8-K
0001768267false00017682672024-05-092024-05-09

 

 

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): May 9, 2024

 

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.)

 

 

 

 

 

25 Mall Road,

Suite 416

Burlington, Massachusetts

 

 

01803

(Address of Principal Executive Offices)

 

 

(Zip Code)

Registrant’s Telephone Number, Including Area Code: (857) 362-7300

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, $0.01 par value

 

CRNC

 

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 


 

Item 2.02 Results of Operations and Financial Condition.

On May 9, 2024, Cerence Inc. (the "Company") announced its financial results for the quarter ended March 31, 2024. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Also on May 9, 2024, the Company used a presentation on its call with investors, discussing its financial results for the quarter ended March 31, 2024, and such earnings release presentation is furnished herewith as Exhibit 99.2. The press release and earnings release presentation include certain non-GAAP financial measures. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release and earnings release presentation.

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

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit

Number

Description

99.1

Press Release announcing financial results dated May 9, 2024.

99.2

 

Earnings Release Presentation dated May 9, 2024.

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: May 9, 2024

By:

  /s/ Daniel Tempesta

  Name: Daniel Tempesta

  Title: Chief Financial Officer

 

 


EX-99.1

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Exhibit 99.1

Cerence Announces Second Quarter Fiscal Year 2024 Results

Headlines

Q2 revenue above the high end of the guidance range due to OEM-related adjustments; however, Company lowering its FY24 guidance and withdrawing its multi-year plan
Included in Q2 results is a Goodwill impairment charge of approximately $252 million
Company believes that initial success with new generative AI products, including six design wins, and early validation of its next-gen platform will provide a solid foundation to reinvigorate future growth

BURLINGTON, Mass., May 9, 2024Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its second quarter fiscal year 2024 results for the quarter ended March 31, 2024.

 

Results Summary (1,2)

(in millions, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

GAAP revenue

 

$

67.8

 

 

$

68.4

 

 

$

206.2

 

 

$

152.1

 

GAAP gross margin

 

 

69.2

%

 

 

63.4

%

 

 

77.1

%

 

 

66.3

%

Non-GAAP gross margin

 

 

70.2

%

 

 

65.3

%

 

 

77.8

%

 

 

68.1

%

GAAP operating margin (3)

 

 

-389.8

%

 

 

-30.1

%

 

 

-99.8

%

 

 

-14.9

%

Non-GAAP operating margin

 

 

-3.6

%

 

 

-0.1

%

 

 

32.0

%

 

 

11.2

%

GAAP net loss(3)

 

$

(278.0

)

 

$

(26.1

)

 

$

(254.1

)

 

$

(28.2

)

GAAP net loss margin(3)

 

 

-409.8

%

 

 

-38.1

%

 

 

-123.3

%

 

 

-18.6

%

Non-GAAP net (loss) income

 

$

(3.6

)

 

$

(1.7

)

 

$

50.7

 

 

$

12.5

 

Adjusted EBITDA

 

$

(0.3

)

 

$

2.5

 

 

$

70.1

 

 

$

22.2

 

Adjusted EBITDA margin

 

 

-0.4

%

 

 

3.6

%

 

 

34.0

%

 

 

14.6

%

GAAP net loss per share - diluted(3)

 

$

(6.66

)

 

$

(0.65

)

 

$

(6.13

)

 

$

(0.70

)

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

 

$

(0.09

)

 

$

(0.04

)

 

$

1.07

 

 

$

0.31

 

 

(1)
As previously disclosed, Q1FY24 revenue includes the non-cash revenue associated with the Toyota “Legacy” contract and related impacts totaling $86.6M.
(2)
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.
(3)
Includes a Goodwill impairment charge of $252M.

 

 


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Stefan Ortmanns, Chief Executive Officer at Cerence, commented, “After receiving Q1 royalty reports and noticing some downward trends, we commenced a deep account-by-account review of our backlog, which concluded in April. As a result of that review, we concluded that some customers’ production expectations are not materializing as expected or as reflected in our forecasts. Therefore, we are bringing down the full year revenue guidance by almost $40M at the midpoint, which represents an approximately 11% reduction in revenue.”

