Item 1. Condensed Consolidated Financial Statements.
Refer to accompanying Notes to the unaudited condensed consolidated financial statements.
Refer to accompanying Notes to the unaudited condensed consolidated financial statements.
Refer to accompanying Notes to the unaudited condensed consolidated financial statements.
Refer to accompanying Notes to the unaudited condensed consolidated financial statements.
Refer to accompanying Notes to the unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements
Note 1. Business Overview
History
On October 1, 2019 (the “Distribution Date”), Nuance Communications, Inc. (“Nuance”), a leading provider of speech and language solutions for businesses and consumers around the world, completed the legal and structural separation and distribution to its stockholders of all of the outstanding shares of our common stock, and its consolidated subsidiaries, in a tax free spin-off (which we refer to as the “Spin-Off”). The distribution was made in the amount of one share of our common stock for every eight shares of Nuance common stock (which we refer to as the “Distribution”) owned by Nuance’s stockholders as of 5:00 p.m. Eastern Time on September 17, 2019, the record date of the Distribution.
In connection with the Distribution, on September 30, 2019, we filed an Amended and Restated Certificate of Incorporation (the “Charter”) with the Secretary of State of the State of Delaware, which became effective on October 1, 2019. Our Amended and Restated By-laws also became effective on October 1, 2019. On October 2, 2019, our common stock began regular-way trading on the Nasdaq Global Select Market under the ticker symbol CRNC.
Business
Cerence Inc. (referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company” or “Cerence”) is a global, premier provider of AI-powered assistants and innovations for connected and autonomous vehicles. Our customers include all major automobile original equipment manufacturers (“OEMs”), or their tier 1 suppliers worldwide. We deliver our solutions on a white-label basis, enabling our customers to deliver customized virtual assistants with unique, branded personalities and ultimately strengthening the bond between automobile brands and end users. We generate revenue primarily by selling software licenses and cloud-connected services. In addition, we generate professional services revenue from our work with OEMs and suppliers during the design, development and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects.
COVID-19 Update
In March 2020, the World Health Organization characterized COVID-19 as a pandemic. In an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, some of which have been subsequently rescinded, modified or reinstated, including orders to close all businesses not deemed “essential,” isolate residents to their homes or places of residence, and practice social distancing.
We have taken numerous steps in our approach to addressing the COVID-19 pandemic, as described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. We continue to closely monitor ongoing developments in connection with the COVID-19 pandemic and its impact on our business.
The full extent to which the ongoing COVID-19 pandemic adversely affects our financial performance will depend on future developments, many of which are outside of our control, are highly uncertain and cannot be predicted, including, but not limited to, the duration and scope of the pandemic, its severity, the emergence of new variants of the virus, the development and availability of effective treatments and vaccines, the speed at which vaccines are administered, and how quickly and to what extent normal economic and operating conditions can resume. The COVID-19 pandemic could also result in additional governmental restrictions and regulations, which could adversely affect our business and financial results. In addition, a recession, depression or other sustained adverse market impact resulting from COVID-19 could materially and adversely affect our business, our access to needed capital and liquidity, and the value of our common stock. Even after the COVID-19 pandemic has lessened or subsided, we may continue to experience adverse impacts on our business and financial performance as a result of its global economic impact.
Note 2. Significant Accounting Policies
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, as well as those of our wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.
9
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements.
The condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended June 30, 2021 are not necessarily indicative of the results to be expected for any other interim period or for the year ending September 30, 2021. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020.
During the second quarter of fiscal 2021, we identified and corrected immaterial errors related to previously issued consolidated financial statements. In order to present the impact of the resulting adjustments, previously issued financial statements have been revised. See Note 16 – Impact on Previously Issued Financial Statements for Immaterial Adjustments for additional details, including a summary of the revisions to certain previously reported financial information presented herein for comparative purposes.
Use of Estimates
The financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions. These estimates, judgments and assumptions can affect the reported amounts in the financial statements and the footnotes thereto. Actual results could differ materially from these estimates.
On an ongoing basis, we evaluate our estimates, assumptions and judgments. Significant estimates inherent to the preparation of financial statements include: revenue recognition; allowance for credit losses; accounting for deferred costs; accounting for internally developed software; the valuation of goodwill and intangible assets; accounting for business combinations; accounting for stock-based compensation; accounting for income taxes; accounting for leases; accounting for convertible debt; and loss contingencies. We base our estimates on historical experience, market participant fair value considerations, projected future cash flows, and various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. As of June 30, 2021, the estimated fair value of our money-market funds was $56.2 million. We estimated the fair value of our money-market funds from quoted prices for identical assets in active markets on the last trading day of the reporting period (Level 1).
Concentration of Risk
Financial instruments that potentially subject us to significant concentrations of credit risk primarily consist of trade accounts receivable. We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed appropriate. Three customers accounted for 19.3%, 11.6%, and 10.3% of our Accounts receivable, net balance at June 30, 2021. Two customers accounted for 14.8% and 10.9% of our Accounts receivable, net balance at September 30, 2020.
Derivative Financial Instruments
We use derivative instruments, including forward contracts, to help manage foreign currency exposures. Derivative instruments are viewed as risk management tools by us and are not used for trading or speculative purposes. Derivatives that qualify for hedge accounting can be designated as either cash flow hedges, net investment hedges, or fair value hedges. We may enter into derivative contracts that economically hedge certain risks, even when hedge accounting does not apply, or we elect not to apply hedge accounting.
Derivatives are recognized in the Condensed Consolidated Balance Sheet at fair value on a gross basis as either assets or liabilities and classified as current or noncurrent based upon whether the maturity of the instrument is less than or greater than 12 months.
Changes in the fair value of derivatives not designated as hedges are reported in earnings primarily in Other income (expense), net. The cash flows associated with derivatives not designated as hedges are reported in cash flows from investing activities in the Condensed Consolidated Statement of Cash Flows.
10
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including trade receivables. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model that requires the use of forward-looking information to calculate credit loss estimates. This standard is effective for interim and annual reporting periods beginning after December 15, 2019. This standard is required to be adopted using the modified retrospective basis, with a cumulative-effect adjustment to Accumulated deficit as of the beginning of the first reporting period in which the guidance of this standard is effective.
We adopted ASU 2016-13 using the modified retrospective approach as of October 1, 2020. The effects of applying ASU 2016-13 as a cumulative-effect adjustment to retained earnings was immaterial.
Recently Issued Accounting Pronouncements to be Adopted
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”). This update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) contract modifications on financial reporting, caused by reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for debt with conversion options, revises the criteria for applying the derivatives scope exception for contracts in an entity’s own equity, and improves the consistency for the calculation of earnings per share. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2021, our fiscal year 2023. Early adoption is permitted for annual periods and interim periods within those annual periods beginning after December 15, 2020, our fiscal year 2022. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.
Note 3. Revenue Recognition
We primarily derive revenue from the following sources: (1) royalty-based software license arrangements, (2) connected services, and (3) professional services. Revenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction including mandatory government charges that are passed through to our customers. We account for a contract when both parties have approved and committed to the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
Our arrangements with customers may contain multiple products and services. We account for individual products and services separately if they are distinct—that is, if a product or service is separately identifiable from other items in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer.
We currently recognize revenue after applying the following five steps:
|
|
•
|
identification of the contract, or contracts, with a customer;
|
|
|
•
|
identification of the performance obligations in the contract, including whether they are distinct within the context of the contract;
|
|
|
•
|
determination of the transaction price, including the constraint on variable consideration;
|
|
|
•
|
allocation of the transaction price to the performance obligations in the contract; and
|
|
|
•
|
recognition of revenue when, or as, performance obligations are satisfied.
|
We allocate the transaction price of the arrangement based on the relative estimated standalone selling price (“SSP”) of each distinct performance obligation. In determining SSP, we maximize observable inputs and consider a number of data points, including:
|
|
•
|
the pricing of standalone sales (when available);
|
|
|
•
|
the pricing established by management when setting prices for deliverables that are intended to be sold on a standalone basis;
|
11
|
|
•
|
contractually stated prices for deliverables that are intended to be sold on a standalone basis; and
|
|
|
•
|
other pricing factors, such as the geographical region in which the products are sold and expected discounts based on the customer size and type.
|
We only include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. We reduce transaction prices for estimated returns and other allowances that represent variable consideration under Accounting Standards Codification (“ASC”) 606, which we estimate based on historical return experience and other relevant factors, and record a corresponding refund liability as a component of accrued expenses and other current liabilities. Other forms of contingent revenue or variable consideration are infrequent.
