crnc-8k_20210809.htm
false 0001768267 0001768267 2021-08-09 2021-08-09

 

 

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): August 9, 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 August 9, 2021, Cerence Inc. (the "Company") announced its financial results for the quarter ended June 30, 2021. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Also on August 9, 2021, the Company used a presentation on its call with investors, discussing its financial results for the quarter ended June 30, 2021, and such earnings release presentation is furnished herewith as Exhibit 99.2. The press release and earnings release presentation include certain non-GAAP financial measures. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release and earnings release presentation.

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

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

 

Description

99.1

 

Press Release announcing financial results dated August 9, 2021

99.2

 

Earnings Release Presentation dated August 9, 2021

104

 

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

 

 


 

 

SIGNATURES

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

 

 

 

Cerence Inc.

 

 

 

 

Date: August 9, 2021

 

By:

  /s/ Mark Gallenberger

 

 

 

  Name: Mark Gallenberger

 

 

 

  Title: Chief Financial Officer

 

 

crnc-ex991_7.htm

Exhibit 99.1

 

 

 

 

Press Release

August 9, 2021

 

Cerence Announces Strong Third Quarter 2021 Results

Cerence Third Quarter Highlights

 

Revenue grew 29% year-over-year

 

Exceeded company quarterly guidance on key GAAP and non-GAAP profitability metrics

 

Increased FY24 revenue Target from $600M to $700M, and improved key profitability metrics

 

Record number of auto SOPs (Start Of Production) from over 15 auto OEMs

 

Strategic collaborations announced in the quarter with Sirius XM, Visteon and Harman

BURLINGTON, Mass., August 9, 2021Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its third fiscal quarter 2021 results for the quarter ended June 30, 2021.

 

Results Summary (1)

(in millions, except per share data)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP Revenue

 

$

96.8

 

 

$

75.2

 

 

$

289.1

 

 

$

239.7

 

GAAP Gross Margin

 

 

75.4

%

 

 

63.3

%

 

 

73.4

%

 

 

65.7

%

Non-GAAP Gross Margin

 

 

79.1

%

 

 

68.9

%

 

 

77.0

%

 

 

70.0

%

GAAP Operating Margin

 

 

15.4

%

 

 

-5.7

%

 

 

17.2

%

 

 

2.6

%

Non-GAAP Operating Margin

 

 

37.7

%

 

 

28.7

%

 

 

38.0

%

 

 

28.6

%

GAAP Net Income (Loss)

 

$

5.8

 

 

$

(28.1

)

 

$

37.9

 

 

$

(26.5

)

Non-GAAP Net Income

 

$

26.1

 

 

$

12.4

 

 

$

78.8

 

 

$

39.3

 

Adjusted EBITDA

 

$

38.7

 

 

$

24.2

 

 

$

117.1

 

 

$

75.6

 

Adjusted EBITDA Margin

 

 

40.0

%

 

 

32.1

%

 

 

40.5

%

 

 

31.5

%

GAAP Net Income (Loss) per Share - diluted

 

$

0.15

 

 

$

(0.77

)

 

$

0.97

 

 

$

(0.73

)

Non-GAAP Net Income per Share - diluted

 

$

0.62

 

 

$

0.32

 

 

$

1.87

 

 

$

1.05

 

 

(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, “According to IHS Markit, calendar Q2 is expected to be the quarter with the most disruption due to the semiconductor shortage yet we delivered 29% revenue growth over the prior year period. This growth is testament to our breadth of customers, products and services. With a record of more than 60 SOPs in the quarter from more than 15 different auto makers, and the

 

 

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Press Release

August 9, 2021

 

bookings momentum for our new products and connected services, we expect to continue to grow faster than the auto SAAR (seasonally adjusted annual rate).”

Dhawan concluded, “Enhancing our future growth opportunities are the strategic collaborations we announced in the quarter with Sirius XM, Visteon and Harman. In the case of Visteon, the collaboration extends into the two-wheeler market, a new adjacent market in which we are making steady progress.”

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

 

Q3FY21

 

Percent of worldwide auto production with Cerence Technology (TTM)

 

 

53

%

Average contract duration - years (TTM):

 

 

6.8

 

Repeatable software contribution (TTM):

 

 

81

%

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

 

 

12

%

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

 

 

13

%

 

(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 11% over the same time period ended June 30, 2021.