“As we look to the future, we are taking action to put Cerence in a position to deliver improved financial results, which includes developing plans to adjust our cost structure. At the same time, we are committed to delivering on our generative AI and large language model product roadmap, and we see positive momentum thus far, with six signed deals for our generative AI products since January. Further, we are already working with three global OEMs to advance and validate our next-gen AI computing platform – which we believe will give us a solid foundation to reinvigorate future growth,” continued Ortmanns.

Cerence Key Performance Indicators

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

Key Performance Indicator1

 

Q2FY24

 

Percent of worldwide auto production with Cerence Technology (TTM)

 

 

54

%

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

 

 

23

%

Change in Adjusted Total Billings (TTM over prior year TTM)3

 

 

9

%

 

(1)
Please refer to the “Key Performance Indicators” section included elsewhere in this release for more information regarding the definitions and our use of key performance indicators.
(2)
Based on IHS Markit data, global auto production increased 8% over the same time period ended on March 31, 2024.
(3)
Change in Adjusted Total Billings YoY (TTM): The year over year change in total billings adjusted to exclude Professional Services, Connected Professional Services, prepay and prepay assumptions.

Third Quarter and Full Year Fiscal 2024 Outlook

For the fiscal quarter ending June 30, 2024, revenue is expected to be in the range of $66 million to $72 million. GAAP net income is expected to be in the range of ($4) million to $2 million. Adjusted EBITDA is expected to be in the range of approximately $5 million to $11 million.

 

For the full fiscal year ending September 30, 2024, the company expects revenue to be in the range of $318 million to $332 million which includes an estimated $30 million of fixed contracts. GAAP Net loss is expected

 


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to be in the range of ($256) million to ($242) million. Adjusted EBITDA is expected to be in the range of approximately $58 million to $72 million.

 

The adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, restructuring and other costs.

 

Additional details regarding guidance will be provided during the earnings call.

 

Cerence Conference Call and Webcast

The company will host a live conference call and webcast with slides to discuss the results today at 8:30 a.m. Eastern Time/5:30 a.m. Pacific Time. Interested investors and analysts are invited join the call by dialing +1.888.596.4144 for U.S. and Canada or +1.646.968.2525 for international and then entering the conference ID 3095543#.

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

A replay of the webcast can be accessed by visiting the company’s website 90 minutes following the conference call at https://www.cerence.com/investors/events-and-resources

 

Forward Looking Statements

Statements in this press release regarding: Cerence’s future performance, results and financial condition; expected growth and profitability; outlook; strategy; opportunities; business, industry and market trends; strategy regarding fixed contracts and its impact on financial results; backlog; revenue visibility; revenue timing and mix; demand for Cerence products; innovation and new product offerings, including AI technology; expected benefits of technology partnerships; cost efficiency initiatives; and management’s future expectations, estimates, assumptions, beliefs, goals, objectives, targets, 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,” “projects,” “forecasts,” “expects,” “intends,” “continues,” “will.” “may,” or “estimates” or similar expressions) should also be considered to be forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risk, uncertainties and other factors, which may cause actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements including but not limited to: the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry, the related supply chain and semiconductor shortage, or the global economy more generally; automotive production delays; changes in customer forecasts; the impacts of the COVID-19 pandemic on our and our customers’ businesses; the impact of the war in Ukraine, conflict between Israel and Hamas and attacks on commercial ships in the Red Sea by the Houthi groups on our and our customers’ businesses; our ability to control and successfully manage our expenses and cash position; escalating pricing pressures from our customers; the impact on our business of the transition to a lower level of fixed contracts, including the failure to achieve such a

 


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transition; our failure to win, renew or implement service contracts; the cancellation or postponement of existing contracts; the loss of business from any of our largest customers; effects of customer defaults; our inability to successfully introduce new products, applications and services; our strategies to increase cloud offerings and deploy generative AI and large language models (LLMs); the inability to expand into adjacent markets; the inability to recruit and retain qualified personnel; disruptions arising from transitions in management personnel; cybersecurity and data privacy incidents; fluctuating currency rates and interest rates; inflation; and the other factors discussed in our most recent Annual Report on Form 10-K, 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 months ended March 31, 2024 and 2023, 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

 


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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 costs, 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 duplicate facilities, third-party fees relating to the modification of our convertible debt, and the release of a pre-acquisition contingency.

