Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today
reported its second quarter fiscal year 2022 results for the
quarter ended March 31, 2022.
Results Summary
(1)
(in millions, except per share data)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
GAAP Revenue |
|
$86.3 |
|
$98.7 |
|
$180.7 |
|
$192.3 |
GAAP Gross Margin |
|
71.8% |
|
73.4% |
|
73.1% |
|
72.4% |
Non-GAAP Gross Margin |
|
74.7% |
|
77.0% |
|
76.2% |
|
76.0% |
GAAP Operating Margin |
|
7.3% |
|
17.6% |
|
16.2% |
|
18.1% |
Non-GAAP Operating Margin |
|
25.2% |
|
37.6% |
|
31.2% |
|
38.2% |
GAAP Net (Loss) Income |
|
($0.5) |
|
$11.2 |
|
$18.6 |
|
$32.1 |
Non-GAAP Net Income |
|
$13.6 |
|
$29.1 |
|
$39.0 |
|
$52.7 |
Adjusted EBITDA |
|
$24.0 |
|
$39.3 |
|
$60.9 |
|
$78.3 |
Adjusted EBITDA Margin |
|
27.9% |
|
39.9% |
|
33.7% |
|
40.7% |
GAAP Net (Loss) Income per
Share - diluted |
|
($0.01) |
|
$0.28 |
|
$0.47 |
|
$0.82 |
Non-GAAP Net Income per Share
- diluted |
|
$0.33 |
|
$0.69 |
|
$0.93 |
|
$1.25 |
|
(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. |
|
Stefan Ortmanns, Chief Executive Officer at Cerence, commented,
“We generated solid financial results fueled by deepened
relationships with long-term customers, new wins with innovative EV
makers, and expansion in newer areas like heavy trucking and
two-wheelers. Despite the headwinds facing the global automotive
industry, we continue to deliver on expectations as the world’s
leading automakers turn to Cerence as their innovation
partner.”
Ortmanns continued, “With a talented and tenured leadership team
firmly in place and a strong pipeline of opportunities for the
second half of the fiscal year, we believe we have the momentum to
drive long-term, sustainable growth. As we look to Cerence’s next
phase, we are advancing our strategic roadmap to deliver AI-powered
innovations that will transform the digital cabin experience and be
integral to the future of mobility.”
Cerence Key Performance Indicators
To help investors gain further insight into the Cerence business
and its performance, management provides a set of key performance
indicators that includes:
Key Performance Indicator¹ |
Q2FY22 |
Percent of worldwide auto
production with Cerence Technology (TTM): |
52% |
Average contract duration -
years (TTM): |
7.6 |
Repeatable software
contribution (TTM): |
79% |
Change in number of Cerence
connected cars shipped² (TTM over prior year TTM): |
(1%) |
Growth in billings per car
(TTM over prior year TTM) (excludes Legacy contract³): |
10% |
|
(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 decreased 2% over the same time period ended on
March 31, 2022(3) Legacy contract is a connected services contract
with Toyota acquired by Nuance through a 2013 acquisition. |
|
Third Quarter and Full Year
Fiscal 2022 Outlook
For the fiscal quarter ending June 30, 2022, revenue is expected
to be in the range of $90 million to $94 million. Adjusted EBITDA
is expected to be in the range of approximately $26 million to $30
million. The adjusted EBITDA guidance excludes acquisition-related
costs, amortization of acquired intangible assets, stock-based
compensation, and restructuring and other costs.
The full-year fiscal 2022 guidance provided by Cerence on
February 7, 2022, remains unchanged.
Additional details regarding guidance will be provided during
the earnings call.
Second Quarter Conference Call
The company will host a live conference call and webcast with
slides to discuss the results today at 8:30 a.m. Eastern Time/5:30
a.m. Pacific Time. Interested investors and analysts are invited to
dial into the conference call by using 844.467.7116 (domestic) or
+1.409.983.9838 (international) and entering the pass code 5990799.
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 May 17,
2022. The replay dial-in number is 1.855.859.2056 (domestic) or
+1.404.537.3406 (international) using pass code 5990799. 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 release regarding Cerence’s future
performance, results and financial condition, expected growth,
opportunities, 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 customers’ 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; the impact of the war
in Ukraine on our and our customers’ businesses; 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; disruptions arising from
transitions in management 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 six months ended March 31, 2022 and
2021, our management has either included or excluded the following
items in general categories, each of which is described below.
