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Fourth Quarter and Fiscal Year Highlights

  • Strong bookings of $590M in FY21 – increases backlog to approximately $2 billion
  • Momentum for new products leads to orders representing nearly 20% of total bookings
  • Won first major customer in the building mobility market for the connected elevator of the future
  • VinFast, Vietnam’s first domestic car company and a leader in electric vehicle innovation worldwide, selected Cerence to power conversational AI across its lineup of smart EVs
  • Cerence Pay receives coveted Automotive News PACE Award, the industry benchmark for innovation
  • Quarterly revenue grew 7.5% year over year, full year revenue grew 17%
  • Met or exceeded nearly all profitability metrics for the quarter and fiscal year

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

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

    Three Months Ended     Twelve Months Ended
    September 30,     September 30,
    2021     2020     2021     2020
GAAP Revenue   $98.1     $91.2     $387.2     $331.0
GAAP Gross Margin   75.4%     72.0%     73.9%     67.4%
Non-GAAP Gross Margin   78.1%     75.8%     77.3%     71.6%
GAAP Operating Margin   11.0%     17.8%     15.7%     6.8%
Non-GAAP Operating Margin   37.2%     42.1%     37.8%     32.3%
GAAP Net Income (Loss)   $8.0     $8.2     $45.9     $(18.3)
Non-GAAP Net Income   $28.4     $26.0     $107.2     $65.3
Adjusted EBITDA   $38.8     $40.7     $155.9     $116.2
Adjusted EBITDA Margin   39.6%     44.6%     40.3%     35.1%
GAAP Net Income (Loss) per Share – diluted   $0.20     $0.21     $1.17     $(0.50)
Non-GAAP Net Income per Share – diluted   $0.66     $0.62     $2.53     $1.70

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

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

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

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

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

Cerence Key Performance Indicators

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

Key Performance Indicator1     Q4FY21  
Percent of worldwide auto production with Cerence Technology (TTM)       53 %
Average contract duration – years (TTM):       7.9  
Repeatable software contribution (TTM):        81 %
Change in number of Cerence connected cars shipped2 (TTM over prior year TTM)       20 %
Growth in billings per car (TTM over prior year TTM) (excludes legacy contract)       8 %

(1) Please refer to the “Key Performance Indicators” included elsewhere in this release for more information regarding the definition and our use of key performance indicators.
(2) Based on IHS Markit data, global auto production increased 9% over the same time period ended September 30, 2021.

First Quarter and Full Year Fiscal 2022 Outlook
For the fiscal quarter ending December 31, 2021, revenue is expected to be in the range of $91M to $96M which is flat year-over-year at the midpoint, while IHS auto production forecast is expected to be down 21% for the same period. Adjusted EBITDA is expected to be in the range of approximately $31M to $35M. The adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs.

The full-year guidance is for revenue to be in the range of $400M to $425M representing a 7% increase at the midpoint compared to the prior year. The guidance reflects an expected reduction of $23M in revenue related to our “legacy” contract. Adjusting for the “legacy” decline, our revenue is expected to increase 12% year-over-year at the midpoint, while IHS auto production forecast is expected to be flat for the same period. Adjusted EBITDA for the full year is expected to be in the range of approximately $144M to $163M. Additional details regarding guidance will be provided on the earnings call.

Fourth Quarter Conference Call
The company will host a live conference call and webcast with slides to discuss the results today at 10:00 a.m. Eastern Time/7:00 a.m. Pacific Time. Interested investors and analysts are invited to dial into the conference call by using 1.844.467.7116 (domestic) or +1.409.983.9838 (international) and entering the pass code 6829375. Webcast access will be available on the Investor Information section of the company’s website at https://www.cerence.com/investors/events-and-resources.

The teleconference replay will be available through November 29, 2021. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 6829375. A replay of the webcast can be accessed by visiting our web site 90 minutes following the conference call at https://www.cerence.com/investors/events-and-resources.

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

Discussion of Non-GAAP Financial Measures
We believe that providing the non-GAAP information in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

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

Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and twelve months ended September 30, 2021 and 2020, our management has either included or excluded the following items in general categories, each of which is described below.

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

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

Acquisition-related costs, net.
In the past, we have completed a number of acquisitions, which result in operating expenses, which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure, which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

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

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

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

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

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

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

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

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

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

Bookings.
Bookings is defined as the amount of revenue we expect to earn from an agreement with our customers for products and services. To count as a booking, we expect there to be persuasive evidence of an arrangement, which may be evidenced by a legally binding document or documents, and that the collectability of the amounts payable under the arrangement are reasonably assured. The revenue we may actually recognize from our estimated bookings is subject to multiple factors, including but not limited to the timing of satisfying performance obligations, potential terminations, or changes in the scope of programs utilizing our technology and currency fluctuations. There is no comparable GAAP financial measure.

Key performance indicators
We believe that providing key performance indicators (“KPIs”), allows investors to gain insight into the way management views the performance of the business. We further believe that providing KPIs allows investors to better understand information used by management to evaluate and measure such performance. KPIs should not be considered superior to, or a substitute for, operating results prepared in accordance with GAAP. In assessing the performance of the business during the three months ended September 30, 2021, our management has reviewed the following KPIs, each of which is described below:

  • Percent of worldwide auto production with Cerence Technology: The number of Cerence enabled cars shipped as compared to IHS Markit car production data.
  • Average contract duration: The weighted average annual period over which we expect to recognize the estimated revenues from new license and connected contracts signed during the quarter, calculated on a trailing twelve months (“TTM”) basis and presented in years.
  • Repeatable software contribution: The percentage of repeatable revenues as compared to total GAAP revenue in the quarter on a TTM basis. Repeatable revenues are defined as the sum of License and Connected Services revenues.
  • Change in number of Cerence connected cars shipped: The year over year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis.
  • Growth in billings per car: The rate of growth calculated from the average billings per car based on a TTM basis, excluding legacy contract and adjusted for prepay usage.

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

To learn more about Cerence, visit www.cerence.com, and follow the company on LinkedIn and Twitter.

About Cerence Inc.
Cerence (NASDAQ: CRNC) is the global industry leader in creating unique, moving experiences for the mobility world. As an innovation partner to the world’s leading automakers and mobility OEMs, it is helping advance the future of connected mobility through intuitive, powerful interaction between humans and their cars, two-wheelers, and even elevators, connecting consumers’ digital lives to their daily journeys no matter where they are. Cerence’s track record is built on more than 20 years of knowledge and more than 400 million cars shipped with Cerence technology. Whether it’s connected cars, autonomous driving, e-vehicles, or buildings, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

Contact Information
Rich Yerganian
Cerence Inc.
Tel: 617-987-4799
Email: [email protected]


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

    Three Months Ended     Twelve Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
Revenues:                                
License   $ 51,418     $ 46,425     $ 202,183     $ 164,268  
Connected service     25,585       25,360       109,534       97,469  
Professional service     21,073       19,457       75,465       69,230  
Total revenues     98,076       91,242       387,182       330,967  
Cost of revenues:                                
License     826       439       3,544       2,783  
Connected service     5,767       7,026       25,727       31,768  
Professional service     15,655       16,190       64,287       64,963  
Amortization of intangible assets     1,879       1,929       7,516       8,337  
Total cost of revenues     24,127       25,584       101,074       107,851  
Gross profit     73,949       65,658       286,108       223,116  
Operating expenses:                                
Research and development     28,705       22,001       112,070       88,899  
Sales and marketing     10,586       8,569       38,683       33,398  
General and administrative     18,416       12,930       56,979       49,386  
Amortization of intangible assets     3,169       3,168       12,690       12,544  
Restructuring and other costs, net     2,315       2,733       5,092       16,458  
Total operating expenses     63,191       49,401       225,514       200,685  
Income from operations     10,758       16,257       60,594       22,431  
Interest income     41       22       109       585  
Interest expense     (3,428 )     (3,694 )     (13,997 )     (22,737 )
Other income (expense), net     131       (2,953 )     1,563       (23,319 )
Income (loss) before income taxes     7,502       9,632       48,269       (23,040 )
Provision for (benefit from) income taxes     (489 )     1,425       2,376       (4,724 )
Net income (loss)   $ 7,991     $ 8,207     $ 45,893     $ (18,316 )
Net income (loss) per share:                                
Basic     0.21       0.22       1.22       (0.50 )
Diluted     0.20       0.21       1.17       (0.50 )
Weighted-average common share outstanding:                                
Basic     38,015       36,765       37,752       36,428  
Diluted     39,748       39,041       39,289       36,428  


CERENCE INC.

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

    September 30,     September 30,  
    2021     2020  
ASSETS                
Current assets:                
Cash and cash equivalents   $ 128,428     $ 136,067  
Marketable securities     30,435       11,662  
Accounts receivable, net of allowances of $395 and $1,394 at September 30, 2021 and September 30, 2020, respectively     45,560       50,900  
Deferred costs     6,095       7,256  
Prepaid expenses and other current assets     76,530       44,220  
Total current assets     287,048       250,105  
Long-term marketable securities     7,339        
Property and equipment, net     31,505       29,529  
Deferred costs     31,702       38,161  
Operating lease right of use assets     14,901       20,096  
Goodwill     1,128,511       1,128,198  
Intangible assets, net     25,348       45,616  
Deferred tax assets     159,293       160,974  
Other assets     20,081       14,938  
Total assets   $ 1,705,728     $ 1,687,617  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 11,636     $ 8,447  
Deferred revenue     78,394       112,156  
Short-term operating lease liabilities     4,562       5,700  
Short-term debt     6,250       6,250  
Accrued expenses and other current liabilities     64,467       66,078  
Total current liabilities     165,309       198,631  
Long-term debt, net of discounts and issuance costs     265,093       266,872  
Deferred revenue, net of current portion     198,343       212,573  
Long-term operating lease liabilities     12,216       17,821  
Other liabilities     32,822       31,649  
Total liabilities     673,783       727,546  
Stockholders’ Equity:                
Common stock, $0.01 par value, 560,000 shares authorized as of September 30, 2021; 38,025 shares issued and outstanding as of September 30, 2021     381       369  
Accumulated other comprehensive income     1,634       3,711  
Additional paid-in capital     1,002,353       974,307  
Retained earnings (accumulated deficit)     27,577       (18,316 )
Total stockholders’ equity     1,031,945       960,071  
Total liabilities and stockholders’ equity   $ 1,705,728     $ 1,687,617  


CERENCE INC.

Consolidated Statements of Cash Flows
(in thousands)

    Twelve Months Ended  
    September 30,  
    2021     2020  
Cash flows from operating activities:                
Net income (loss)   $ 45,893     $ (18,316 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
               
Depreciation and amortization     29,661       30,041  
(Benefit from) provision for doubtful accounts     (415 )     704  
Stock-based compensation expense     60,555       47,285  
Non-cash interest expense     5,013       5,286  
Loss on debt extinguishment           19,279  
Deferred tax benefit     (4,419 )     (10,568 )
Other     (606 )      
Changes in operating assets and liabilities:                
Accounts receivable     5,751       15,154  
Prepaid expenses and other assets     (30,661 )     (30,311 )
Deferred costs     6,984       (1,381 )
Accounts payable     3,411       (2,430 )
Accrued expenses and other liabilities     (1,125 )     26,040  
Deferred revenue     (45,653 )     (35,994 )
Net cash provided by operating activities     74,389       44,789  
Cash flows from investing activities:                
Capital expenditures     (12,047 )     (19,012 )
Purchases of marketable securities     (42,471 )     (11,663 )
Sale and maturities of marketable securities     16,350        
Purchase of debt securities     (2,000 )      
Payments for equity securities     (2,563 )      
Other investing activities     1,100        
Net cash used in investing activities     (41,631 )     (30,675 )
Cash flows from financing activities:                
Net transactions with Parent           12,964  
Distributions to Parent           (152,978 )
Proceeds from long-term debt, net of discount           547,719  
Payments for long-term debt issuance costs     (520 )     (6,402 )
Principal payments of long-term debt     (6,252 )     (271,563 )
Common stock repurchases for tax withholdings for net settlement of equity awards     (45,769 )     (9,369 )
Principal payments of lease liabilities arising from a finance lease     (486 )     (136 )
Proceeds from the issuance of common stock     11,522       1,318  
Net cash (used in) provided by financing activities     (41,505 )     121,553  
Effects of exchange rate changes on cash and cash equivalents     1,108       400  
Net change in cash and cash equivalents     (7,639 )     136,067  
Cash and cash equivalents at the beginning of the period     136,067        
Cash and cash equivalents at the end of the period   $ 128,428     $ 136,067  


CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures
(unaudited – in thousands)

    Three Months Ended     Twelve Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
GAAP revenue   $ 98,076     $ 91,242     $ 387,182     $ 330,967  
                                 
GAAP gross profit   $ 73,949     $ 65,658     $ 286,108     $ 223,116  
Stock-based compensation     815       1,588       5,760       5,573  
Amortization of intangible assets     1,879       1,929       7,516       8,337  
Non-GAAP gross profit   $ 76,643     $ 69,175     $ 299,384     $ 237,026  
GAAP gross margin     75.4 %     72.0 %     73.9 %     67.4 %
Non-GAAP gross margin     78.1 %     75.8 %     77.3 %     71.6 %
                                 
GAAP operating income   $ 10,758     $ 16,257     $ 60,594     $ 22,431  
Stock-based compensation     18,376       14,331       60,555       47,285  
Amortization of intangible assets     5,048       5,097       20,206       20,881  
Restructuring and other costs, net     2,315       2,733       5,092       16,458  
Non-GAAP operating income   $ 36,497     $ 38,418     $ 146,447     $ 107,055  
GAAP operating margin     11.0 %     17.8 %     15.7 %     6.8 %
Non-GAAP operating margin     37.2 %     42.1 %     37.8 %     32.3 %
                                 
GAAP net income (loss)   $ 7,991     $ 8,207     $ 45,893     $ (18,316 )
Stock-based compensation     18,376       14,331       60,555       47,285  
Amortization of intangible assets     5,048       5,097       20,206       20,881  
Restructuring and other costs, net     2,315       2,733       5,092       16,458  
Depreciation     2,337       2,240       9,455       9,160  
Total other income (expense), net     (3,256 )     (6,625 )     (12,325 )     (45,471 )
Provision for (benefit from) income taxes     (489 )     1,425       2,376       (4,724 )
Adjusted EBITDA   $ 38,834     $ 40,658     $ 155,902     $ 116,215  
GAAP net income (loss) margin     8.1 %     9.0 %     11.9 %     -5.5 %
Adjusted EBITDA margin     39.6 %     44.6 %     40.3 %     35.1 %


CERENCE INC.

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

    Three Months Ended     Twelve Months Ended  
    September 30,     September 30,  
    2021     2020     2021     2020  
GAAP net income (loss)   $ 7,991     $ 8,207     $ 45,893     $ (18,316 )
Stock-based compensation     18,376       14,331       60,555       47,285  
Amortization of intangible assets     5,048       5,097       20,206       20,881  
Restructuring and other costs, net     2,315       2,733       5,092       16,458  
Loss on debt extinguishment                       19,279  
Non-cash interest expense     1,283       1,261       5,013       5,286  
Indemnification asset release           1,215             1,215  
Adjustments to income tax expense     (6,599 )     (6,841 )     (29,582 )     (26,742 )
Non-GAAP net income   $ 28,414     $ 26,003     $ 107,177     $ 65,346  
                                 
Adjusted EPS:                                
GAAP Numerator:                                
Net income (loss) attributed to common shareholders   $ 7,991     $ 8,207     $ 45,893     $ (18,316 )
                                 
Non-GAAP Numerator:                                
Net income attributed to common shareholders   $ 28,414     $ 26,003     $ 107,177     $ 65,346  
Interest on Convertible Senior Notes, net of tax     1,019       998       4,043       1,323  
Net income attributed to common shareholders – diluted   $ 29,433     $ 27,001     $ 111,220     $ 66,669  
                                 
GAAP Denominator:                                
Weighted-average common shares outstanding – basic     38,015       36,765       37,752       36,428  
Adjustment for diluted shares     1,733       2,276       1,537        
Weighted-average common shares outstanding – diluted     39,748       39,041       39,289       36,428  
                                 
Non-GAAP Denominator:                                
Weighted-average common shares outstanding- basic     38,015       36,765       37,752       36,428  
Adjustment for diluted shares     6,410       6,952       6,214       2,747  
Weighted-average common shares outstanding – diluted     44,425       43,717       43,966       39,175  
                                 
GAAP net income (loss) per share – diluted   $ 0.20     $ 0.21     $ 1.17     $ (0.50 )
Non-GAAP net income per share – diluted   $ 0.66     $ 0.62     $ 2.53     $ 1.70  
                                 
GAAP net cash provided by operating activities   $ 23,321     $ 26,212     $ 74,389     $ 44,789  
Capital expenditures     (3,992 )     (2,937 )     (12,047 )     (19,012 )
Free Cash Flow   $ 19,329     $ 23,275     $ 62,342     $ 25,777  


CERENCE INC.

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

    Q4FY21     Q3FY21     Q2FY21     Q1FY21  
GAAP revenues   $ 98,076     $ 96,801     $ 98,662     $ 93,643  
Less: Professional services revenue     21,073       16,538       16,555       21,299  
Non-GAAP Repeatable revenues   $ 77,003     $ 80,263     $ 82,107     $ 72,344  
                                 
GAAP revenues TTM   $ 387,182                          
Less: Professional services revenue TTM     75,465                          
Non-GAAP Repeatable revenues TTM   $ 311,717                          
Repeatable software contribution     81 %                        


CERENCE INC.

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

    Q1 2022     FY2022  
    Low     High     Low     High  
GAAP revenue   $ 91,000     $ 96,000     $ 400,000     $ 425,000  
                                 
GAAP gross profit   $ 66,000     $ 71,000     $ 298,000     $ 321,000  
Stock-based compensation     1,300       1,300       5,600       5,600  
Amortization of intangible assets     1,900       1,900       3,000       3,000  
Non-GAAP gross profit   $ 69,200     $ 74,200     $ 306,600     $ 329,600  
GAAP gross margin     73 %     74 %     75 %     76 %
Non-GAAP gross margin     76 %     77 %     77 %     78 %
                                 
GAAP operating income   $ 11,800     $ 15,300     $ 67,400     $ 86,300  
Stock-based compensation     10,900       10,900       48,200       48,200  
Amortization of intangible assets     5,000       5,000       14,700       14,700  
Restructuring and other costs, net     1,100       1,100       2,300       2,300  
Non-GAAP operating income   $ 28,800     $ 32,300     $ 132,600     $ 151,500  
GAAP operating margin     13 %     16 %     17 %     20 %
Non-GAAP operating margin     32 %     34 %     33 %     36 %
                                 
GAAP net income   $ 8,000     $ 10,200     $ 33,900     $ 43,000  
Stock-based compensation     10,900       10,900       48,200       48,200  
Amortization of intangible assets     5,000       5,000       14,700       14,700  
Restructuring and other costs, net     1,100       1,100       2,300       2,300  
Depreciation     2,300       2,300       11,400       11,400  
Total other income (expense), net     (3,400 )     (3,400 )     (13,500 )     (13,500 )
Provision for income taxes     400       1,700       20,000       29,800  
Adjusted EBITDA   $ 31,100     $ 34,600     $ 144,000     $ 162,900  
GAAP net income margin     9 %     11 %     8 %     10 %
Adjusted EBITDA margin     34 %     36 %     36 %     38 %


CERENCE INC.

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

    Q1 2022     FY2022  
    Low     High     Low     High  
GAAP net income   $ 8,000     $ 10,200     $ 33,900     $ 43,000  
Stock-based compensation     10,900       10,900       48,200       48,200  
Amortization of intangible assets     5,000       5,000       14,700       14,700  
Restructuring and other costs, net     1,100       1,100       2,300       2,300  
Non-cash interest expense     1,300       1,300       5,300       5,300  
Income tax impact of Non-GAAP adjustments     (6,400 )     (6,000 )     (11,100 )     (5,100 )
Non-GAAP net income   $ 19,900     $ 22,500     $ 93,300     $ 108,400  
                                 
Adjusted EPS:                                
GAAP Numerator:                                
Net income attributed to common shareholders   $ 8,000     $ 10,200     $ 33,900     $ 43,000  
                                 
Non-GAAP Numerator:                                
Net income attributed to common shareholders   $ 19,900     $ 22,500     $ 93,300     $ 108,400  
Interest on Convertible Senior Notes, net of tax     1,000       1,000       4,000       4,000  
Net income attributed to common shareholders – diluted   $ 20,900     $ 23,500     $ 97,300     $ 112,400  
                                 
GAAP Denominator:                                
Weighted-average common shares outstanding – basic     38,800       38,800       39,200       39,200  
Adjustment for diluted shares     900       900       900       900  
Weighted-average common shares outstanding – diluted     39,700       39,700       40,100       40,100  
                                 
Non-GAAP Denominator:                                
Weighted-average common shares outstanding- basic     38,800       38,800       39,200       39,200  
Adjustment for diluted shares     5,600       5,600       5,600       5,600  
Weighted-average common shares outstanding – diluted     44,400       44,400       44,800       44,800  
                                 
GAAP net income per share – diluted   $ 0.20     $ 0.26     $ 0.85     $ 1.07  
Non-GAAP net income per share – diluted   $ 0.47     $ 0.53     $ 2.17     $ 2.51  

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