 

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.

 


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Other expenses.

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

Adjustments to income tax provision.

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

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 March 31, 2024, 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.
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.
Change in Adjusted total billings YoY (TTM): The year over year change in total billings adjusted to exclude Professional Services, prepay billings and prepay consumption.

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, AI-powered interaction between humans and their vehicles, connecting consumers’ digital lives to their daily journeys no matter where they are.

 


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Cerence’s track record is built on more than 20 years of knowledge and 475 million cars shipped with Cerence technology. Whether it’s connected cars, autonomous driving, e-vehicles, or two-wheelers, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

 

Contact Information

Rich Yerganian

Senior Vice President of Investor Relations

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 


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CERENCE INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

35,527

 

 

$

30,800

 

 

$

56,350

 

 

$

76,217

 

Connected services

 

 

13,597

 

 

 

18,926

 

 

 

110,417

 

 

 

37,320

 

Professional services

 

 

18,701

 

 

 

18,667

 

 

 

39,393

 

 

 

38,514

 

Total revenues

 

 

67,825

 

 

 

68,393

 

 

 

206,160

 

 

 

152,051

 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

License

 

 

1,404

 

 

 

2,209

 

 

 

3,008

 

 

 

3,823

 

Connected services

 

 

5,359

 

 

 

6,114

 

 

 

12,662

 

 

 

12,656

 

Professional services

 

 

14,119

 

 

 

16,587

 

 

 

31,444

 

 

 

34,511

 

Amortization of intangible assets

 

 

 

 

 

104

 

 

 

103

 

 

 

207

 

Total cost of revenues

 

 

20,882

 

 

 

25,014

 

 

 

47,217

 

 

 

51,197

 

Gross profit

 

 

46,943

 

 

 

43,379

 

 

 

158,943

 

 

 

100,854

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

31,846

 

 

 

28,494

 

 

 

65,152

 

 

 

57,988

 

Sales and marketing

 

 

5,619

 

 

 

8,217

 

 

 

11,690

 

 

 

17,379

 

General and administrative

 

 

16,659

 

 

 

19,177

 

 

 

29,452

 

 

 

33,434

 

Amortization of intangible assets

 

 

555

 

 

 

2,394

 

 

 

1,100

 

 

 

4,744

 

Restructuring and other costs, net

 

 

4,551

 

 

 

5,714

 

 

 

5,256

 

 

 

9,903

 

Goodwill impairment

 

 

252,096

 

 

 

 

 

 

252,096

 

 

 

 

Total operating expenses

 

 

311,326

 

 

 

63,996

 

 

 

364,746

 

 

 

123,448

 

Loss from operations

 

 

(264,383

)

 

 

(20,617

)

 

 

(205,803

)

 

 

(22,594

)

Interest income

 

 

1,190

 

 

 

1,163

 

 

 

2,622

 

 

 

2,033

 

Interest expense

 

 

(3,111

)

 

 

(4,003

)

 

 

(6,347

)

 

 

(7,517

)

Other (expense) income, net

 

 

(25

)

 

 

1,074

 

 

 

1,397

 

 

 

4,787

 

Loss before income taxes

 

 

(266,329

)

 

 

(22,383

)

 

 

(208,131

)

 

 

(23,291

)

Provision for income taxes

 

 

11,647

 

 

 

3,706

 

 

 

45,988

 

 

 

4,956

 

Net loss

 

$

(277,976

)

 

$

(26,089

)

 

$

(254,119

)

 

$

(28,247

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(6.66

)

 

$

(0.65

)

 

$

(6.13

)

 

$

(0.70

)

Diluted

 

$

(6.66

)

 

$

(0.65

)

 

$

(6.13

)

 