Adjusted EBITDA
Adjusted EBITDA is defined as net income attributable to Cerence
Inc. before net income (loss) attributable to income tax (benefit)
expense, other income (expense) items, net, depreciation and
amortization expense, and excluding acquisition-related costs,
amortization of acquired intangible assets, stock-based
compensation, and restructuring and other costs, net or impairment
charges related to fixed and intangible assets and gains or losses
on the sale of long-lived assets, if any. From time to time we may
exclude from Adjusted EBITDA the impact of events, gains, losses or
other charges (such as significant legal settlements) that affect
the period-to-period comparability of our operating performance.
Other income (expense) items, net include interest expense,
interest income, and other income (expense), net (as stated in our
Condensed Consolidated Statement of Operations). Our management and
Board of Directors use this financial measure to evaluate our
operating performance. It is also a significant performance measure
in our annual incentive compensation programs.
Restructuring and other costs, net.
Restructuring and other charges, net include restructuring
expenses as well as other charges that are unusual in nature, are
the result of unplanned events, and arise outside the ordinary
course of our business such as employee severance costs, costs for
consolidating duplication facilities, and separation costs directly
attributable to the Cerence business becoming a standalone public
company.
Acquisition-related costs, net.
In 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:
- 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.
- 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.
- 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:
- 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.
- 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 March 31,
2022, 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 YerganianSenior Vice President of Investor RelationsCerence
Inc.Tel: 617-987-4799Email: richard.yerganian@cerence.com
|
CERENCE
INC.Condensed Consolidated Statements of
Operations(in thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
46,308 |
|
|
$ |
54,371 |
|
|
$ |
93,158 |
|
|
$ |
100,785 |
|
Connected services |
|
|
19,326 |
|
|
|
27,736 |
|
|
|
47,485 |
|
|
|
53,666 |
|
Professional services |
|
|
20,646 |
|
|
|
16,555 |
|
|
|
40,063 |
|
|
|
37,854 |
|
Total revenues |
|
|
86,280 |
|
|
|
98,662 |
|
|
|
180,706 |
|
|
|
192,305 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
|
386 |
|
|
|
1,181 |
|
|
|
1,107 |
|
|
|
1,855 |
|
Connected services |
|
|
5,651 |
|
|
|
6,839 |
|
|
|
11,375 |
|
|
|
13,852 |
|
Professional services |
|
|
17,372 |
|
|
|
16,325 |
|
|
|
33,275 |
|
|
|
33,647 |
|
Amortization of intangible assets |
|
|
897 |
|
|
|
1,879 |
|
|
|
2,776 |
|
|
|
3,758 |
|
Total cost of revenues |
|
|
24,306 |
|
|
|
26,224 |
|
|
|
48,533 |
|
|
|
53,112 |
|
Gross profit |
|
|
61,974 |
|
|
|
72,438 |
|
|
|
132,173 |
|
|
|
139,193 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
29,976 |
|
|
|
28,864 |
|
|
|
55,768 |
|
|
|
52,995 |
|
Sales and marketing |
|
|
8,309 |
|
|
|
9,555 |
|
|
|
14,188 |
|
|
|
18,563 |
|
General and administrative |
|
|
13,800 |
|
|
|
12,956 |
|
|
|
21,327 |
|
|