Fourth Quarter Fiscal 2021

For the fiscal quarter ending September 30, 2021, Revenue is expected to be in the range of $97M to $101M representing a 6% to 11% increase compared to the same period in the prior year.  GAAP Net Income is expected to be in the range of $3M to $7M, and Adjusted EBITDA is expected to be in the range of $36M to $39M. The Adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs.

 

Third 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. Further details on the updated FY2024 model will also be provided on the call. 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 9974299. 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 August 16, 2021. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 9974299. 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,

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

August 9, 2021

 

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 nine months ended June 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

 

 

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August 9, 2021

 

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

Restructuring and other costs, net.

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

 

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

 

 

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August 9, 2021

 

 

(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.

 

 

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August 9, 2021

 

 

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 June 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.

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 nearly 400 million cars shipped with Cerence technology. Whether it’s connected cars, autonomous driving, e-vehicles, or buildings, Cerence

 

 

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August 9, 2021

 

is mapping the road ahead. For more information, visit www.cerence.com.

 

Contact Information

Rich Yerganian

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 

 

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Press Release

August 9, 2021

 

 

CERENCE INC.

Condensed Consolidated Statements of Operations

(unaudited - in thousands, except per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

49,980

 

 

$

32,454

 

 

$

150,765

 

 

$

117,843

 

Connected services

 

 

30,283

 

 

 

25,383

 

 

 

83,949

 

 

 

72,109

 

Professional services

 

 

16,538

 

 

 

17,360

 

 

 

54,392

 

 

 

49,773

 

Total revenues

 

 

96,801

 

 

 

75,197

 

 

 

289,106

 

 

 

239,725

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

863

 

 

 

820

 

 

 

2,718

 

 

 

2,344

 

Connected services

 

 

6,108

 

 

 

7,191

 

 

 

19,960

 

 

 

24,742

 

Professional services

 

 

14,985

 

 

 

17,529

 

 

 

48,632

 

 

 

48,773

 

Amortization of intangible assets

 

 

1,879

 

 

 

2,063

 

 

 

5,637

 

 

 

6,408

 

Total cost of revenues

 

 

23,835

 

 

 

27,603

 

 

 

76,947

 

 

 

82,267

 

Gross profit

 

 

72,966

 

 

 

47,594

 

 

 

212,159

 

 

 

157,458

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

30,370

 

 

 

22,041

 

 

 

83,365

 

 

 

66,898

 

Sales and marketing

 

 

9,534

 

 

 

9,180

 

 

 

28,097

 

 

 

24,829

 

General and administrative

 

 

13,173

 

 

 

14,261

 

 

 

38,563

 

 

 

36,456

 

Amortization of intangible assets

 

 

3,180

 

 

 

3,120

 

 

 

9,521

 

 

 

9,376

 

Restructuring and other costs, net

 

 

1,760

 

 

 

3,301

 

 

 

2,777

 

 

 

13,725

 

Total operating expenses

 

 

58,017

 

 

 

51,903

 

 

 

162,323

 

 

 

151,284

 

Income (loss) from operations

 

 

14,949

 

 

 

(4,309

)

 

 

49,836

 

 

 

6,174

 

Interest income

 

 

34

 

 

 

38

 

 

 

68

 

 

 

563

 

Interest expense

 

 

(3,294

)

 

 

(5,546

)

 

 

(10,569

)

 

 

(19,043

)

Other income (expense), net

 

 

173

 

 

 

(20,446

)

 

 

1,432

 

 

 

(20,366

)

Income (loss) before income taxes

 

 

11,862

 

 

 

(30,263

)

 

 

40,767

 

 

 

(32,672

)

Provision for (benefit from) income taxes

 

 

6,064

 

 

 

(2,211

)

 

 

2,865

 

 

 

(6,149

)

Net income (loss)

 

$

5,798

 

 

$

(28,052

)

 

$

37,902

 

 

$

(26,523

)

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

 

$

(0.77

)

 

$

1.01

 

 

$

(0.73

)

Diluted

 

$

0.15

 

 

$

(0.77

)

 

$

0.97

 

 

$

(0.73

)

Weighted-average common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,825

 

 

 

36,509

 

 

 

37,664

 

 

 

36,315

 

Diluted

 

 

39,296

 

 

 

36,509

 

 

 

39,135

 

 

 

36,315

 

 

 

 

 

 

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Press Release

August 9, 2021

 

 

CERENCE INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

 

 

June 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

120,840

 

 

 

136,067

 

Marketable securities

 

 

29,100

 

 

 

11,662

 

Accounts receivable, net of allowances of $404 and $1,394

 

 

53,141

 

 

 

50,900

 

Deferred costs

 