$

(0.70

)

Weighted-average common share outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

41,724

 

 

 

40,219

 

 

 

41,452

 

 

 

40,088

 

Diluted

 

 

41,724

 

 

 

40,219

 

 

 

41,452

 

 

 

40,088

 

 

 

 

 


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CERENCE INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

 

March 31,

 

 

September 30,

 

 

2024

 

 

2023

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

99,176

 

 

 

101,154

 

Marketable securities

 

 

9,356

 

 

 

9,211

 

Accounts receivable, net of allowances of $4,101 and $4,044

 

 

66,787

 

 

 

61,270

 

Deferred costs

 

 

5,296

 

 

 

6,935

 

Prepaid expenses and other current assets

 

 

52,121

 

 

 

47,157

 

Total current assets

 

 

232,736

 

 

 

225,727

 

Long-term marketable securities

 

 

6,711

 

 

 

10,607

 

Property and equipment, net

 

 

32,242

 

 

 

34,013

 

Deferred costs

 

 

18,857

 

 

 

20,299

 

Operating lease right of use assets

 

 

10,941

 

 

 

11,961

 

Goodwill

 

 

650,623

 

 

 

900,342

 

Intangible assets, net

 

 

2,750

 

 

 

3,875

 

Deferred tax assets

 

 

7,059

 

 

 

46,601

 

Other assets

 

 

25,173

 

 

 

44,165

 

Total assets

 

$

987,092

 

 

$

1,297,590

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

16,429

 

 

$

16,873

 

Deferred revenue

 

 

45,483

 

 

 

77,068

 

Short-term operating lease liabilities

 

 

5,188

 

 

 

5,434

 

Accrued expenses and other current liabilities

 

 

39,552

 

 

 

48,718

 

Total current liabilities

 

 

106,652

 

 

 

148,093

 

Long-term debt

 

 

278,890

 

 

 

275,951

 

Deferred revenue, net of current portion

 

 

103,468

 

 

 

145,531

 

Long-term operating lease liabilities

 

 

7,010

 

 

 

7,947

 

Other liabilities

 

 

27,672

 

 

 

25,193

 

Total liabilities

 

 

523,692

 

 

 

602,715

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 560,000 shares authorized; 41,777 and 40,423 shares issued and outstanding, respectively

 

 

417

 

 

 

404

 

Accumulated other comprehensive loss

 

 

(26,763

)

 

 

(27,966

)

Additional paid-in capital

 

 

1,077,527

 

 

 

1,056,099

 

Accumulated deficit

 

 

(587,781

)

 

 

(333,662

)

Total stockholders' equity

 

 

463,400

 

 

 

694,875

 

Total liabilities and stockholders' equity

 

$

987,092

 

 

$

1,297,590

 

 

 


https://cdn.kscope.io/fc75cbb4506d6a8a26b7102fcda4a7cb-img86656129_0.jpg 

 

CERENCE INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Six Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(254,119

)

 

$

(28,247

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

5,384

 

 

 

10,033

 

Provision for credit loss reserve

 

 

6,065

 

 

 

3,626

 

Stock-based compensation

 

 

13,125

 

 

 

24,827

 

Non-cash interest expense

 

 

2,939

 

 

 

910

 

Deferred tax provision (benefit)

 

 

40,949

 

 

 

(422

)

Goodwill impairment

 

 

252,096

 

 

 

-

 

Unrealized foreign currency transaction gains

 

 

(262

)

 

 

(6,461

)

Other

 

 

474

 

 

 

(608

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(75

)

 

 

(14,836

)

Prepaid expenses and other assets

 

 

5,854

 

 

 

13,014

 

Deferred costs

 

 

3,423

 

 

 

2,559

 

Accounts payable

 

 

(292

)

 

 

7,864

 

Accrued expenses and other liabilities

 

 

(1,673

)

 

 

2,930

 

Deferred revenue

 

 

(75,659

)

 

 

(10,752

)

Net cash (used in) provided by operating activities

 

 

(1,771

)

 

 

4,437

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(2,776

)

 

 

(2,077

)

