues as compared to total GAAP revenue in the quarter on a TTM basis. Repeatable revenues are defined as the sum of License and Connected Services revenues.

 

Change in number of Cerence connected cars shipped: The year over year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis.

 

Growth in billings per car: The rate of growth calculated from the average billings per car based on a TTM basis, excluding legacy contract and adjusted for prepay usage.

 

 

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Press Release

February 8, 2021

 

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

About Cerence Inc.

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

 

Contact Information

Rich Yerganian

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

License

 

$

46,414

 

 

$

40,767

 

Connected services

 

 

27,251

 

 

 

23,021

 

Professional services

 

 

21,299

 

 

 

13,671

 

Total revenues

 

 

94,964

 

 

 

77,459

 

Cost of revenues:

 

 

 

 

 

 

 

 

License

 

 

674

 

 

 

681

 

Connected services

 

 

7,013

 

 

 

8,675

 

Professional services

 

 

17,315

 

 

 

14,491

 

Amortization of intangible assets

 

 

1,879

 

 

 

2,087

 

Total cost of revenues

 

 

26,881

 

 

 

25,934

 

Gross profit

 

 

68,083

 

 

 

51,525

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

24,091

 

 

 

23,511

 

Sales and marketing

 

 

8,898

 

 

 

7,943

 

General and administrative

 

 

11,617

 

 

 

11,483

 

Amortization of intangible assets

 

 

3,158

 

 

 

3,131

 

Restructuring and other costs, net

 

 

47

 

 

 

7,554

 

Total operating expenses

 

 

47,811

 

 

 

53,622

 

Income (loss) from operations

 

 

20,272

 

 

 

(2,097

)

Interest income

 

 

18

 

 

 

281

 

Interest expense

 

 

(3,799

)

 

 

(6,798

)

Other income (expense), net

 

 

(2,237

)

 

 

(146

)

Income (loss) before income taxes

 

 

14,254

 

 

 

(8,760

)

(Benefit from) provision for income taxes

 

 

(7,384

)

 

 

3,002

 

Net income (loss)

 

$

21,638

 

 

$

(11,762

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.58

 

 

$

(0.33

)

Diluted

 

$

0.54

 

 

$

(0.33

)

Weighted-average common share outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

37,180

 

 

 

35,995

 

Diluted

 

 

43,363

 

 

 

35,995

 

 

 

 

 

 

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Press Release

February 8, 2021

 

CERENCE INC.

Condensed Consolidated Balance Sheets

(unaudited - in thousands, except per share data)

 

 

December 31,

 

 

September 30,

 

 

 

2020

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

110,360

 

 

 

136,067

 

Marketable securities

 

 

17,088

 

 

 

11,662

 

Accounts receivable, net of allowances of $579 and $1,394

 

 

60,426

 

 

 

49,943

 

Deferred costs

 

 

7,748

 

 

 

7,256

 

Prepaid expenses and other current assets

 

 

43,703

 

 

 

44,220

 

Total current assets

 

 

239,325

 

 

 

249,148

 

Property and equipment, net

 

 

29,708

 

 

 

29,529

 

Deferred costs

 

 

36,913

 

 

 

38,161

 

Operating lease right of use assets

 

 

20,630

 

 

 

20,096

 

Goodwill

 

 

1,136,356

 

 

 

1,128,198

 

Intangible assets, net

 

 

41,070

 

 

 

45,616

 

Deferred tax assets

 

 

180,166

 

 

 

161,759

 

Other assets

 

 

16,580

 

 

 

14,938

 

Total assets

 

$

1,700,748

 

 

$

1,687,445

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,806

 

 

$

8,447

 

Deferred revenue

 

 

104,577

 

 

 

112,520

 

Short-term operating lease liabilities

 

 

6,259

 

 

 

5,700

 

Short-term debt

 

 

6,250

 

 

 

6,250

 

Accrued expenses and other current liabilities

 

 

52,200

 

 

 

67,857

 

Total current liabilities

 

 

174,092

 

 

 

200,774

 

Long-term debt

 

 

266,019

 

 

 

266,872

 

Deferred revenue, net of current portion

 

 

215,692

 

 

 

212,573

 

Long-term operating lease liabilities

 

 

16,823

 

 

 

17,821

 

Other liabilities

 

 

34,994

 

 

 

31,649

 

Total liabilities

 

 

707,620

 

 

 

729,689

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 560,000 shares authorized; 37,685 shares issued and outstanding as of December 31, 2020; 36,842 shares issued and outstanding as of September 30, 2020.

 

 

378

 

 

 

369

 

Accumulated other comprehensive income

 

 

17,851

 

 

 

3,711

 

Additional paid-in capital

 

 

973,892

 

 

 

974,307

 

Retained earnings (accumulated deficit)

 

 

1,007

 

 

 

(20,631

)

Total stockholders' equity

 

 

993,128

 

 

 

957,756

 

Total liabilities and stockholders' equity

 

$

1,700,748

 

 

$

1,687,445

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

21,638

 

 

$

(11,762

)

Adjustments to reconcile net income (loss) to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,624

 

 

 

7,359

 

Benefit from credit loss reserve

 

 

(410

)

 

 

-

 

Stock-based compensation expense

 

 

12,351

 

 

 

8,969

 

Non-cash interest expense

 

 

1,230

 

 

 

1,332

 

Deferred tax benefit

 

 

(14,106

)

 

 

(4,928

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(8,112

)

 

 

1,691

 

Prepaid expenses and other assets

 

 

1,025

 

 

 

(18,193

)

Deferred costs

 

 

2,051

 

 

 

(192

)

Accounts payable

 

 

(3,655

)

 

 

905

 

Accrued expenses and other liabilities

 

 

(1,960

)

 

 

22,210

 

Deferred revenue

 

 

(6,867

)

 

 

2,065

 

Net cash provided by operating activities

 

 

10,809

 

 

 

9,456

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(2,369

)

 

 

(3,612

)

Purchases of marketable securities

 

 

(6,358

)

 

 

-

 

Net cash used in investing activities

 

 

(8,727

)

 

 

(3,612

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net transactions with Parent

 

 

-

 

 

 

11,384

 

Distributions to Parent

 

 

-

 

 

 

(152,978

)

Proceeds from long-term debt, net of discount

 

 

-

 

 

 

249,705

 

Payments for long-term debt issuance costs

 

 

(520

)

 

 

(515

)

Principal payments of long-term debt

 

 

(1,563

)

 

 

-

 

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

 

 

(30,258

)

 

 

(141

)

Principal payments of lease liabilities arising from a finance lease

 

 

(101

)

 

 

(55

)

Proceeds from the issuance of common stock

 

 

3,663

 

 

 

-

 

Net cash (used in) provided by financing activities

 

 

(28,779

)

 

 

107,400

 

Effects of exchange rate changes on cash and cash equivalents

 

 

990

 

 

 

152

 

Net change in cash and cash equivalents

 

 

(25,707

)

 

 

113,396

 

Cash and cash equivalents at the beginning of the period

 

 

136,067

 

 

 

-

 

Cash and cash equivalents at the end of the period

 

$

110,360

 

 

$

113,396

 

 

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

GAAP revenue

 

$

94,964

 

 

$

77,459

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

68,083

 

 

$

51,525

 

Stock-based compensation

 

 

1,585

 

 

 

1,223

 

Amortization of intangible assets

 

 

1,879

 

 

 

2,087

 

Non-GAAP gross profit

 

$

71,547

 

 

$

54,835

 

GAAP gross margin

 

 

71.7

%

 

 

66.5

%

Non-GAAP gross margin

 

 

75.3

%

 

 

70.8

%

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

 

$

20,272

 

 

$

(2,097

)

Stock-based compensation

 

 

12,351

 

 

 

8,969

 

Amortization of intangible assets

 

 

5,037

 

 

 

5,218

 

Restructuring and other costs, net

 

 

47

 

 

 

7,554

 

Non-GAAP operating income

 

$

37,707

 

 

$

19,644

 

GAAP operating margin

 

 

21.3

%

 

 

-2.7

%

Non-GAAP operating margin

 

 

39.7

%

 

 

25.4

%

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

21,638

 

 

$

(11,762

)

Stock-based compensation

 

 

12,351

 

 

 

8,969

 

Amortization of intangible assets

 

 

5,037

 

 

 

5,218

 

Restructuring and other costs, net

 

 

47

 

 

 

7,554

 

Depreciation

 

 

2,587

 

 

 

2,141

 

Total other income (expense), net

 

 

(6,018

)

 

 

(6,663

)

(Benefit from) provision for income taxes

 

 

(7,384

)

 

 

3,002

 

Adjusted EBITDA

 

$

40,294

 

 

$

21,785

 

GAAP net income margin

 

 

22.8

%

 

 

-15.2

%

Adjusted EBITDA margin

 

 

42.4

%

 

 

28.1

%

 

 

 

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

GAAP net income (loss)

 

$

21,638

 

 

$

(11,762

)

Stock-based compensation

 

 

12,351

 

 

 

8,969

 

Amortization of intangible assets

 

 

5,037

 

 

 

5,218

 

Restructuring and other costs, net

 

 

47

 

 

 

7,554

 

Non-cash interest expense

 

 

1,230

 

 

 

1,332

 

Adjustments to income tax expense

 

 

(15,710

)

 

 

(976

)

Non-GAAP net income

 

$

24,593

 

 

$

10,335

 

 

 

 

 

 

 

 

 

 

Adjusted EPS:

 

 

 

 

 

 

 

 

GAAP Numerator:

 

 

 

 

 

 

 

 

Net income (loss) attributed to common shareholders

 

$

21,638

 

 

$

(11,762

)

Interest on Convertible Senior Notes, net of tax

 

 

1,831

 

 

 

-

 

Net income (loss) attributed to common shareholders - diluted

 

$

23,469

 

 

$

(11,762

)

 

 

 

 

 

 

 

 

 

Non-GAAP Numerator:

 

 

 

 

 

 

 

 

Net income attributed to common shareholders

 

$

24,593

 

 

$

10,335

 

Interest on Convertible Senior Notes, net of tax

 

 

1,005

 

 

 

-

 

Net income attributed to common shareholders - diluted

 

$

25,598

 

 

$

10,335

 

 

 

 

 

 

 

 

 

 

GAAP Denominator:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic

 

 

37,180

 

 

 

35,995

 

Adjustment for diluted shares

 

 

6,183

 

 

 

-

 

Weighted-average common shares outstanding - diluted

 

 

43,363

 

 

 

35,995

 

 

 

 

 

 

 

 

 

 

Non-GAAP Denominator:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding- basic

 

 

37,180

 

 

 

35,995

 

Adjustment for diluted shares

 

 

6,183

 

 

 

-

 

Weighted-average common shares outstanding - diluted

 

 

43,363

 

 

 

35,995

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per share - diluted

 

$

0.54

 

 

$

(0.33

)

Non-GAAP net income per share - diluted

 

$

0.59

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by operating activities

 

$

10,809

 

 

$

9,456

 

Capital expenditures

 

 

(2,369

)

 

 

(3,612

)

Free Cash Flow

 

$

8,440

 

 

$

5,844

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

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

(unaudited - in thousands)

 

 

Q1FY21

 

 

Q4FY20

 

 

Q3FY20

 

 

Q2FY20

 

GAAP revenues

 

$

94,964

 

 

$

90,882

 

 

$

74,810

 

 

$

86,495

 

Less: Professional services revenue

 

 

21,299

 

 

 

19,457

 

 

 

17,360

 

 

 

18,742

 

Non-GAAP Repeatable revenues

 

$

73,665

 

 

$

71,425

 

 

$

57,450

 

 

$

67,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP revenues TTM

 

$

347,151

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Professional services revenue TTM

 

 

76,858

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Repeatable revenues TTM

 

$

270,293

 

 

 

 

 

 

 

 

 

 

 

 

 

Repeatable software contribution

 

 

78

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

February 8, 2021

 

CERENCE INC.

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

(unaudited - in thousands)

 

 

Q2 2021

 

 

FY2021

 

 

 

Low

 

 

High

 

 

Low

 

 

High

 

GAAP revenue

 

$

92,000

 

 

$

95,000

 

 

$

370,000

 

 

$

380,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

64,900

 

 

$

68,100

 

 

$

259,200

 

 

$

270,900

 

Stock-based compensation

 

 

1,600

 

 

 

1,600

 

 

 

6,300

 

 

 

6,300

 

Amortization of intangible assets

 

 

1,900

 

 

 

1,900

 

 

 

7,500

 

 

 

7,500

 

Non-GAAP gross profit

 

$

68,400

 

 

$

71,600

 

 

$

273,000

 

 

$

284,700

 

GAAP gross margin

 

 

71

%

 

 

72

%

 

 

70

%

 

 

71

%

Non-GAAP gross margin

 

 

74

%

 

 

75

%

 

 

74

%

 

 

75

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income

 

$

12,900

 

 

$

15,900

 

 

$

52,500

 

 

$

62,500

 

Stock-based compensation

 

 

11,500

 

 

 

11,500

 

 

 

46,300

 

 

 

46,300

 

Amortization of intangible assets

 

 

5,000

 

 

 

5,000

 

 

 

20,100

 

 

 

20,100

 

Restructuring and other costs, net

 

 

2,000

 

 

 

2,000

 

 

 

2,400

 

 

 

2,400

 

Non-GAAP operating income

 

$

31,400

 

 

$

34,400

 

 

$

121,300

 

 

$

131,300

 

GAAP operating margin

 

 

14

%

 

 

17

%

 

 

14

%

 

 

16

%

Non-GAAP operating margin

 

 

34

%

 

 

36

%

 

 

33

%

 

 

35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income

 

$

4,600

 

 

$

6,200

 

 

$

32,900

 

 

$

39,100

 

Stock-based compensation

 

 

11,500

 

 

 

11,500

 

 

 

46,300

 

 

 

46,300

 

Amortization of intangible assets

 

 

5,000

 

 

 

5,000

 

 

 

20,100

 

 

 

20,100

 

Restructuring and other costs, net

 

 

2,000

 

 

 

2,000

 

 

 

2,400

 

 

 

2,400

 

Depreciation

 

 

2,100

 

 

 

2,100

 

 

 

9,900

 

 

 

9,000

 

Total other income (expense), net