|
25,390 |
|
Amortization of intangible assets |
|
|
3,135 |
|
|
|
3,183 |
|
|
|
6,289 |
|
|
|
6,341 |
|
Restructuring and other costs, net |
|
|
474 |
|
|
|
537 |
|
|
|
5,389 |
|
|
|
1,017 |
|
Total operating expenses |
|
|
55,694 |
|
|
|
55,095 |
|
|
|
102,961 |
|
|
|
104,306 |
|
Income from operations |
|
|
6,280 |
|
|
|
17,343 |
|
|
|
29,212 |
|
|
|
34,887 |
|
Interest income |
|
|
83 |
|
|
|
16 |
|
|
|
173 |
|
|
|
34 |
|
Interest expense |
|
|
(3,360 |
) |
|
|
(3,476 |
) |
|
|
(6,787 |
) |
|
|
(7,275 |
) |
Other income (expense),
net |
|
|
(34 |
) |
|
|
3,496 |
|
|
|
(286 |
) |
|
|
1,259 |
|
Income before income
taxes |
|
|
2,969 |
|
|
|
17,379 |
|
|
|
22,312 |
|
|
|
28,905 |
|
Provision for (benefit from)
income taxes |
|
|
3,445 |
|
|
|
6,216 |
|
|
|
3,744 |
|
|
|
(3,199 |
) |
Net (loss) income |
|
$ |
(476 |
) |
|
$ |
11,163 |
|
|
$ |
18,568 |
|
|
$ |
32,104 |
|
Net (loss) income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.01 |
) |
|
$ |
0.30 |
|
|
$ |
0.48 |
|
|
$ |
0.85 |
|
Diluted |
|
$ |
(0.01 |
) |
|
$ |
0.28 |
|
|
$ |
0.47 |
|
|
$ |
0.82 |
|
Weighted-average common share
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,189 |
|
|
|
37,743 |
|
|
|
39,013 |
|
|
|
37,583 |
|
Diluted |
|
|
39,189 |
|
|
|
39,177 |
|
|
|
39,586 |
|
|
|
43,730 |
|
CERENCE
INC.Condensed Consolidated Balance
Sheets(in thousands, except per share amounts) |
|
|
|
March 31, |
|
|
September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
111,819 |
|
|
|
128,428 |
|
Marketable securities |
|
|
29,810 |
|
|
|
30,435 |
|
Accounts receivable, net of allowances of $178 and $395 |
|
|
48,029 |
|
|
|
45,560 |
|
Deferred costs |
|
|
7,418 |
|
|
|
6,095 |
|
Prepaid expenses and other current assets |
|
|
68,924 |
|
|
|
76,530 |
|
Total current assets |
|
|
266,000 |
|
|
|
287,048 |
|
Long-term marketable securities |
|
|
4,457 |
|
|
|
7,339 |
|
Property and equipment, net |
|
|
37,184 |
|
|
|
31,505 |
|
Deferred costs |
|
|
26,511 |
|
|
|
31,702 |
|
Operating lease right of use assets |
|
|
18,654 |
|
|
|
14,901 |
|
Goodwill |
|
|
1,123,561 |
|
|
|
1,128,511 |
|
Intangible assets, net |
|
|
15,947 |
|
|
|
25,348 |
|
Deferred tax assets |
|
|
155,763 |
|
|
|
159,293 |
|
Other assets |
|
|
54,450 |
|
|
|
20,081 |
|
Total assets |
|
$ |
1,702,527 |
|
|
$ |
1,705,728 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
18,165 |
|
|
$ |
11,636 |
|
Deferred revenue |
|
|
78,895 |
|
|
|
78,394 |
|
Short-term operating lease liabilities |
|
|
5,844 |
|
|
|
4,562 |
|
Short-term debt |
|
|
7,813 |
|
|
|
6,250 |
|
Accrued expenses and other current liabilities |
|
|
45,768 |
|
|
|
64,467 |
|
Total current liabilities |
|
|
156,485 |
|
|
|
165,309 |
|
Long-term debt |
|
|
263,000 |
|
|
|
265,093 |
|
Deferred revenue, net of current portion |
|
|
182,823 |
|
|
|
198,343 |
|
Long-term operating lease liabilities |
|
|
14,749 |
|
|
|
12,216 |
|
Other liabilities |
|
|
29,284 |
|
|
|
32,822 |
|
Total liabilities |
|
|
646,341 |
|
|
|
673,783 |
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 560,000 shares authorized; 39,305
and 38,025 shares issued and outstanding, respectively |
|
|
393 |
|
|
|
381 |
|
Accumulated other comprehensive (loss) income |
|
|
(9,083 |
) |
|
|
1,634 |
|
Additional paid-in capital |
|
|
1,018,731 |
|
|
|
1,002,353 |
|
Retained earnings |
|
|
46,145 |
|
|
|
27,577 |
|
Total stockholders' equity |
|
|
1,056,186 |
|
|
|
1,031,945 |
|
Total liabilities and stockholders' equity |
|
$ |
1,702,527 |
|
|
$ |
1,705,728 |
|
CERENCE
INC.Condensed Consolidated Statements of Cash
Flows(in thousands) |
|
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
18,568 |
|
|
$ |
32,104 |
|
Adjustments to reconcile net
income to net cash provided by operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
13,574 |
|
|
|
14,947 |
|
Benefit from credit loss reserve |
|
|
(418 |
) |
|
|
(261 |
) |
Stock-based compensation |
|
|
16,767 |
|
|
|
27,469 |
|
Non-cash interest expense |
|
|
2,595 |
|
|
|
2,454 |
|
Deferred tax benefit |
|
|
(2,162 |
) |
|
|
(7,653 |
) |
Other |
|
|
2,504 |
|
|
|
(1,481 |
) |
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(3,557 |
) |
|
|
(8,206 |
) |
Prepaid expenses and other assets |
|
|
(36,354 |
) |
|
|
(7,608 |
) |
Deferred costs |
|
|
2,896 |
|
|
|
3,835 |
|
Accounts payable |
|
|
6,293 |
|
|
|
(4,129 |
) |
Accrued expenses and other liabilities |
|
|
(2,115 |
) |
|
|
(2,970 |
) |
Deferred revenue |
|
|
(11,848 |
) |
|
|
(21,492 |
) |
Net cash provided by operating
activities |
|
|
6,743 |
|
|
|
27,009 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(9,985 |
) |
|
|
(5,181 |
) |
Purchases of marketable securities |
|
|
(13,115 |
) |
|
|
(9,067 |
) |
Sale and maturities of marketable securities |
|
|
16,453 |
|
|
|
2,700 |
|
Payments for equity investments |
|
|
(584 |
) |
|
|
(2,563 |
) |
Other investing activities |
|
|
1,266 |
|
|
|
264 |
|
Net cash used in investing
activities |
|
|
(5,965 |
) |
|
|
(13,847 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Payments for long-term debt issuance costs |
|
|
- |
|
|
|
(520 |
) |
Principal payments of long-term debt |
|
|
(3,126 |
) |
|
|
(3,126 |
) |
Common stock repurchases for tax withholdings for net settlement of
equity awards |
|
|
(46,423 |
) |
|
|
(32,200 |
) |
Principal payment of lease liabilities arising from a finance
lease |
|
|
(246 |
) |
|
|
(238 |
) |
Proceeds from the issuance of common stock |
|
|
33,459 |
|
|
|
5,045 |
|
Net cash used in financing
activities |
|
|
(16,336 |
) |
|
|
(31,039 |
) |
Effects of exchange rate
changes on cash and cash equivalents |
|
|
(1,051 |
) |
|
|
1,356 |
|
Net change in cash and cash
equivalents |
|
|
(16,609 |
) |
|
|
(16,521 |
) |
Cash and cash equivalents at
beginning of period |
|
|
128,428 |
|
|
|
136,067 |
|
Cash and cash equivalents at
end of period |
|
$ |
111,819 |
|
|
$ |
119,546 |
|
CERENCE
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures(unaudited - in thousands) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
GAAP revenue |
|
$ |
86,280 |
|
|
$ |
98,662 |
|
|
$ |
180,706 |
|
|
$ |
192,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
61,974 |
|
|
$ |
72,438 |
|
|
$ |
132,173 |
|
|
$ |
139,193 |
|
Stock-based compensation |
|
|
1,570 |
|
|
|
1,645 |
|
|
|
2,662 |
|
|
|
3,237 |
|
Amortization of intangible assets |
|
|
897 |
|
|
|
1,879 |
|
|
|
2,776 |
|
|
|
3,758 |
|
Non-GAAP gross
profit |
|
$ |
64,441 |
|
|
$ |
75,962 |
|
|
$ |
137,611 |
|
|
$ |
146,188 |
|
GAAP gross
margin |
|
|
71.8 |
% |
|
|
73.4 |
% |
|
|
73.1 |
% |
|
|
72.4 |
% |
Non-GAAP gross
margin |
|
|
74.7 |
% |
|
|
77.0 |
% |
|
|
76.2 |
% |
|
|
76.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
6,280 |
|
|
$ |
17,343 |
|
|
$ |
29,212 |
|
|
$ |
34,887 |
|
Stock-based compensation* |
|
|
10,926 |
|
|
|
14,144 |
|
|
|
12,767 |
|
|
|
27,469 |
|
Amortization of intangible assets |
|
|
4,032 |
|
|
|
5,062 |
|
|
|
9,065 |
|
|
|
10,099 |
|
Restructuring and other costs, net* |
|
|
474 |
|
|
|
537 |
|
|
|
5,389 |
|
|
|
1,017 |
|
Non-GAAP operating
income |
|
$ |
21,712 |
|
|
$ |
37,086 |
|
|
$ |
56,433 |
|
|
$ |
73,472 |
|
GAAP operating
margin |
|
|
7.3 |
% |
|
|
17.6 |
% |
|
|
16.2 |
% |
|
|
18.1 |
% |
Non-GAAP operating
margin |
|
|
25.2 |
% |
|
|
37.6 |
% |
|
|
31.2 |
% |
|
|
38.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss)
income |
|
$ |
(476 |
) |
|
$ |
11,163 |
|
|
$ |
18,568 |
|
|
$ |
32,104 |
|
Stock-based compensation* |
|
|
10,926 |
|
|
|
14,144 |
|
|
|
12,767 |
|
|
|
27,469 |
|
Amortization of intangible assets |
|
|
4,032 |
|
|
|
5,062 |
|
|
|
9,065 |
|
|
|
10,099 |
|
Restructuring and other costs, net* |
|
|
474 |
|
|
|
537 |
|
|
|
5,389 |
|
|
|
1,017 |
|
Depreciation |
|
|
2,332 |
|
|
|
2,261 |
|
|
|
4,509 |
|
|
|
4,848 |
|
Total other income (expense), net |
|
|
(3,311 |
) |
|
|
36 |
|
|
|
(6,900 |
) |
|
|
(5,982 |
) |
Provision for (benefit from) income taxes |
|
|
3,445 |
|
|
|
6,216 |
|
|
|
3,744 |
|
|
|
(3,199 |
) |
Adjusted
EBITDA |
|
$ |
24,044 |
|
|
$ |
39,347 |
|
|
$ |
60,942 |
|
|
$ |
78,320 |
|
GAAP net income
margin |
|
|
-0.6 |
% |
|
|
11.3 |
% |
|
|
10.3 |
% |
|
|
16.7 |
% |
Adjusted EBITDA
margin |
|
|
27.9 |
% |
|
|
39.9 |
% |
|
|
33.7 |
% |
|
|
40.7 |
% |
* - $4.0 million
in stock-based compensation is included in Restructuring and other
costs, net |
CERENCE
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures (cont.)(unaudited - in
thousands, except per share data) |
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
March 31, |
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
GAAP net (loss) income |
|
$ |
(476 |
) |
|
$ |
11,163 |
|
|
$ |
18,568 |
|
|
$ |
32,104 |
|
Stock-based compensation* |
|
|
10,926 |
|
|
|
14,144 |
|
|
|
12,767 |
|
|
|
27,469 |
|
Amortization of intangible assets |
|
|
4,032 |
|
|
|
5,062 |
|
|
|
9,065 |
|
|
|
10,099 |
|
Restructuring and other costs, net* |
|
|
474 |
|
|
|
537 |
|
|
|
5,389 |
|
|
|
1,017 |
|
Non-cash interest expense |
|
|
1,294 |
|
|
|
1,224 |
|
|
|
2,595 |
|
|
|
2,454 |
|
Indemnification asset release |
|
|
- |
|
|
|
- |
|
|
|
1,302 |
|
|
|
- |
|
Adjustments to income tax expense |
|
|
(2,612 |
) |
|
|
(3,051 |
) |
|
|
(10,719 |
) |
|
|
(20,467 |
) |
Non-GAAP net
income |
|
$ |
13,638 |
|
|
$ |
29,079 |
|
|
$ |
38,967 |
|
|
$ |
52,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributed to common shareholders |
|
$ |
(476 |
) |
|
$ |
11,163 |
|
|
$ |
18,568 |
|
|
$ |
32,104 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,614 |
|
Net (loss) income attributed to common shareholders - diluted |
|
$ |
(476 |
) |
|
$ |
11,163 |
|
|
$ |
18,568 |
|
|
$ |
35,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
13,638 |
|
|
$ |
29,079 |
|
|
$ |
38,967 |
|
|
$ |
52,676 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
997 |
|
|
|
978 |
|
|
|
2,016 |
|
|
|
1,977 |
|
Net income attributed to common shareholders - diluted |
|
$ |
14,635 |
|
|
$ |
30,057 |
|
|
$ |
40,983 |
|
|
$ |
54,653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic |
|
|
39,189 |
|
|
|
37,743 |
|
|
|
39,013 |
|
|
|
37,583 |
|
Adjustment for diluted shares |
|
|
- |
|
|
|
1,434 |
|
|
|
573 |
|
|
|
6,147 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,189 |
|
|
|
39,177 |
|
|
|
39,586 |
|
|
|
43,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
39,189 |
|
|
|
37,743 |
|
|
|
39,013 |
|
|
|
37,583 |
|
Adjustment for diluted shares |
|
|
4,969 |
|
|
|
6,111 |
|
|
|
5,250 |
|
|
|
6,147 |
|
Weighted-average common shares outstanding - diluted |
|
|
44,158 |
|
|
|
43,854 |
|
|
|
44,263 |
|
|
|
43,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss) income per share - diluted |
|
$ |
(0.01 |
) |
|
$ |
0.28 |
|
|
$ |
0.47 |
|
|
$ |
0.82 |
|
Non-GAAP net income per share - diluted |
|
$ |
0.33 |
|
|
$ |
0.69 |
|
|
$ |
0.93 |
|
|
$ |
1.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net cash provided
by operating activities |
|
$ |
1,598 |
|
|
$ |
16,200 |
|
|
$ |
6,743 |
|
|
$ |
27,009 |
|
Capital expenditures |
|
|
(5,575 |
) |
|
|
(2,812 |
) |
|
|
(9,985 |
) |
|
|
(5,181 |
) |
Free Cash
Flow |
|
$ |
(3,977 |
) |
|
$ |
13,388 |
|
|
$ |
(3,242 |
) |
|
$ |
21,828 |
|
* - $4.0 million
in stock-based compensation is included in Restructuring and other
costs, net |
CERENCE
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures (cont.)(unaudited - in
thousands) |
|
|
|
Q2FY22 |
|
|
Q1FY22 |
|
|
Q4FY21 |
|
|
Q3FY21 |
|
GAAP revenues |
|
$ |
86,280 |
|
|
$ |
94,426 |
|
|
$ |
98,076 |
|
|
$ |
96,801 |
|
Less: Professional services
revenue |
|
|
20,646 |
|
|
|
19,417 |
|
|
|
21,073 |
|
|
|
16,538 |
|
Non-GAAP Repeatable
revenues |
|
$ |
65,634 |
|
|
$ |
75,009 |
|
|
$ |
77,003 |
|
|
$ |
80,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
TTM |
|
$ |
375,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Professional services
revenue TTM |
|
|
77,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Repeatable
revenues TTM |
|
$ |
297,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repeatable software
contribution |
|
|
79 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures (cont.)(unaudited - in
thousands) |
|
|
|
Q3 2022 |
|
|
FY2022 |
|
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP revenue |
|
$ |
90,000 |
|
|
$ |
94,000 |
|
|
$ |
365,000 |
|
|
$ |
385,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
66,300 |
|
|
$ |
70,300 |
|
|
$ |
267,900 |
|
|
$ |
287,900 |
|
Stock-based compensation |
|
|
1,400 |
|
|
|
1,400 |
|
|
|
4,700 |
|
|
|
4,700 |
|
Amortization of intangible assets |
|
|
100 |
|
|
|
100 |
|
|
|
3,000 |
|
|
|
3,000 |
|
Non-GAAP gross
profit |
|
$ |
67,800 |
|
|
$ |
71,800 |
|
|
$ |
275,600 |
|
|
$ |
295,600 |
|
GAAP gross
margin |
|
|
74 |
% |
|
|
75 |
% |
|
|
73 |
% |
|
|
75 |
% |
Non-GAAP gross
margin |
|
|
75 |
% |
|
|
76 |
% |
|
|
76 |
% |
|
|
77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
13,300 |
|
|
$ |
17,300 |
|
|
$ |
59,300 |
|
|
$ |
79,300 |
|
Stock-based compensation |
|
|
7,100 |
|
|
|
7,100 |
|
|
|
28,400 |
|
|
|
28,400 |
|
Amortization of intangible assets |
|
|
3,000 |
|
|
|
3,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs, net |
|
|
400 |
|
|
|
400 |
|
|
|
6,300 |
|
|
|
6,300 |
|
Non-GAAP operating
income |
|
$ |
23,800 |
|
|
$ |
27,800 |
|
|
$ |
108,700 |
|
|
$ |
128,700 |