Purchases of marketable securities

 

 

-

 

 

 

(11,045

)

Sale and maturities of marketable securities

 

 

3,912

 

 

 

15,900

 

Other investing activities

 

 

(891

)

 

 

(552

)

Net cash provided by investing activities

 

 

245

 

 

 

2,226

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments for long-term debt issuance costs

 

 

-

 

 

 

(403

)

Principal payments of long-term debt

 

 

-

 

 

 

(4,688

)

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

 

 

(9,744

)

 

 

(4,430

)

Principal payment of lease liabilities arising from a finance lease

 

 

(202

)

 

 

(316

)

Proceeds from the issuance of common stock

 

 

10,461

 

 

 

4,394

 

Net cash provided by (used in) financing activities

 

 

515

 

 

 

(5,443

)

Effects of exchange rate changes on cash and cash equivalents

 

 

(967

)

 

 

(690

)

Net change in cash and cash equivalents

 

 

(1,978

)

 

 

530

 

Cash and cash equivalents at beginning of period

 

 

101,154

 

 

 

94,847

 

Cash and cash equivalents at end of period

 

$

99,176

 

 

$

95,377

 

 

 


https://cdn.kscope.io/fc75cbb4506d6a8a26b7102fcda4a7cb-img86656129_0.jpg 

 

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

0

2023

 

GAAP revenue

 

$

67,825

 

 

$

68,393

 

 

$

206,160

 

 

$

152,051

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

46,943

 

 

$

43,379

 

 

$

158,943

 

 

$

100,854

 

Stock-based compensation

 

 

665

 

 

 

1,187

 

 

 

1,306

 

 

 

2,536

 

Amortization of intangible assets

 

 

-

 

 

 

104

 

 

 

103

 

 

 

207

 

Non-GAAP gross profit

 

$

47,608

 

 

$

44,670

 

 

$

160,352

 

 

$

103,597

 

GAAP gross margin

 

 

69.2

%

 

 

63.4

%

 

 

77.1

%

 

 

66.3

%

Non-GAAP gross margin

 

 

70.2

%

 

 

65.3

%

 

 

77.8

%

 

 

68.1

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(264,383

)

 

$

(20,617

)

 

$

(205,803

)

 

$

(22,594

)

Stock-based compensation

 

 

4,745

 

 

 

12,355

 

 

 

13,125

 

 

 

24,827

 

Amortization of intangible assets

 

 

555

 

 

 

2,498

 

 

 

1,203

 

 

 

4,951

 

Restructuring and other costs, net

 

 

4,551

 

 

 

5,714

 

 

 

5,256

 

 

 

9,903

 

Goodwill Impairment

 

 

252,096

 

 

 

-

 

 

 

252,096

 

 

 

-

 

Non-GAAP operating (loss) income

 

$

(2,436

)

 

$

(50

)

 

$

65,877

 

 

$

17,087

 

GAAP operating margin

 

 

-389.8

%

 

 

-30.1

%

 

 

-99.8

%

 

 

-14.9

%

Non-GAAP operating margin

 

 

-3.6

%

 

 

-0.1

%

 

 

32.0

%

 

 

11.2

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(277,976

)

 

$

(26,089

)

 

$

(254,119

)

 

$

(28,247

)

Stock-based compensation

 

 

4,745

 

 

 

12,355

 

 

 

13,125

 

 

 

24,827

 

Amortization of intangible assets

 

 

555

 

 

 

2,498

 

 

 

1,203

 

 

 

4,951

 

Restructuring and other costs, net

 

 

4,551

 

 

 

5,714

 

 

 

5,256

 

 

 

9,903

 

Goodwill Impairment

 

 

252,096

 

 

 

-

 

 

 

252,096

 

 

 

-

 

Depreciation

 

 

2,143

 

 

 

2,527

 

 

 

4,181

 

 

 

5,082

 

Total other expense, net

 

 

(1,946

)

 

 

(1,766

)

 

 

(2,328

)

 

 

(697

)

Provision for income taxes

 

 

11,647

 

 

 

3,706

 

 

 

45,988

 

 

 

4,956

 

Adjusted EBITDA

 

$

(293

)

 

$

2,477

 

 

$

70,058

 

 

$

22,169

 

GAAP net loss margin

 

 

-409.8

%

 

 

-38.1

%

 

 

-123.3

%

 

 

-18.6

%

Adjusted EBITDA margin

 

 

-0.4

%

 

 

3.6

%

 

 

34.0

%

 

 

14.6

%

 

 

 

 

 


https://cdn.kscope.io/fc75cbb4506d6a8a26b7102fcda4a7cb-img86656129_0.jpg 

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

GAAP net loss

 

$

(277,976

)

 

$

(26,089

)

 

$

(254,119

)

 

$

(28,247

)

Stock-based compensation

 

 

4,745

 

 

 

12,355

 

 

 

13,125

 

 

 

24,827

 

Amortization of intangible assets

 

 

555

 

 

 

2,498

 

 

 

1,203

 

 

 

4,951

 

Restructuring and other costs, net

 

 

4,551

 

 

 

5,714

 

 

 

5,256

 

 

 

9,903

 

Goodwill impairment

 

 

252,096

 

 

 

-

 

 

 

252,096

 

 

 

-

 

Non-cash interest expense

 

 

1,471

 

 

 

466

 

 

 

2,939

 

 

 

910

 

Other

 

 

(29

)

 

 

(819

)

 

 

(56

)

 

 

(819

)

Adjustments to income tax expense

 

 

11,004

 

 

 

4,148

 

 

 

30,282

 

 

 

963

 

Non-GAAP net (loss) income

 

$

(3,583

)

 

$

(1,727

)

 

$

50,726

 

 

$

12,488

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EPS:

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributed to common shareholders - basic and diluted

 

$

(277,976

)

 

$

(26,089

)

 

$

(254,119

)

 

$

(28,247

)

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributed to common shareholders - basic

 

$

(3,583

)

 

$

(1,727

)

 

$

50,726

 

 

$

12,488

 

Interest on the Notes, net of tax

 

 

-

 

 

 

-

 

 

 

2,228

 

 

 

-

 

Net (loss) income attributed to common shareholders - diluted

 

$

(3,583

)

 

$

(1,727

)

 

$

52,954

 

 

$

12,488

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding - basic and diluted

 

 

41,724

 

 

 

40,219

 

 

 

41,452

 

 

 

40,088

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding- basic

 

 

41,724

 

 

 

40,219

 

 

 

41,452

 

 

 

40,088

 

Adjustment for diluted shares

 

 

-

 

 

 

-

 

 

 

7,891

 

 

 

-

 

Weighted-average common shares outstanding - diluted

 

 

41,724

 

 

 

40,219

 

 

 

49,343

 

 

 

40,088

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per share - diluted

 

$

(6.66

)

 

$

(0.65

)

 

$

(6.13

)

 

$

(0.70

)

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

 

$

(0.09

)

 

$

(0.04

)

 

$

1.07

 

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net cash provided by (used in) operating activities

 

$

1,044

 

 

$

6,555

 

 

$

(1,771

)

 

$

4,437

 

Capital expenditures

 

 

(1,845

)

 

 

(1,394

)

 

 

(2,776

)

 

 

(2,077

)

Free Cash Flow

 

$

(801

)

 

$

5,161

 

 

$

(4,547

)

 

$

2,360

 

 

 

 

 

 

 

 

 

 

 


https://cdn.kscope.io/fc75cbb4506d6a8a26b7102fcda4a7cb-img86656129_0.jpg 

 

CERENCE INC.

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

(unaudited - in thousands)

 

Q3 2024

 

 

FY2024

 

 

Low

 

 

High

 

 

Low

 

 

High

 

GAAP revenue

 

$

66,000

 

 

$

72,000

 

 

$

318,000

 

 

$

332,000

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

46,000

 

 

$

52,000

 

 

$

231,100

 

 

$

245,100

 

Stock-based compensation

 

 

600

 

 

 

600

 

 

 

2,500

 

 

 

2,500

 

Amortization of intangible assets

 

 

-

 

 

 

-

 

 

 

100

 

 

 

100

 

Non-GAAP gross profit

 

$

46,600

 

 

$

52,600

 

 

$

233,700

 

 

$

247,700

 

GAAP gross margin

 

 

70

%

 

 

72

%

 

 

73

%

 

 

74

%

Non-GAAP gross margin

 

 

71

%

 

 

73

%

 

 

73

%

 

 

75

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP operating loss

 

$

(7,100

)

 

$

(1,100

)

 

$

(240,800

)

 

$

(226,800

)

Stock-based compensation

 

 

7,700

 

 

 

7,700

 

 

 

29,200

 

 

 

29,200

 

Amortization of intangible assets

 

 

600

 

 

 

600

 

 

 

2,300

 

 

 

2,300

 

Restructuring and other costs, net

 

 

1,200

 

 

 

1,200

 

 

 

6,800

 

 

 

6,800

 

Goodwill impairment

 

 

-

 

 

 

-

 

 

 

252,100

 

 

 

252,100

 

Non-GAAP operating income

 

$

2,400

 

 

$

8,400

 

 

$

49,600

 

 

$

63,600

 

GAAP operating margin

 

 

-11

%

 

 

-2

%

 

 

-76

%

 

 

-68

%

Non-GAAP operating margin

 

 

4

%

 

 

12

%

 

 

16

%

 

 

19

%

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net (loss) income

 

$

(4,000

)

 

$

2,000

 

 

$

(255,800

)

 

$

(241,800

)

Stock-based compensation

 

 

7,700

 

 

 

7,700

 

 

 

29,200

 

 

 

29,200

 

Amortization of intangible assets

 

 

600

 

 

 

600

 

 

 

2,300

 

 

 

2,300

 

Restructuring and other costs, net

 

 

1,200

 

 

 

1,200

 

 

 

6,800

 

 

 

6,800

 

Goodwill impairment

 

 

-

 

 

 

-

 

 

 

252,100

 

 

 

252,100

 

Depreciation

 

 

2,100

 

 

 

2,100

 

 

 

8,500

 

 

 

8,500

 

Total other expense, net

 

 

(2,000

)

 

 

(2,000

)

 

 

(5,500

)

 

 

(5,500

)

(Benefit from) provision for income taxes

 

 

(5,100

)

 

 

(5,100

)

 

 

9,500

 

 

 

9,500

 

Adjusted EBITDA

 

$

4,500

 

 

$

10,500

 

 

$

58,100

 

 

$

72,100

 

GAAP net (loss) income margin

 

 

-6

%

 

 

3

%

 

 

-80

%

 

 

-73

%

Adjusted EBITDA margin

 

 

7

%

 

 

15

%

 

 

18

%

 

 

22

%

 

 

 


https://cdn.kscope.io/fc75cbb4506d6a8a26b7102fcda4a7cb-img86656129_0.jpg 

 

CERENCE INC.

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

(unaudited - in thousands, except per share data)

 

 

Q3 2024

 

 

FY2024

 

 

Low

 

 

High

 

 

Low

 

 

High

 

GAAP net (loss) income

 

$

(4,000

)

 

$

2,000

 

 

$

(255,800

)

 

$

(241,800

)

Stock-based compensation

 

 

7,700

 

 

 

7,700

 

 

 

29,200

 

 

 

29,200

 

Amortization of intangibles

 

 

600

 

 

 

600

 

 

 

2,300

 

 

 

2,300

 

Restructuring and other costs, net

 

 

1,200

 

 

 

1,200

 

 

 

6,800

 

 

 

6,800

 

Non-cash interest expense

 

 

1,500

 

 

 

1,500

 

 

 

6,000

 

 

 

6,000

 

Goodwill impairment

 

 

-

 

 

 

-

 

 

 

252,100

 

 

 

252,100

 

Other

 

 

-

 

 

 

-

 

 

 

(100

)

 

 

(100

)

Adjustments to income tax expense

 

 

(7,500

)

 

 

(7,500

)