 

7,330

 

 

 

7,256

 

Prepaid expenses and other current assets

 

 

61,328

 

 

 

44,220

 

Total current assets

 

 

271,739

 

 

 

250,105

 

Long-term marketable securities

 

 

7,348

 

 

 

-

 

Property and equipment, net

 

 

30,723

 

 

 

29,529

 

Deferred costs

 

 

33,446

 

 

 

38,161

 

Operating lease right of use assets

 

 

16,837

 

 

 

20,096

 

Goodwill

 

 

1,132,897

 

 

 

1,128,198

 

Intangible assets, net

 

 

30,618

 

 

 

45,616

 

Deferred tax assets

 

 

165,077

 

 

 

160,974

 

Other assets

 

 

20,354

 

 

 

14,938

 

Total assets

 

$

1,709,039

 

 

$

1,687,617

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

11,187

 

 

$

8,447

 

Deferred revenue

 

 

84,993

 

 

 

112,156

 

Short-term operating lease liabilities

 

 

5,497

 

 

 

5,700

 

Short-term debt

 

 

6,250

 

 

 

6,250

 

Accrued expenses and other current liabilities

 

 

60,955

 

 

 

66,078

 

Total current liabilities

 

 

168,882

 

 

 

198,631

 

Long-term debt

 

 

265,372

 

 

 

266,872

 

Deferred revenue, net of current portion

 

 

204,790

 

 

 

212,573

 

Long-term operating lease liabilities

 

 

13,157

 

 

 

17,821

 

Other liabilities

 

 

34,989

 

 

 

31,649

 

Total liabilities

 

 

687,190

 

 

 

727,546

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, 560,000 shares authorized; 37,828 shares issued and outstanding as of June 30, 2021; 36,842 shares issued and outstanding as of September 30, 2020.

 

 

379

 

 

 

369

 

Accumulated other comprehensive income

 

 

9,579

 

 

 

3,711

 

Additional paid-in capital

 

 

992,305

 

 

 

974,307

 

Retained earnings (accumulated deficit)

 

 

19,586

 

 

 

(18,316

)

Total stockholders' equity

 

 

1,021,849

 

 

 

960,071

 

Total liabilities and stockholders' equity

 

$

1,709,039

 

 

$

1,687,617

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

August 9, 2021

 

 

CERENCE INC.

Condensed Consolidated Statements of Cash Flows

(unaudited - in thousands)

 

 

Nine Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

37,902

 

 

$

(26,523

)

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

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

22,276

 

 

 

22,704

 

(Benefit from) provision for credit loss reserve

 

 

(412

)

 

 

525

 

Stock-based compensation expense

 

 

42,179

 

 

 

32,954

 

Non-cash interest expense

 

 

3,730

 

 

 

4,025

 

Loss on debt extinguishment

 

 

-

 

 

 

19,279

 

Deferred tax benefit

 

 

(3,812

)

 

 

(12,535

)

Other

 

 

(1,590

)

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,698

)

 

 

3,164

 

Prepaid expenses and other assets

 

 

(17,065

)

 

 

(21,328

)

Deferred costs

 

 

5,078

 

 

 

(749

)

Accounts payable

 

 

2,906

 

 

 

(170

)

Accrued expenses and other liabilities

 

 

(4,026

)

 

 

19,283

 

Deferred revenue

 

 

(34,400

)

 

 

(22,052

)

Net cash provided by operating activities

 

 

51,068

 

 

 

18,577

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(8,055

)

 

 

(16,075

)

Purchases of marketable securities

 

 

(33,800

)

 

 

-

 

Sale and maturities of marketable securities

 

 

9,000

 

 

 

-

 

Payments for equity investments

 

 

(2,563

)

 

 

-

 

Other investing activities

 

 

702

 

 

 

-

 

Net cash used in investing activities

 

 

(34,716

)

 

 

(16,075

)

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

)

 

 

(5,765

)

Principal payments of long-term debt

 

 

(4,689

)

 

 

(270,000

)

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

 

 

(34,089

)

 

 

(1,613

)

Principal payments of lease liabilities arising from a finance lease

 

 

(326

)

 

 

(96

)

Proceeds from the issuance of common stock

 

 

6,682

 

 

 

-

 

Net cash (used in) provided by financing activities

 

 

(32,942

)

 

 

130,231

 

Effects of exchange rate changes on cash and cash equivalents

 

 

1,363

 

 

 

111

 

Net change in cash and cash equivalents

 

 

(15,227

)

 

 

132,844

 