|
GAAP operating
margin |
|
|
15 |
% |
|
|
18 |
% |
|
|
16 |
% |
|
|
21 |
% |
Non-GAAP operating
margin |
|
|
26 |
% |
|
|
30 |
% |
|
|
30 |
% |
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income |
|
$ |
6,200 |
|
|
$ |
8,800 |
|
|
$ |
34,400 |
|
|
$ |
49,200 |
|
Stock-based compensation |
|
|
7,100 |
|
|
|
7,100 |
|
|
|
28,400 |
|
|
|
28,400 |
|
Amortization of intangible assets |
|
|
3,000 |
|
|
|
3,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs, net |
|
|
400 |
|
|
|
400 |
|
|
|
6,300 |
|
|
|
6,300 |
|
Depreciation |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
10,000 |
|
|
|
10,000 |
|
Total other income (expense), net |
|
|
(3,400 |
) |
|
|
(3,400 |
) |
|
|
(13,500 |
) |
|
|
(13,500 |
) |
Provision for income taxes |
|
|
3,700 |
|
|
|
5,100 |
|
|
|
11,400 |
|
|
|
16,600 |
|
Adjusted
EBITDA |
|
$ |
26,300 |
|
|
$ |
30,300 |
|
|
$ |
118,700 |
|
|
$ |
138,700 |
|
GAAP net income
margin |
|
|
7 |
% |
|
|
9 |
% |
|
|
9 |
% |
|
|
13 |
% |
Adjusted EBITDA
margin |
|
|
29 |
% |
|
|
32 |
% |
|
|
33 |
% |
|
|
36 |
% |
CERENCE
INC.Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures (cont.)(unaudited - in
thousands, except per share data) |
|
|
|
Q3 2022 |
|
|
FY2022 |
|
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP net income |
|
$ |
6,200 |
|
|
$ |
8,800 |
|
|
$ |
34,400 |
|
|
$ |
49,200 |
|
Stock-based compensation |
|
|
7,100 |
|
|
|
7,100 |
|
|
|
28,400 |
|
|
|
28,400 |
|
Amortization of intangibles |
|
|
3,000 |
|
|
|
3,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs, net |
|
|
400 |
|
|
|
400 |
|
|
|
6,300 |
|
|
|
6,300 |
|
Non-cash interest expense |
|
|
1,300 |
|
|
|
1,300 |
|
|
|
5,300 |
|
|
|
5,300 |
|
Indemnification asset release |
|
|
- |
|
|
|
- |
|
|
|
1,300 |
|
|
|
1,300 |
|
Adjustments to income tax expense |
|
|
(1,200 |
) |
|
|
(700 |
) |
|
|
(14,400 |
) |
|
|
(13,400 |
) |
Non-GAAP net
income |
|
$ |
16,800 |
|
|
$ |
19,900 |
|
|
$ |
76,000 |
|
|
$ |
91,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
6,200 |
|
|
$ |
8,800 |
|
|
$ |
34,400 |
|
|
$ |
49,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
16,800 |
|
|
$ |
19,900 |
|
|
$ |
76,000 |
|
|
$ |
91,800 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
1,000 |
|
|
|
1,000 |
|
|
|
4,000 |
|
|
|
4,000 |
|
Net income attributed to common shareholders - diluted |
|
$ |
17,800 |
|
|
$ |
20,900 |
|
|
$ |
80,000 |
|
|
$ |
95,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic |
|
|
39,300 |
|
|
|
39,300 |
|
|
|
39,100 |
|
|
|
39,100 |
|
Adjustment for diluted shares |
|
|
300 |
|
|
|
300 |
|
|
|
700 |
|
|
|
700 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,600 |
|
|
|
39,600 |
|
|
|
39,800 |
|
|
|
39,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
39,300 |
|
|
|
39,300 |
|
|
|
39,100 |
|
|
|
39,100 |
|
Adjustment for diluted shares |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
5,300 |
|
|
|
5,300 |
|
Weighted-average common shares outstanding - diluted |
|
|
44,300 |
|
|
|
44,300 |
|
|
|
44,400 |
|
|
|
44,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income per share - diluted |
|
$ |
0.16 |
|
|
$ |
0.22 |
|
|
$ |
0.86 |
|
|
$ |
1.24 |
|
Non-GAAP net income per share - diluted |
|
$ |
0.40 |
|
|
$ |
0.47 |
|
|
$ |
1.80 |
|
|
$ |
2.16 |
|
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