Revenue is recognized when control of these products or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.
We assess the timing of the transfer of products or services to the customer as compared to the timing of payments to determine whether a significant financing component exists. In accordance with the practical expedient in ASC 606-10-32-18, we do not assess the existence of a significant financing component when the difference between payment and transfer of deliverables is a year or less. If the difference in timing arises for reasons other than the provision of finance to either the customer or us, no financing component is deemed to exist. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our services, not to receive or provide financing from or to customers. We do not consider set-up fees nor other upfront fees paid by our customers to represent a financing component.
Reimbursements for out-of-pocket costs generally include, but are not limited to, costs related to transportation, lodging and meals. Revenue from reimbursed out-of-pocket costs is accounted for as variable consideration.
(a) Performance Obligations
Licenses
Embedded software and technology licenses operate without access to the external networks and information. Embedded licenses sold with non-distinct professional services to customize and/or integrate the underlying software and technology are accounted for as a combined performance obligation. Revenue from the combined performance obligation is recognized over time based upon the progress towards completion of the project, which is measured based on the labor hours already incurred to date as compared to the total estimated labor hours.
Revenue from distinct embedded software and technology licenses, which do not require professional services to customize and/or integrate the software license, is recognized at the point in time when the software and technology is made available to the customer and control is transferred. For income statement presentation purposes, we separate distinct embedded license revenue from professional services revenue based on their relative SSPs.
Revenue from embedded software and technology licenses sold on a royalty basis, where the license of non-exclusive intellectual property is the predominant item to which the royalty relates, is recognized in the period the usage occurs in accordance with ASC 606-10-55-65(A).
Connected Services
Connected services, which allow our customers to use the hosted software over the contract period without taking possession of the software, are provided on a usage basis as consumed or on a fixed fee subscription basis. Subscription basis revenue represents a single promise to stand-ready to provide access to our connected services. Our connected services contract terms generally range from one to five years.
As each day of providing services is substantially the same and the customer simultaneously receives and consumes the benefits as access is provided, we have determined that our connected services arrangements are a single performance obligation comprised of a series of distinct services. These services include variable consideration, typically a function of usage. We recognize revenue as each distinct service period is performed (i.e., recognized as incurred).
Our connected service arrangements generally include services to develop, customize, and stand-up applications for each customer. In determining whether these services are distinct, we consider dependence of the cloud service on the up-front development and stand-up, as well as availability of the services from other vendors. We have concluded that the up-front development, stand-up and customization services are not distinct performance obligations, and as such, revenue for these activities is
12
recognized over the period during which the cloud-connected services are provided, and is included within connected services revenue. There can be instances where the customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party. For such arrangements, the performance obligation of the license is completed at a point in time once the customer takes possession of the software.
Professional Services
Revenue from distinct professional services, including training, is recognized over time based upon the progress towards completion of the project, which is measured based on the labor hours already incurred to date as compared to the total estimated labor hours.
(b) Significant Judgments
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Our license contracts often include professional services to customize and/or integrate the licenses into the customer’s environment. Judgment is required to determine whether the license is considered distinct and accounted for separately, or not distinct and accounted for together with professional services. Furthermore, hybrid contracts that contain both embedded and connected license and professional services are analyzed to determine if the products and services are distinct or have stand-alone functionality to determine the revenue treatment.
Judgments are required to determine the SSP for each distinct performance obligation. When the SSP is directly observable, we estimate the SSP based upon the historical transaction prices, adjusted for geographic considerations, customer classes, and customer relationship profiles. In instances where the SSP is not directly observable, we determine the SSP using information that may include market conditions and other observable inputs. We may have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. Determining the SSP for performance obligations which we never sell separately also requires significant judgment. In estimating the SSP, we consider the likely price that would have resulted from established pricing practices had the deliverable been offered separately and the prices a customer would likely be willing to pay. For contracts that contain future royalties, the allocation of SSP is determined using any fixed payments as well as the forecasted volume usage associated with royalties.
(c) Disaggregated Revenue
Revenues, classified by the major geographic region in which our customers are located, for the three and nine months ended June 30, 2021 and 2020 (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
31,632
|
|
|
$
|
27,969
|
|
|
$
|
100,507
|
|
|
$
|
99,907
|
|
|
Other Americas
|
|
|
37
|
|
|
|
8
|
|
|
|
105
|
|
|
|
16
|
|
|
Germany
|
|
|
24,519
|
|
|
|
21,082
|
|
|
|
81,230
|
|
|
|
61,401
|
|
|
Other Europe, Middle East and Africa
|
|
|
10,574
|
|
|
|
6,868
|
|
|
|
27,239
|
|
|
|
20,093
|
|
|
Japan
|
|
|
19,032
|
|
|
|
11,727
|
|
|
|
45,484
|
|
|
|
38,656
|
|
|
Other Asia-Pacific
|
|
|
11,007
|
|
|
|
7,543
|
|
|
|
34,541
|
|
|
|
19,652
|
|
|
Total net revenues
|
|
$
|
96,801
|
|
|
$
|
75,197
|
|
|
$
|
289,106
|
|
|
$
|
239,725
|
|
Revenues within the United States, Germany, and Japan accounted for more than 10% of revenue, respectively, for all periods presented.
Revenues relating to two customers accounted for $19.3 million, or 20.0%, and $12.7 million, or 13.1%, of revenues for the three months ended June 30, 2021. Revenues relating to two customers accounted for $54.5 million, or 18.8%, and $37.4 million, or 12.9%, of revenues for the nine months ended June 30, 2021. Revenues relating to three customers accounted for $19.2 million, or 25.6%, $8.0 million, or 10.6%, and $7.8 million, or 10.4%, of revenues for the three months ended June 30, 2020. Revenues relating to one customer accounted for $56.4 million, or 23.5%, of revenues for the nine months ended June 30, 2020.
13
(d) Contract Acquisition Costs
In conjunction with the adoption of ASC 606, we are required to capitalize certain contract acquisition costs. The capitalized costs primarily relate to paid commissions. In accordance with the practical expedient in ASC 606-10-10-4, we apply a portfolio approach to estimate contract acquisition costs for groups of customer contracts. We elect to apply the practical expedient in ASC 340-40-25-4 and will expense contract acquisition costs as incurred where the expected period of benefit is one year or less. Contract acquisition costs are deferred and amortized on a straight-line basis over the period of benefit, which we have estimated to be, on average, between one and eight years. The period of benefit was determined based on an average customer contract term, expected contract renewals, changes in technology and our ability to retain customers, including canceled contracts. We assess the amortization term for all major transactions based on specific facts and circumstances. Contract acquisition costs are classified as current or noncurrent assets based on when the expense will be recognized. The current and noncurrent portions of contract acquisition costs are included in prepaid expenses and other current assets, and in other assets, respectively. As of June 30, 2021, we had $6.1 million of contract acquisition costs. We had amortization expense of $0.6 million and $0.3 million related to these costs during the three months ended June 30, 2021 and 2020, respectively, and $1.5 million and $0.9 million for the nine months ended June 30, 2021 and 2020, respectively. There was no impairment related to contract acquisition costs.
(e) Capitalized Contract Costs
We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Our capitalized costs consist primarily of setup costs, such as costs to standup, customize and develop applications for each customer, which are incurred to satisfy our stand-ready obligation to provide access to our connected offerings. These contract costs are expensed to cost of revenue as we satisfy our stand-ready obligation over the contract term which we estimate to be between one and eight years, on average. The contract term was determined based on an average customer contract term, expected contract renewals, changes in technology, and our ability to retain customers, including canceled contracts. We classify these costs as current or noncurrent based on the timing of when we expect to recognize the expense. The current and noncurrent portions of capitalized contract fulfillment costs are presented as deferred costs. As of June 30, 2021, we had $40.8 million of capitalized contract costs.
We had amortization expense of $3.0 million and $4.0 million related to these costs during the three months ended June 30, 2021 and 2020, respectively, and $10.5 million and $9.3 million for the nine months ended June 30, 2021 and 2020, respectively. There was no impairment related to contract costs capitalized.
(f) Trade Accounts Receivable and Contract Balances
We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due). We present such receivables in accounts receivable, net at their net estimated realizable value. We maintain an allowance for credit losses to provide for the estimated amount of receivables and contract assets that may not be collected.
Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
Contract assets include unbilled amounts from long-term contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not solely subject to the passage of time. Contract assets are included in prepaid expenses and other current assets. The table below shows significant changes in contract assets (dollars in thousands):
|
|
|
Contract assets
|
|
|
Balance as of September 30, 2020
|
|
$
|
30,277
|
|
|
Revenues recognized but not billed
|
|
|
58,161
|
|
|
Amounts reclassified to accounts receivable, net
|
|
|
(39,794
|
)
|
|
Balance as of June 30, 2021
|
|
$
|
48,644
|
|
|
Less: allowance for credit losses
|
|
|
(496
|
)
|
|
Balance as of June 30, 2021, net
|
|
$
|
48,148
|
|
14
Our contract liabilities, which we present as deferred revenue, consist of advance payments and billings in excess of revenues recognized. We classify deferred revenue as current or noncurrent based on when we expect to recognize the revenues. The table below shows significant changes in deferred revenue (dollars in thousands):
|
|
|
Deferred revenue
|
|
|
Balance as of September 30, 2020
|
|
$
|
324,729
|
|
|
Amounts billed but not recognized
|
|
|
80,683
|
|
|
Revenue recognized
|
|
|
(115,629
|
)
|
|
Balance as of June 30, 2021
|
|
$
|
289,783
|
|
(g) Remaining Performance Obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at June 30, 2021 (dollars in thousands):
|
|
|
Within One
Year
|
|
|
Two to Five
Years
|
|
|
Greater
than
Five Years
|
|
|
Total
|
|
|
Total revenue
|
|
$
|
138,003
|
|
|
$
|
175,677
|
|
|
$
|
21,959
|
|
|
$
|
335,639
|
|
The table above includes fixed backlogs and does not include variable backlogs derived from contingent usage-based activities, such as royalties and usage-based connected services.
Note 4. Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of restricted stock units is reflected in diluted net income per share by applying the treasury stock method.
The dilutive effect of the Notes (as defined in Note 15) is reflected in net income per share by application of the “if-converted” method. The “if-converted” method is only assumed in periods where such application would be dilutive. In applying the “if-converted” method for diluted net income per share, we would assume conversion of the Notes at a ratio of 26.7271 shares of our common stock per $1,000 principal amount of the Notes. Assumed converted shares of our common stock are weighted for the period the Notes were outstanding. The shares of common stock underlying the conversion option of our Notes were not included in the calculation of diluted income per share for the three and nine months ended June 30, 2021.
The following table presents the reconciliation of the numerator and denominator for calculating net income (loss) per share:
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
in thousands, except per share data
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) - basic and diluted
|
|
$
|
5,798
|
|
|
$
|
(28,052
|
)
|
|
$
|
37,902
|
|
|
$
|
(26,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
37,825
|
|
|
|
36,509
|
|
|
|
37,664
|
|
|
|
36,315
|
|
|
Dilutive effect of restricted stock awards
|
|
|
1,471
|
|
|
|
-
|
|
|
|
1,471
|
|
|
|
-
|
|
|
Weighted average common shares outstanding - diluted
|
|
|
39,296
|
|
|
|
36,509
|
|
|
|
39,135
|
|
|
|
36,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.15
|
|
|
$
|
(0.77
|
)
|
|
$
|
1.01
|
|
|
$
|
(0.73
|
)
|
|
Diluted
|
|
$
|
0.15
|
|
|
$
|
(0.77
|
)
|
|
$
|
0.97
|
|
|
$
|
(0.73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
We exclude weighted-average potential shares from the calculations of diluted net income (loss) per share during the applicable periods when their inclusion is anti-dilutive. The following table sets forth potential shares that were considered anti-dilutive during the three and nine months ended June 30, 2021 and 2020.
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
in thousands
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Restricted stock unit awards
|
|
|
-
|
|
|
|
1,531
|
|
|
|
-
|
|
|
|
828
|
|
|
Contingently issuable stock awards
|
|
|
-
|
|
|
|
77
|
|
|
|
-
|
|
|
|
26
|
|
|
Conversion option of our Notes
|
|
|
4,677
|
|
|
|
1,439
|
|
|
|
4,677
|
|
|
|
480
|
|
Note 5. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. When determining fair value measurements for assets and liabilities recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use in pricing the asset or liability.
The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement as of the measurement date as follows:
|
|
•
|
Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the assets or liabilities.
|
|
|
•
|
Level 3 - Unobservable inputs that are supported by little or no market activity.
|
The following table presents information about our financial assets that are measured at fair value and indicates the fair value hierarchy of the valuation inputs used (dollars in thousands) as of:
|
|
|
June 30, 2021
|
|
|
|
|
Fair Value
|
|
|
Cash and Cash Equivalents
|
|
|
Marketable Securities
|
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (a)
|
|
$
|
56,229
|
|
|
$
|
56,229
|
|
|
$
|
-
|
|
|
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, $23,730 at cost (a) (b)
|
|
|
23,730
|
|
|
|
7,999
|
|
|
|
15,731
|
|
|
Corporate bonds, $25,734 at cost (a) (b)
|
|
|
25,719
|
|
|
|
5,002
|
|
|
|
20,717
|
|
|
Total assets
|
|
$
|
105,678
|
|
|
$
|
69,230
|
|
|
$
|
36,448
|
|
|
|
|
September 30, 2020
|
|
|
|
|
Fair Value
|
|
|
Cash and Cash Equivalents
|
|
|
Marketable Securities
|
|
|
Level 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds (a)
|
|
$
|
101,437
|
|
|
$
|
101,437
|
|
|
$
|
-
|
|
|
Level 2:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper, $9,883 at cost (a) (b)
|
|
|
9,883
|
|
|
|
-
|
|
|
|
9,883
|
|
|
Corporate bonds, $1,780 at cost (a) (b)
|
|
|
1,779
|
|
|
|
-
|
|
|
|
1,779
|
|
|
Total assets
|
|
$
|
113,099
|
|
|
$
|
101,437
|
|
|
$
|
11,662
|
|
|
|
(a)
|
Money market funds and other highly liquid investments with original maturities of 90 days or less are included within Cash and cash equivalents in the Condensed Consolidated Balance Sheets.
|
|
|
(b)
|
Commercial paper and corporate bonds with original maturities greater than 90 days are included within Marketable securities in the Condensed Consolidated Balance Sheets and classified as current or noncurrent based upon whether the maturity of the financial asset is less than or greater than 12 months.
|
16
During the three and nine months ended June 30, 2021, we recorded an immaterial amount of unrealized losses related to our marketable securities within Accumulated other comprehensive income. During the three and nine months ended June 30, 2020, we did not possess any marketable securities.
The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities and are excluded from the fair value tables above.
Derivative financial instruments are recognized at fair value and are classified within Level 2 of the fair value hierarchy. See Note 6 – Derivative Financial Instruments for additional details.
Long-term debt
The estimated fair value of our Long-term debt is determined by Level 2 inputs and is based on observable market data including prices for similar instruments. As of June 30, 2021 and September 30, 2020, the estimated fair value of our Notes was $521.5 million and $271.0 million, respectively. The Notes are recorded at face value less unamortized debt discount and transaction costs on our Condensed Consolidated Balance Sheets. The carrying amount of the Senior Credit Facilities (as defined in Note 15) approximates fair value given the underlying interest rate applied to such amounts outstanding is currently set to the prevailing market rate.
Equity securities
During the second quarter of fiscal 2021, we made a non-controlling equity investment in a privately held company. We evaluated the equity investment under the voting model and concluded consolidation was not applicable. We accounted for the investment by electing the measurement alternative for investments without readily determinable fair values and for which we do not have the ability to exercise significant influence. The non-marketable equity securities are carried at cost less any impairment, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the Condensed Consolidated Statements of Operations. We hold $2.6 million of investments without readily determinable fair values as of June 30, 2021. The investment is included within Other assets on the Condensed Consolidated Balance Sheets. There have been no adjustments to the carrying value of the investment resulting from impairments or observable price changes.
Note 6. Derivative Financial Instruments
We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates related to third-party vendor and intercompany payments for goods and services within our non-U.S. subsidiaries. We use foreign exchange forward contracts that are not designated as hedges to manage currency risk. The contracts can have maturities up to three years. At June 30, 2021, the total notional amount of forward contracts was $61.8 million. At June 30, 2021, the weighted-average remaining maturity of these instruments was approximately 11.9 months.
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative instruments as of June 30, 2021 and September 30, 2020 (dollars in thousands):
|
|
|
|
|
Fair Value
|
|
|
Derivatives not designated as hedges
|
|
Classification
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
|
Foreign currency forward contracts
|
|
Prepaid expenses and other current assets
|
|
$
|
1,300
|
|
|
$
|
-
|
|
|
Foreign currency forward contracts
|
|
Other assets
|
|
|
428
|
|
|
|
-
|
|
|
Foreign currency forward contracts
|
|
Accrued expenses and other current liabilities
|
|
|
32
|
|
|
|
-
|
|
|
Foreign currency forward contracts
|
|
Other liabilities
|
|
$
|
56
|
|
|
$
|
-
|
|
The following tables display a summary of the income (loss) related to foreign currency forward contracts for the three and nine months ended June 30, 2021 and 2020 (dollars in thousand):
|
|
|
|
|
Gain recognized in earnings
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
Derivatives not designated as hedges
|
|
Classification
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
Foreign currency forward contracts
|
|
Other income (expense), net
|
|
$
|
649
|
|
|
$
|
-
|
|
|
$
|
2,419
|
|
|
$
|
-
|
|
17
Note 7. Credit Losses
We are exposed to credit losses primarily through our sales of software licenses and services to customers. We determine credit ratings for each customer in our portfolio based upon public information and information obtained directly from our customers. A credit limit for each customer is established and in certain cases we may require collateral or prepayment to mitigate credit risk. Our expected loss methodology is developed using historical collection experience, current customer credit information, current and future economic and market conditions and a review of the current status of the customer's account balances. We monitor our ongoing credit exposure through reviews of customer balances against contract terms and due dates, current economic conditions, and dispute resolution. Estimated credit losses are written off in the period in which the financial asset is no longer collectible.
The change in the allowance for credit losses for the nine months ended June 30, 2021 is as follows (dollars in thousands):
|
|
|
Allowance for Credit Losses
|
|
|
Balance as of September 30, 2020
|
|
$
|
(1,394
|
)
|
|
Current period recovery for expected credit losses
|
|
|
521
|
|
|
Write-offs charged against the allowance for expected credit losses
|
|
|
(109
|
)
|
|
Foreign exchange impact on ending balance
|
|
|
82
|
|
|
Balance as of June 30, 2021
|
|
$
|
(900
|
)
|
Note 8. Goodwill and Other Intangible Assets
(a) Goodwill
We believe our Chief Executive Officer (“CEO”) is our chief operating decision maker (“CODM”). Our CEO approves all major decisions, including reorganizations and new business initiatives. Our CODM reviews routine consolidated operating information and makes decisions on the allocation of resources at this level, as such, we have concluded that we have one operating segment.
All goodwill is assigned to one or more reporting units. A reporting unit represents an operating segment or a component within an operating segment for which discrete financial information is available and is regularly reviewed by segment management for performance assessment and resource allocation. Upon consideration of our components, we have concluded that our goodwill is associated with one reporting unit.
On June 30, 2021, we concluded that no goodwill impairment indicators were present. We will continue to monitor the impacts of the COVID-19 pandemic on our reporting unit fair value. The full extent to which the ongoing COVID-19 pandemic could adversely affect our financial performance will depend on future developments, many of which are outside of our control.
The changes in the carrying amount of goodwill for the nine months ended June 30, 2021 are as follows (dollars in thousands):
|
|
|
Total
|
|
|
Balance as of September 30, 2020
|
|
$
|
1,128,198
|
|
|
Effect of foreign currency translation
|
|
|
4,699
|
|
|
Balance as of June 30, 2021
|
|
$
|
1,132,897
|
|
(b) Intangible Assets, Net
As of June 30, 2021, there were no indicators of impairment present related to our long-lived asset group.
The following tables summarizes the gross carrying amounts and accumulated amortization of intangible assets by major class (dollars in thousands):
|
|
|
June 30, 2021
|
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Weighted Average
Remaining Life
(Years)
|
|
|
Customer relationships
|
|
$
|
111,403
|
|
|
$
|
(86,165
|
)
|
|
$
|
25,238
|
|
|
|
2.4
|
|
|
Technology and patents
|
|
|
91,142
|
|
|
|
(85,762
|
)
|
|
|
5,380
|
|
|
|
1.0
|
|
|
Total
|
|
$
|
202,545
|
|
|
$
|
(171,927
|
)
|
|
$
|
30,618
|
|
|
|
|
|
18
|
|
|
September 30, 2020
|
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Weighted Average
Remaining Life
(Years)
|
|
|
Customer relationships
|
|
$
|
110,512
|
|
|
$
|
(75,915
|
)
|
|
$
|
34,597
|
|
|
|
3.0
|
|
|
Technology and patents
|
|
|
90,658
|
|
|
|
(79,639
|
)
|
|
|
11,019
|
|
|
|
1.6
|
|
|
Total
|
|
$
|
201,170
|
|
|
$
|
(155,554
|
)
|
|
$
|
45,616
|
|
|
|
|
|
Amortization expense related to intangible assets in the aggregate was $5.1 million and $5.2 million for the three months ended June 30, 2021 and 2020, respectively, and $15.2 million and $15.8 million for the nine months ended June 30, 2021 and 2020, respectively. We expect amortization of intangible assets to be approximately $5.0 million for the remainder of fiscal year 2021.
Note 9. Leases
We have entered into a number of facility and equipment leases which qualify as operating leases under GAAP. We also have a limited number of equipment leases that qualify as finance leases. We determine if contracts with vendors represent a lease or have a lease component under GAAP at contract inception. Our leases have remaining terms ranging from less than one year to seven years. Some of our leases include options to extend or terminate the lease prior to the end of the agreed upon lease term. For purposes of calculating lease liabilities, lease terms include options to extend or terminate the lease when it is reasonably certain that we will exercise such options.
Operating lease right of use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the lease commencement date. As our leases generally do not provide an implicit rate, we use an estimated incremental borrowing rate in determining the present value of future payments. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease within a particular location and currency environment.
The following table presents certain information related to lease term and incremental borrowing rates for leases as of June 30, 2021 and September 30, 2020:
|
|
|
June 30, 2021
|
|
September 30, 2020
|
|
|
Weighted-average remaining lease term (in months):
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
50.5
|
|
|
55.9
|
|
|
Finance leases
|
|
|
50.1
|
|
|
55.8
|
|
|
Weighted-average discount rate:
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
6.8
|
%
|
|
7.4
|
%
|
|
Finance leases
|
|
|
4.4
|
%
|
|
4.4
|
%
|
Lease costs for minimum lease payments is recognized on a straight-line basis over the lease term. For operating leases, costs are included within Cost of revenues, Research and development, Sales and marketing, and General and administrative lines on the Condensed Consolidated Statements of Operations. For financing leases, amortization of the finance right-of-use assets is included within Research and development, Sales and marketing, and General and administrative lines on the Condensed Consolidated Statements of Operations, and interest expense is included within Interest expense.
The following table presents lease expense for the three and nine months ended June 30, 2021 and 2020 (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Finance lease costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right of use asset
|
|
$
|
87
|
|
|
$
|
33
|
|
|
$
|
301
|
|
|
$
|
102
|
|
|
Interest on lease liability
|
|
|
16
|
|
|
|
1
|
|
|
|
48
|
|
|
|
3
|
|
|
Operating lease cost
|
|
|
1,885
|
|
|
|
2,209
|
|
|
|
5,825
|
|
|
|
6,059
|
|
|
Variable lease cost
|
|
|
801
|
|
|
|
347
|
|
|
|
1,271
|
|
|
|
1,021
|
|
|
Sublease income
|
|
|
(53
|
)
|
|
|
(47
|
)
|
|
|
(157
|
)
|
|
|
(157
|
)
|
|
Total lease cost
|
|
$
|
2,736
|
|
|
$
|
2,543
|
|
|
$
|
7,288
|
|
|
$
|
7,028
|
|
19
For operating leases, the related cash payments are included in the operating cash flows on the Condensed Consolidated Statements of Cash Flows. For the three months ended June 30, 2021 and 2020, cash payments related to operating leases were $1.8 million and $2.1 million, respectively, and $5.9 million and $5.7 million for the nine months ended June 30, 2021 and 2020, respectively. For financing leases, the related cash payments for the principal portion of the lease liability are included in the financing cash flows on the Condensed Consolidated Statement of Cash Flows and the related cash payments for the interest portion of the lease liability are included within the operating section of the Condensed Consolidated Statement of Cash Flows. For the three and nine months ended June 30, 2021, cash payments related to financing leases were $0.1 million and $0.3 million, of which an immaterial amount related to the interest portion of the lease liability. For the three months ended June 30, 2020, cash payments related to financing leases were immaterial. For the nine months ended June 30, 2020, cash payments related to financing leases were $0.1 million, of which an immaterial amount was related to the interest portion of the lease liability.
The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases to the total lease liabilities recognized on the Condensed Consolidated Balance Sheet as of June 30, 2021 (dollars in thousands):
|
Year Ending September 30,
|
|
Operating Leases
|
|
|
Financing Leases
|
|
|
Total
|
|
|
2021 (excluding nine months ended June 30, 2021)
|
|
$
|
1,830
|
|
|
$
|
118
|
|
|
$
|
1,948
|
|
|
2022
|
|
|
6,250
|
|
|
|
469
|
|
|
|
6,719
|
|
|
2023
|
|
|
4,145
|
|
|
|
469
|
|
|
|
4,614
|
|
|
2024
|
|
|
3,800
|
|
|
|
417
|
|
|
|
4,217
|
|
|
2025
|
|
|
2,351
|
|
|
|
362
|
|
|
|
2,713
|
|
|
Thereafter
|
|
|
3,125
|
|
|
|
53
|
|
|
|
3,178
|
|
|
Total future minimum lease payments
|
|
$
|
21,501
|
|
|
$
|
1,888
|
|
|
$
|
23,389
|
|
|
Less effects of discounting
|
|
|
(2,847
|
)
|
|
|
(131
|
)
|
|
|
(2,978
|
)
|
|
Total lease liabilities
|
|
$
|
18,654
|
|
|
$
|
1,757
|
|
|
$
|
20,411
|
|
|
Reported as of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term lease liabilities
|
|
$
|
5,497
|
|
|
$
|
429
|
|
|
$
|
5,926
|
|
|
Long-term lease liabilities
|
|
|
13,157
|
|
|
|
1,328
|
|
|
|
14,485
|
|
|
Total lease liabilities
|
|
$
|
18,654
|
|
|
$
|
1,757
|
|
|
$
|
20,411
|
|
Note 10. Accrued Expenses and Other Liabilities
Accrued expenses and other current liabilities consisted of the following (dollars in thousands):
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
$
|
37,121
|
|
|
$
|
37,960
|
|
|
Sales and other taxes payable
|
|
|
11,621
|
|
|
|
14,688
|
|
|
Professional fees
|
|
|
3,974
|
|
|
|
2,458
|
|
|
Cost of revenue related liabilities
|
|
|
3,946
|
|
|
|
3,683
|
|
|
Interest payable
|
|
|
622
|
|
|
|
2,703
|
|
|
Other
|
|
|
3,671
|
|
|
|
4,586
|
|
|
Total
|
|
$
|
60,955
|
|
|
$
|
66,078
|
|
20
Note 11. Restructuring and Other Costs, Net
Restructuring and other costs, net includes restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside of the ordinary course of our business. The following table sets forth accrual activity relating to restructuring reserves for the nine months ended June 30, 2021 (dollars in thousands):
|
|
|
Personnel
|
|
|
Facilities
|
|
|
Restructuring Subtotal
|
|
|
Other
|
|
|
Total
|
|
|
Balance at September 30, 2020
|
|
$
|
764
|
|
|
$
|
10
|
|
|
$
|
774
|
|
|
$
|
1,928
|
|
|
$
|
2,702
|
|
|
Restructuring and other costs, net
|
|
|
381
|
|
|
|
1,012
|
|
|
|
1,393
|
|
|
|
1,384
|
|
|
|
2,777
|
|
|
Non-cash adjustments
|
|
|
—
|
|
|
|
2,749
|
|
|
|
2,749
|
|
|
|
—
|
|
|
|
2,749
|
|
|
Cash payments
|
|
|
(719
|
)
|
|
|
(852
|
)
|
|
|
(1,571
|
)
|
|
|
(1,985
|
)
|
|
|
(3,556
|
)
|
|
Foreign exchange impact on ending balance
|
|
|
6
|
|
|
|
(45
|
)
|
|
|
(39
|
)
|
|
|
—
|
|
|
|
(39
|
)
|
|
Balance at June 30, 2021
|
|
$
|
432
|
|
|
$
|
2,874
|
|
|
$
|
3,306
|
|
|
$
|
1,327
|
|
|
$
|
4,633
|
|
The following table sets forth restructuring and other costs, net recognized for the three and nine months ended June 30, 2021 and 2020 (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
|
$
|
—
|
|
|
$
|
2,452
|
|
|
$
|
381
|
|
|
$
|
3,133
|
|
|
Facilities
|
|
|
447
|
|
|
|
—
|
|
|
|
1,012
|
|
|
|
—
|
|
|
Restructuring subtotal
|
|
|
447
|
|
|
|
2,452
|
|
|
|
1,393
|
|
|
|
3,133
|
|
|
Other
|
|
|
1,313
|
|
|
|
849
|
|
|
|
1,384
|
|
|
|
10,592
|
|
|
Restructuring and other costs, net
|
|
$
|
1,760
|
|
|
$
|
3,301
|
|
|
$
|
2,777
|
|
|
$
|
13,725
|
|
Fiscal Year 2021
For the three months ended June 30, 2021, we recorded restructuring charges of $1.8 million, which resulted from a $0.4 million charge resulting from the closure of facilities that will no longer be utilized and $1.3 million related to other one-time charges.
For the nine months ended June 30, 2021, we recorded restructuring charges of $2.8 million, which included a $0.4 million severance charge related to the elimination of personnel, $1.0 million charge resulting from the closure of facilities that will no longer be utilized, and $1.4 million related to other one-time charges.
Fiscal Year 2020
For the three months ended June 30, 2020, we recorded restructuring charges of $3.3 million, which included a $2.5 million severance charge related to the elimination of personnel, and $0.8 million related to costs incurred to establish the Cerence business as a standalone public company.
For the nine months ended June 30, 2020, we recorded restructuring charges of $13.7 million, which included a $3.1 million severance charge related to the elimination of personnel, and $10.6 million related to costs incurred to establish the Cerence business as a standalone public company.
Note 12. Stockholder’s Equity
Per the Amended and Restated Certificate of Incorporation, which was adopted on October 1, 2019, 600,000,000 shares of capital stock have been authorized, consisting of 40,000,000 shares of Preferred Stock, par value $0.01 per share, or Preferred Stock, and 560,000,000 shares of Common Stock, par value $0.01 per share (“Common Stock”).
On October 2, 2019, we registered the issuance of 6,350,000 shares of Common Stock, consisting of 5,300,000 shares of Common Stock reserved for issuance upon the exercise of options granted, or in respect of awards granted, under the Cerence 2019 Equity Incentive Plan, (“Equity Incentive Plan”), and 1,050,000 shares of Common Stock that are reserved for issuance under the Cerence 2019 Employee Stock Purchase Plan. On January 1, 2021, in accordance with the automatic annual increase provisions of the Equity Incentive Plan, an aggregate of 1,130,547 shares of our Common Stock were added to the shares available for issuance under the Equity Incentive Plan.
The Equity Incentive Plan provides for the grant of incentive stock options, stock awards, stock units, stock appreciation rights, and certain other stock-based awards.
21
Awards issued under the Plan may not have a term greater than ten years from the date of grant.
Restricted Units
Information with respect to our non-vested restricted stock units for the nine months ended June 30, 2021 was as follows:
|
|
Non-Vested Restricted Stock Units
|
|
|
|
Time-Based
Shares
|
|
Performance-
Based Shares
|
|
Total Shares
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Weighted-
Average
Remaining
Contractual
Term (years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
|
Non-vested at September 30, 2020
|
|
2,042,918
|
|
|
771,387
|
|
|
2,814,305
|
|
$
|
18.63
|
|
|
|
|
|
|
|
|
Granted
|
|
676,883
|
|
|
290,035
|
|
|
966,918
|
|
$
|
61.32
|
|
|
|
|
|
|
|
|
Vested
|
|
(1,006,553
|
)
|
|
(403,502
|
)
|
|
(1,410,055
|
)
|
$
|
37.85
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(22,844
|
)
|
|
(2,287
|
)
|
|
(25,131
|
)
|
$
|
45.21
|
|
|
|
|
|
|
|
|
Non-vested at June 30, 2021
|
|
1,690,404
|
|
|
655,633
|
|
|
2,346,037
|
|
$
|
42.34
|
|
|
1.24
|
|
$
|
250,322
|
|
|
Expected to vest
|
|
|
|
|
|
|
|
2,346,037
|
|
$
|
42.34
|
|
|
1.24
|
|
$
|
250,322
|
|
Stock-based Compensation
Stock-based compensation was included in the following captions in our Condensed Consolidated Statements of Operations for the three and nine months ended June 30, 2021 and 2020 (in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Cost of connected services
|
|
$
|
165
|
|
|
$
|
423
|
|
|
$
|
937
|
|
|
$
|
963
|
|
|
Cost of professional services
|
|
|
1,543
|
|
|
|
1,718
|
|
|
|
4,008
|
|
|
|
3,022
|
|
|
Research and development
|
|
|
4,774
|
|
|
|
5,001
|
|
|
|
13,377
|
|
|
|
9,924
|
|
|
Sales and marketing
|
|
|
2,774
|
|
|
|
3,223
|
|
|
|
8,351
|
|
|
|
6,589
|
|
|
General and administrative
|
|
|
5,454
|
|
|
|
7,060
|
|
|
|
15,506
|
|
|
|
12,456
|
|
|
|
|
$
|
14,710
|
|
|
$
|
17,425
|
|
|
$
|
42,179
|
|
|
$
|
32,954
|
|
Note 13. Commitments and Contingencies
Litigation and Other Claims
Similar to many companies in the software industry, we are involved in a variety of claims, demands, suits, investigations and proceedings that arise from time to time relating to matters incidental to the ordinary course of our business, including at times actions with respect to contracts, intellectual property, employment, benefits and securities matters. At each balance sheet date, we evaluate contingent liabilities associated with these matters in accordance with ASC 450 “Contingencies.” If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgments are required for the determination of probability and the range of the outcomes, and estimates are based only on the best information available at the time. Due to the inherent uncertainties involved in claims and legal proceedings and in estimating losses that may arise, actual outcomes may differ from our estimates. Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods, which may have a material impact on our results of operations and financial position. As of June 30, 2021, accrued losses were not material to our condensed consolidated financial statements, and we do not expect any pending matter to have a material impact on our condensed consolidated financial statements.
Guarantees and Other
We include indemnification provisions in the contracts we enter with customers and business partners. Generally, these provisions require us to defend claims arising out of our products’ infringement of third-party intellectual property rights, breach of contractual obligations and/or unlawful or otherwise culpable conduct. The indemnity obligations generally cover damages, costs and attorneys’ fees arising out of such claims. In most, but not all cases, our total liability under such provisions is limited to either the value of the contract or a specified, agreed-upon amount. In some cases, our total liability under such provisions is unlimited. In many, but not all cases, the term of the indemnity provision is perpetual. While the maximum potential amount of future payments we could be required to make under all the indemnification provisions is unlimited, we believe the estimated fair value of these provisions is minimal due to the low frequency with which these provisions have been triggered.
22
We indemnify our directors and officers to the fullest extent permitted by Delaware law, which provides among other things, indemnification to directors and officers for expenses, judgments, fines, penalties and settlement amounts incurred by such persons in their capacity as a director or officer of the Company, regardless of whether the individual is serving in any such capacity at the time the liability or expense is incurred. Additionally, in connection with certain acquisitions, we agreed to indemnify the former officers and members of the boards of directors of those companies, on similar terms as described above, for a period of six years from the acquisition date. In certain cases, we purchase director and officer insurance policies related to these obligations, which fully cover the six-year period. To the extent that we do not purchase a director and officer insurance policy for the full period of any contractual indemnification, and such directors and officers do not have coverage under separate insurance policies, we would be required to pay for costs incurred, if any, as described above.
As of June 30, 2021, we have a $1.7 million letter of credit that is used as a security deposit in connection with our leased Bellevue, Washington office space. In the event of default on the underlying lease, the landlord would be eligible to draw against the letter of credit. The letter of credit is subject to aggregate reductions, provided that we are not in default under the underlying lease. We also have letters of credit in connection with security deposits for other facility leases totaling $0.6 million in the aggregate. These letters of credit have various terms and expire during fiscal year 2021 and beyond, while some of the letters of credit may automatically renew based on the terms of the underlying agreements.
Note 14. Income Taxes
The components of income (loss) before income taxes are as follows (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
4,895
|
|
|
$
|
(37,511
|
)
|
|
$
|
19,139
|
|
|
$
|
(42,187
|
)
|
|
Foreign
|
|
|
6,967
|
|
|
|
7,248
|
|
|
|
21,628
|
|
|
|
9,515
|
|
|
Income (loss) before income taxes
|
|
$
|
11,862
|
|
|
$
|
(30,263
|
)
|
|
$
|
40,767
|
|
|
$
|
(32,672
|
)
|
The components of the provision for (benefit from) income taxes are as follows (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
2,661
|
|
|
$
|
(5,899
|
)
|
|
$
|
6,414
|
|
|
$
|
(6,841
|
)
|
|
Foreign
|
|
|
3,403
|
|
|
|
3,688
|
|
|
|
(3,549
|
)
|
|
|
692
|
|
|
Provision for (benefit from) income taxes
|
|
$
|
6,064
|
|
|
$
|
(2,211
|
)
|
|
$
|
2,865
|
|
|
$
|
(6,149
|
)
|
|
Effective income tax rate
|
|
|
51.1
|
%
|
|
|
7.3
|
%
|
|
|
7.0
|
%
|
|
|
18.8
|
%
|
The effective tax rates for the periods presented are based upon estimated income for the fiscal year and the statutory tax rates enacted in the jurisdictions in which we operate. For all periods presented, the effective tax rate differs from the 21.0% statutory U.S. tax rate due to the impact of the nondeductible stock-based compensation, U.S. inclusions of global intangible low-taxed income (GILTI), and our mix of jurisdictional earnings and related differences in foreign statutory tax rates.
Our effective tax rate for the three months ended June 30, 2021 was 51.1% compared to 7.3% for the three months ended June 30, 2020. Consequently, our provision for income taxes for the three months ended June 30, 2021 was $6.1 million, a net change of $8.3 million from a benefit from income taxes of $2.2 million for the three months ended June 30, 2020. This difference was attributable to our composition of jurisdiction earnings, U.S. inclusions of foreign taxable income as a result of 2017 tax law changes, non-deductible compensation expenses.
Our effective tax rate for the nine months ended June 30, 2021 was 7.0% compared to 18.8% for the nine months ended June 30, 2020. Consequently, our provision for income taxes for the nine months ended June 30, 2021 was $2.9 million, a net change of $9.0 million from a benefit from income taxes of $6.1 million for the nine months ended June 30, 2020. This difference was attributable to a $15.8 million tax benefit recorded as a result of an increase to the enacted Netherlands tax rate in the first quarter of fiscal 2021 and the realization of a $3.9 million tax benefit related to stock-based compensation in the period. This compares to a $5.0 million tax benefit realized during the nine months ended June 30, 2020, which was the result of a previous change to the Netherlands enacted tax rate.
23
Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible. Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.
Note 15. Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
|
|
June 30, 2021
|
|
|
September 30, 2020
|
|
|
3.00% Convertible Senior Notes due 2025, net of unamortized discount of $15,929 and deferred issuance costs of $4,005 at June 30, 2021. Effective interest rate 6.29%.
|
|
$
|
155,066
|
|
|
$
|
151,791
|
|
|
|
Senior Credit Facilities, net of unamortized discount of $1,958 and deferred issuance costs of $236 at June 30, 2021. Effective interest rate 2.91%.
|
|
|
116,556
|
|
|
|
121,331
|
|
|
Total debt
|
|
$
|
271,622
|
|
|
$
|
273,122
|
|
|
Less: current portion
|
|
|
(6,250
|
)
|
|
|
(6,250
|
)
|
|
Total long-term debt
|
|
$
|
265,372
|
|
|
$
|
266,872
|
|
The following table summarizes the maturities of our borrowing obligations as of June 30, 2021 (in thousands):
|
Fiscal Year
|
|
Convertible
Senior Notes
|
|
|
Senior Facilities
|
|
|
Total
|
|
|
2021
|
|
$
|
—
|
|
|
$
|
1,562
|
|
|
$
|
1,562
|
|
|
2022
|
|
|
—
|
|
|
|
6,250
|
|
|
|
6,250
|
|
|
2023
|
|
|
—
|
|
|
|
10,938
|
|
|
|
10,938
|
|
|
2024
|
|
|
—
|
|
|
|
12,500
|
|
|
|
12,500
|
|
|
2025
|
|
|
175,000
|
|
|
|
87,500
|
|
|
|
262,500
|
|
|
Thereafter
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total before unamortized discount and issuance costs and current portion
|
|
$
|
175,000
|
|
|
$
|
118,750
|
|
|
$
|
293,750
|
|
|
Less: unamortized discount and issuance costs
|
|
|
(19,934
|
)
|
|
|
(2,194
|
)
|
|
|
(22,128
|
)
|
|
Less: current portion of long-term debt
|
|
|
—
|
|
|
|
(6,250
|
)
|
|
|
(6,250
|
)
|
|
Total long-term debt
|
|
$
|
155,066
|
|
|
$
|
110,306
|
|
|
$
|
265,372
|
|
3.00% Senior Convertible Notes due 2025
On June 2, 2020, in an effort to refinance our debt structure, we issued $175.0 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the “Notes”), including the initial purchasers’ exercise in full of their option to purchase an additional $25.0 million principal amount of the Notes, between the Company and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from the issuance of the Notes were $169.8 million after deducting transaction costs. We used net proceeds from the issuance of the Notes to repay a portion of our indebtedness under the Credit Agreement, dated October 1, 2019, by and among the Company, the lenders and issuing banks party thereto and Barclays Bank PLC, as administrative agent (the “Existing Facility”).
The Notes are senior, unsecured obligations and will accrue interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020, at a rate of 3.00% per year. The Notes will mature on June 1, 2025, unless earlier converted, redeemed, or repurchased. The Notes are convertible into cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s election.
The conversion rate will initially be 26.7271 shares of our Common Stock per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $37.42 per share of our Common Stock).
As of June 30, 2021, the carrying amount of the equity component, net of taxes and transaction costs was $14.4 million.
24
The interest expense recognized related to the Notes for the three and nine months ended June 30, 2021 was as follows (dollars in thousands):
|
|
|
Three Months Ended June 30,
|
|
|
Nine Months Ended June 30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Contractual interest expense
|
|
$
|
1,308
|
|
|
$
|
431
|
|
|
$
|
3,924
|
|
|
$
|
431
|
|
|
Amortization of debt discount
|
|
|
886
|
|
|
|
276
|
|
|
|
2,617
|
|
|
|
276
|
|
|
Amortization of issuance costs
|
|
|
223
|
|
|
|
70
|
|
|
|
658
|
|
|
|
70
|
|
|
Total interest expense related to the Notes
|
|
$
|
2,417
|
|
|
$
|
777
|
|
|
$
|
7,199
|
|
|
$
|
777
|
|
The conditional conversion feature of the Notes was triggered during the nine months ended June 30, 2021, and the Notes were convertible during the fiscal quarter ended June 30, 2021, with no Notes being converted. Whether any of the Notes will be convertible in future quarters will depend on the satisfaction of one or more of the conversion conditions in the future. If one or more holders elect to convert their Notes at a time when any such Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
Senior Credit Facilities
On June 12, 2020 (the “Financing Closing Date”), in connection with our effort to refinance our existing indebtedness, we entered into a Credit Agreement, by and among the Borrower, the lenders and issuing banks party thereto and Wells Fargo Bank, N.A., as administrative agent (the “Credit Agreement”), consisting of a four-year senior secured term loan facility in the aggregate principal amount of $125.0 million (the “Term Loan Facility”). The net proceeds from the issuance of the Term Loan Facility were $123.0 million, which together with proceeds from the Convertible Senior Notes was intended to pay in full all indebtedness under the Existing Facility, and paid fees and expenses in connection with the Senior Credit Facilities. We also entered into a senior secured first-lien revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Senior Credit Facilities”), which shall be drawn on in the event that our working capital and other cash needs are not supported by our operating cash flow. As of June 30, 2021, there were no amounts outstanding under the Revolving Facility.
On December 17, 2020 (the “Amendment No. 1 Effective Date”), we entered into Amendment No. 1 to the Credit Agreement (the “Amendment”). The Amendment extended the scheduled maturity date of the revolving credit and term facilities from June 12, 2024 to April 1, 2025. The Amendment was accounted for as a debt modification, and therefore, $0.5 million of the refinancing fees paid directly to lender were recorded as deferred debt issuance costs, and $0.1 million of the refinancing fees paid to third parties were expensed in the period.
The Amendment, among other things, revised certain interest rates in the Credit Agreement. Following delivery of a compliance certificate for the first full fiscal quarter after the Amendment No. 1 Effective Date, the applicable margins for the revolving credit and term facilities is subject to a pricing grid based upon the net total leverage ratio as follows (i) if the net total leverage ratio is greater than 3.00 to 1.00, the applicable margin is LIBOR plus 3.00% or ABR plus 2.00%; (ii) if the net total leverage ratio is less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00, the applicable margin is LIBOR plus 2.75% or ABR plus 1.75%; (iii) if the net total leverage ratio is less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00, the applicable margin is LIBOR plus 2.50% or ABR plus 1.50%; (iv) if the net total leverage ratio is less than or equal to 2.00 to 1.00 but greater than 1.50 to 1.00, the applicable margin is LIBOR plus 2.25% or ABR plus 1.25%; and (v) if the net total leverage ratio is less than or equal to 1.50 to 1.00, the applicable margin is LIBOR plus 2.20% or ABR plus 1.00%. As a result of the Amendment, the applicable LIBOR floor was reduced from 0.50% to 0.00%. From the Amendment No. 1 Effective Date until the fiscal quarter ended December 31, 2020, the interest rate was LIBOR plus 2.50%. For the three months ended March 31, 2021, the interest rate was LIBOR plus 2.25%. For the three months ended June 30, 2021, the interest rate was LIBOR plus 2.25%. Total interest expense relating to the Senior Credit Facilities for the three months ended June 30, 2021 and 2020 was $0.8 million and $0.3 million, respectively, and $3.2 million and $0.3 million for the nine months ended June 30, 2021 and 2020, respectively, reflecting the coupon and accretion of the discount.
In addition, the quarterly commitment fee required to be paid based on the unused portion of the revolving facility is subject to a pricing grid based upon the net total leverage ratio as follows (i) if the net total leverage ratio is greater than 3.00 to 1.00, the unused line fee is 0.500%; (ii) if the net total leverage ratio is less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00, the unused line fee is 0.450%; (iii) if the net total leverage ratio is less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00, the unused line fee is 0.400%; (iv) if the net total leverage ratio is less than or equal to 2.00 to 1.00 but greater than 1.50 to 1.00, the unused line fee is 0.350%; and (v) if the net total leverage ratio is less than or equal to 1.50 to 1.00, the unused line fee is 0.300%.
25
The Amendment also revised the amount by which we are obligated to make quarterly principal payments. Through the fiscal quarter ending December 31, 2022, we are obligated to make quarterly principal payments in an aggregate amount equal to 1.25% of the original principal amount of the Term Loan Facility. From the fiscal quarter ending March 31, 2023 and for each fiscal quarter thereafter, we are obligated to make quarterly principal payments in an aggregate amount equal to 2.50% of the original principal amount of the Term Loan Facility, with the balance payable at the maturity date thereof.
The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to designate subsidiaries as unrestricted, to make certain investments, to prepay certain indebtedness and to pay dividends, or to make other distributions or redemptions/repurchases, in respect of our and our subsidiaries’ equity interests. In addition, the Credit Agreement contains financial covenants, each tested quarterly, (1) a net secured leveraged ratio of not greater than 3.25 to 1.00; (2) a net total leverage ratio of not greater than 4.25 to 1.00; and (3) minimum liquidity of at least $75 million. The Credit Agreement also contains events of default customary for financings of this type, including certain customary change of control events. As of June 30, 2021, we were in compliance with all Credit Agreement covenants.
Note 16. Impact on Previously Issued Financial Statements for Immaterial Adjustments
During the quarter ended March 31, 2021, we identified three immaterial errors and made adjustments to correct those errors that affected previously issued consolidated financial statements.
|
|
•
|
During the first quarter of fiscal 2021, we recognized an immaterial amount of connected services revenue which related to fiscal year 2020.
|
|
|
•
|
During the first quarter of fiscal 2021, the estimated achievement percentage relating to our long-term incentive plan increased. We did not originally record the corresponding cumulative adjustment to stock-based compensation during the three months ended December 31, 2020.
|
|
|
•
|
During the fourth quarter of fiscal 2020, we recorded a restructuring accrual relating to the closure of a facility under ASC 420 Exit or Disposal Cost Obligation when ASC 842 Leases should have been applied. During the three months ended December 31, 2020, a partial true up was recorded to the restructuring accrual.
|
We also recorded certain adjustments to income taxes reflecting the tax effect of the aforementioned adjustments.
We assessed the materiality, both quantitatively and qualitatively, in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108, and concluded that these identified errors were not material to any of the previously issued financial statements. In order to present the impact of these resulting adjustments, previously issued financial statements have been revised and are presented as “As Revised” in the tables presented below.
|
|
|
Three Months Ended December 31, 2019
|
|
|
Revised Consolidated Statement of Operations Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
Total revenues
|
|
|
77,459
|
|
|
|
246
|
|
|
|
77,705
|
|
|
Gross profit
|
|
|
51,525
|
|
|
|
246
|
|
|
|
51,771
|
|
|
Loss from operations
|
|
|
(2,097
|
)
|
|
|
246
|
|
|
|
(1,851
|
)
|
|
Loss before income taxes
|
|
|
(8,760
|
)
|
|
|
246
|
|
|
|
(8,514
|
)
|
|
Provision for income taxes
|
|
|
3,002
|
|
|
|
(233
|
)
|
|
|
2,769
|
|
|
Net loss
|
|
$
|
(11,762
|
)
|
|
$
|
479
|
|
|
$
|
(11,283
|
)
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
$
|
(0.31
|
)
|
|
Diluted
|
|
$
|
(0.33
|
)
|
|
|
|
|
|
$
|
(0.31
|
)
|
|
|
|
Three Months Ended March 31, 2020
|
|
|
Revised Consolidated Statement of Operations Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
Total revenues
|
|
|
86,495
|
|
|
|
328
|
|
|
|
86,823
|
|
|
Gross profit
|
|
|
57,765
|
|
|
|
328
|
|
|
|
58,093
|
|
|
Income from operations
|
|
|
12,006
|
|
|
|
328
|
|
|
|
12,334
|
|
|
Income before income taxes
|
|
|
5,777
|
|
|
|
328
|
|
|
|
6,105
|
|
|
Benefit from income taxes
|
|
|
(6,718
|
)
|
|
|
11
|
|
|
|
(6,707
|
)
|
|
Net income
|
|
$
|
12,495
|
|
|
$
|
317
|
|
|
$
|
12,812
|
|
26
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.34
|
|
|
|
|
|
|
$
|
0.35
|
|
|
Diluted
|
|
$
|
0.33
|
|
|
|
|
|
|
$
|
0.34
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
|
Revised Consolidated Statement of Operations Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
Total revenues
|
|
|
74,810
|
|
|
|
387
|
|
|
|
75,197
|
|
|
Gross profit
|
|
|
47,207
|
|
|
|
387
|
|
|
|
47,594
|
|
|
Loss from operations
|
|
|
(4,696
|
)
|
|
|
387
|
|
|
|
(4,309
|
)
|
|
Loss before income taxes
|
|
|
(30,650
|
)
|
|
|
387
|
|
|
|
(30,263
|
)
|
|
Benefit from income taxes
|
|
|
(2,469
|
)
|
|
|
258
|
|
|
|
(2,211
|
)
|
|
Net loss
|
|
$
|
(28,181
|
)
|
|
$
|
129
|
|
|
$
|
(28,052
|
)
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.77
|
)
|
|
|
|
|
|
$
|
(0.77
|
)
|
|
Diluted
|
|
$
|
(0.77
|
)
|
|
|
|
|
|
$
|
(0.77
|
)
|
|
|
|
Year Ended September 30, 2020
|
|
|
Revised Consolidated Statement of Operations Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
Total revenues
|
|
|
329,646
|
|
|
|
1,321
|
|
|
|
330,967
|
|
|
Gross profit
|
|
|
221,795
|
|
|
|
1,321
|
|
|
|
223,116
|
|
|
Income from operations
|
|
|
19,331
|
|
|
|
3,100
|
|
|
|
22,431
|
|
|
Loss before income taxes
|
|
|
(26,140
|
)
|
|
|
3,100
|
|
|
|
(23,040
|
)
|
|
Benefit from income taxes
|
|
|
(5,509
|
)
|
|
|
785
|
|
|
|
(4,724
|
)
|
|
Net loss
|
|
$
|
(20,631
|
)
|
|
$
|
2,315
|
|
|
$
|
(18,316
|
)
|
|
Net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.57
|
)
|
|
|
|
|
|
$
|
(0.50
|
)
|
|
Diluted
|
|
$
|
(0.57
|
)
|
|
|
|
|
|
$
|
(0.50
|
)
|
|
|
|
September 30, 2020
|
|
|
Revised Consolidated Balance Sheet Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
ASSETS
|
|
|
Total current assets
|
|
|
249,148
|
|
|
|
957
|
|
|
|
250,105
|
|
|
Total assets
|
|
$
|
1,687,445
|
|
|
$
|
172
|
|
|
$
|
1,687,617
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
Total current liabilities
|
|
|
200,774
|
|
|
|
(2,143
|
)
|
|
|
198,631
|
|
|
Total liabilities
|
|
|
729,689
|
|
|
|
(2,143
|
)
|
|
|
727,546
|
|
|
Total stockholders' equity
|
|
|
957,756
|
|
|
|
2,315
|
|
|
|
960,071
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
1,687,445
|
|
|
$
|
172
|
|
|
$
|
1,687,617
|
|
|
|
|
Three Months Ended December 31, 2020
|
|
|
Revised Condensed Consolidated Statement of Operations Amounts:
|
|
As Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
|
Total revenues
|
|
|
94,964
|
|
|
|
(1,321
|
)
|
|
|
93,643
|
|
|
Total cost of revenues
|
|
|
26,881
|
|
|
|
7
|
|
|
|
26,888
|
|
|
Gross profit
|
|
|
68,083
|
|
|
|
(1,328
|
)
|
|
|
66,755
|
|
|
Total operating expenses
|
|
|
47,811
|
|
|
|
1,400
|
|
|
|
49,211
|
|
|
Income from operations
|
|
|
20,272
|
|
|
|
(2,728
|
)
|
|
|
17,544
|
|
|
Income before income taxes
|
|
|
14,254
|
|
|
|
(2,728
|
)
|
|
|
11,526
|
|
|
Benefit from income taxes
|
|
|
(7,384
|
)
|
|
|
(2,031
|
)
|
|
|
(9,415
|
)
|
|
Net income
|
|
$
|
21,638
|
|
|
$
|
(697
|
)
|
|
$
|
20,941
|
|
27
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.58
|
|
|
|
|
|
|
$
|
0.56
|
|
|
Diluted
|
|
$
|
0.54
|
|
|
|
|
|
|
$
|
0.53
|
|
28