Cash and cash equivalents at the beginning of the period

 

 

136,067

 

 

 

-

 

Cash and cash equivalents at the end of the period

 

$

120,840

 

 

$

132,844

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

August 9, 2021

 

 

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP revenue

 

$

96,801

 

 

$

75,197

 

 

$

289,106

 

 

$

239,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

72,966

 

 

$

47,594

 

 

$

212,159

 

 

$

157,458

 

Stock-based compensation

 

 

1,708

 

 

 

2,141

 

 

 

4,945

 

 

 

3,985

 

Amortization of intangible assets

 

 

1,879

 

 

 

2,063

 

 

 

5,637

 

 

 

6,408

 

Non-GAAP gross profit

 

$

76,553

 

 

$

51,798

 

 

$

222,741

 

 

$

167,851

 

GAAP gross margin

 

 

75.4

%

 

 

63.3

%

 

 

73.4

%

 

 

65.7

%

Non-GAAP gross margin

 

 

79.1

%

 

 

68.9

%

 

 

77.0

%

 

 

70.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating income (loss)

 

$

14,949

 

 

$

(4,309

)

 

$

49,836

 

 

$

6,174

 

Stock-based compensation

 

 

14,710

 

 

 

17,425

 

 

 

42,179

 

 

 

32,954

 

Amortization of intangible assets

 

 

5,059

 

 

 

5,183

 

 

 

15,158

 

 

 

15,784

 

Restructuring and other costs, net

 

 

1,760

 

 

 

3,301

 

 

 

2,777

 

 

 

13,725

 

Non-GAAP operating income

 

$

36,478

 

 

$

21,600

 

 

$

109,950

 

 

$

68,637

 

GAAP operating margin

 

 

15.4

%

 

 

-5.7

%

 

 

17.2

%

 

 

2.6

%

Non-GAAP operating margin

 

 

37.7

%

 

 

28.7

%

 

 

38.0

%

 

 

28.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss)

 

$

5,798

 

 

$

(28,052

)

 

$

37,902

 

 

$

(26,523

)

Stock-based compensation

 

 

14,710

 

 

 

17,425

 

 

 

42,179

 

 

 

32,954

 

Amortization of intangible assets

 

 

5,059

 

 

 

5,183

 

 

 

15,158

 

 

 

15,784

 

Restructuring and other costs, net

 

 

1,760

 

 

 

3,301

 

 

 

2,777

 

 

 

13,725

 

Depreciation

 

 

2,270

 

 

 

2,550

 

 

 

7,118

 

 

 

6,920

 

Total other income (expense), net

 

 

(3,087

)

 

 

(25,954

)

 

 

(9,069

)

 

 

(38,846

)

Provision for (benefit from) income taxes

 

 

6,064

 

 

 

(2,211

)

 

 

2,865

 

 

 

(6,149

)

Adjusted EBITDA

 

$

38,748

 

 

$

24,150

 

 

$

117,068

 

 

$

75,557

 

GAAP net income margin

 

 

6.0

%

 

 

-37.3

%

 

 

13.1

%

 

 

-11.1

%

Adjusted EBITDA margin

 

 

40.0

%

 

 

32.1

%

 

 

40.5

%

 

 

31.5

%

 

 

 

 

 

 

 

 

 

Cerence. All rights reserved

 


 

 

 

 

 

Press Release

August 9, 2021

 

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP net income (loss)

 

$

5,798

 

 

$

(28,052

)

 

$

37,902

 

 

$

(26,523

)

Stock-based compensation

 

 

14,710

 

 

 

17,425

 

 

 

42,179

 

 

 

32,954

 

Amortization of intangible assets

 

 

5,059

 

 

 

5,183

 

 

 

15,158

 

 

 

15,784

 

Restructuring and other costs, net

 

 

1,760

 

 

 

3,301

 

 

 

2,777

 

 

 

13,725

 

Loss on debt extinguishment

 

 

-

 

 

 

19,279

 

 

 

-

 

 

 

19,279

 

Non-cash interest expense

 

 

1,276

 

 

 

1,379

 

 

 

3,730

 

 

 

4,025

 

Adjustments to income tax expense

 

 

(2,517

)

 

 

(6,088

)

 

 

(22,984

)

 

 

(19,901

)

Non-GAAP net income

 

$

26,086

 

 

$

12,427

 

 

$

78,762

 

 

$

39,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributed to common shareholders

 

$

5,798

 

 

$

(28,052

)

 

$

37,902

 

 

$

(26,523

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Numerator: