Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today
reported its third quarter fiscal year 2022 results for the quarter
ended June 30, 2022.
Results Summary
(1)(in millions, except per share data)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
GAAP Revenue |
|
$ |
89.0 |
|
|
$ |
96.8 |
|
|
$ |
269.7 |
|
|
$ |
289.1 |
|
GAAP Gross Margin |
|
|
72.8 |
% |
|
|
75.4 |
% |
|
|
73.0 |
% |
|
|
73.4 |
% |
Non-GAAP Gross Margin |
|
|
73.7 |
% |
|
|
79.1 |
% |
|
|
75.3 |
% |
|
|
77.0 |
% |
GAAP Operating Margin |
|
|
17.7 |
% |
|
|
15.4 |
% |
|
|
16.7 |
% |
|
|
17.2 |
% |
Non-GAAP Operating Margin |
|
|
29.4 |
% |
|
|
37.7 |
% |
|
|
30.6 |
% |
|
|
38.0 |
% |
GAAP Net (Loss) Income
(2) |
|
$ |
(99.3 |
) |
|
$ |
5.8 |
|
|
$ |
(80.7 |
) |
|
$ |
37.9 |
|
Non-GAAP Net Income |
|
$ |
17.0 |
|
|
$ |
26.1 |
|
|
$ |
55.9 |
|
|
$ |
78.8 |
|
Adjusted EBITDA |
|
$ |
28.5 |
|
|
$ |
38.7 |
|
|
$ |
89.4 |
|
|
$ |
117.1 |
|
Adjusted EBITDA Margin |
|
|
32.0 |
% |
|
|
40.0 |
% |
|
|
33.2 |
% |
|
|
40.5 |
% |
GAAP Net (Loss) Income per
Share – diluted |
|
$ |
(2.53 |
) |
|
$ |
0.15 |
|
|
$ |
(2.06 |
) |
|
$ |
0.97 |
|
Non-GAAP Net Income per Share
– diluted |
|
$ |
0.43 |
|
|
$ |
0.62 |
|
|
$ |
1.34 |
|
|
$ |
1.87 |
|
(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. |
(2) |
|
During the third quarter of
fiscal 2022, we established a valuation allowance of $107.6 million
against our deferred tax assets in the Netherlands, which consist
of tax amortizable intellectual property and net operating loss
carryforwards. This provision is a non-cash event. |
Stefan Ortmanns, Chief Executive Officer at
Cerence, commented, “Our third quarter brought meaningful and
exciting progress across our business, from celebrating 43 customer
global SOPs and introducing our new Cerence Cloud services to
delivering record professional services revenue and securing a
strategic win-back from Big Tech. Notwithstanding external
headwinds, we are invigorated for the future and confident in our
direction.
Ortmanns continued, “In that vein, in order to
enhance predictability and visibility into our future revenue, we
have decided to sign no fixed contracts in our fourth quarter and
apply an approach in the future to keep the annual contribution of
fixed contracts within the historical range of approximately $40
million per year. We are aware of the short-term impact of this
decision but stand firm in our belief that, in the long run, this
will return the business to more predictable, long-term growth that
is consistent with our solid underlying results.”
“Overall, we’re confident in our ability to make
the type of decisions that will set us up for success in the coming
quarters and years. We’re proud to continue to support our
automaker partners as they build the next generation of connected
in-vehicle experiences. And, with a strong innovation pipeline in
place, we are confident in Cerence’s integral role for the digital
cabin of the future,” Ortmanns concluded.
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 |
|
Q3FY22 |
Percent of worldwide auto production with Cerence Technology
(TTM): |
|
51% |
Average contract duration -
years (TTM): |
|
7.7 |
Repeatable software
contribution (TTM): |
|
77% |
Change in number of Cerence
connected cars shipped2 (TTM over prior year TTM): |
|
(19%) |
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 8% over the same time period ended on
June 30, 2022. |
(3) |
|
Legacy contract is a connected
services contract with Toyota acquired by Nuance through a 2013
acquisition. |
Fourth Quarter and Full Year
Fiscal 2022 Outlook
As discussed last quarter, the Company has been
continuing to assess the right balance of fixed contracts for the
business as part of the long-term planning process. In order to
further enhance predictability and visibility into future revenue,
after Q3, the Company decided not to book any fixed contracts in
the fourth quarter. For future fiscal years, starting in FY23, the
company is committed to managing the annual contribution of fixed
contracts to stay at the historical level of approximately $40
million per year.
The near-term impact of this decision is
materially adverse to the company’s financial performance but the
Company believes that in the long run this will return the business
to predictable, long-term growth that is more consistent with our
underlying performance. This shift is also expected to improve the
Company’s focus on long-term margins and returns while capitalizing
on strong demand for Cerence products. In addition to no
contribution from fixed contracts in the quarter other factors
included in the fourth quarter guidance are uncertainties around
non-auto licensing agreements and currency fluctuations.
The Company is convinced the reduction in fixed
contracts best serves the long-term interests of the company as
this will enhance visibility into the strong core business and will
demonstrate more consistent underlying results. Further, the
Company would expect these effects to be in fiscal year 2023
allowing for more predictability in revenue in 2024 and beyond.
For the fiscal quarter ending September 30,
2022, revenue is expected to be in the range of $52 million to $58
million. Adjusted EBITDA is expected to be in the range of
approximately ($11) million to ($5) million.
For the full fiscal year ending September 30,
2022, revenue is now expected to be in the range of $322 million to
$328 million. Adjusted EBITDA is expected to be in the range of
approximately $79 million to $85 million.
The adjusted EBITDA guidance excludes
acquisition-related costs, amortization of acquired intangible
assets, stock-based compensation, and restructuring and other
costs.
Additional details regarding guidance will be
provided during the earnings call.
Third 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 the
following link: Register Here
Webcast access will also be available on the
Investor Information section of the company’s website at
https://www.cerence.com/investors/events-and-resources.
A replay of the webcast can be accessed by
visiting 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, our strategy
regarding fixed contracts and its impact on financial results,
demand for Cerence products, and innovation and new product
offerings, 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;
the impact on our business of the transition to a lower level of
fixed contracts, including the failure to achieve such a
transition; 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 nine months ended June 30, 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:
(i) |
|
Transition and integration costs. Transition and integration costs
include retention payments, transitional employee costs, and
earn-out payments treated as compensation expense, as well as the
costs of integration-related activities, including services
provided by third-parties. |
|
|
|
(ii) |
|
Professional service fees and expenses. Professional service fees
and expenses include financial advisory, legal, accounting and
other outside services incurred in connection with acquisition
activities, and disputes and regulatory matters related to acquired
entities. |
|
|
|
(iii) |
|
Acquisition-related adjustments. Acquisition-related adjustments
include adjustments to acquisition-related items that are required
to be marked to fair value each reporting period, such as
contingent consideration, and other items related to acquisitions
for which the measurement period has ended, such as gains or losses
on settlements of pre-acquisition contingencies. |
Amortization of acquired intangible assets.
We exclude the amortization of acquired
intangible assets from non-GAAP expense and income measures. These
amounts are inconsistent in amount and frequency and are
significantly impacted by the timing and size of acquisitions.
Providing a supplemental measure which excludes these charges
allows management and investors to evaluate results “as-if” the
acquired intangible assets had been developed internally rather
than acquired and, therefore, provides a supplemental measure of
performance in which our acquired intellectual property is treated
in a comparable manner to our internally developed intellectual
property. Although we exclude amortization of acquired intangible
assets from our non-GAAP expenses, we believe that it is important
for investors to understand that such intangible assets contribute
to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Future acquisitions
may result in the amortization of additional intangible assets.
Non-cash expenses.
We provide non-GAAP information relative to the
following non-cash expenses: (i) stock-based compensation; and (ii)
non-cash interest. These items are further discussed as
follows:
i) |
|
Stock-based compensation. Because of varying valuation
methodologies, subjective assumptions and the variety of award
types, we exclude stock-based compensation from our operating
results. We evaluate performance both with and without these
measures because compensation expense related to stock-based
compensation is typically non-cash and awards granted are
influenced by the Company’s stock price and other factors such as
volatility that are beyond our control. The expense related to
stock-based awards is generally not controllable in the short-term
and can vary significantly based on the timing, size and nature of
awards granted. As such, we do not include such charges in
operating plans. Stock-based compensation will continue in future
periods. |
|
|
|
ii) |
|
Non-cash interest. We exclude non-cash interest because we believe
that excluding this expense provides management, as well as other
users of the financial statements, with a valuable perspective on
the cash-based performance and health of the business, including
the current near-term projected liquidity. Non-cash interest
expense will continue in future periods. |
Other expenses.
We exclude certain other expenses that result
from unplanned events outside the ordinary course of continuing
operations, in order to measure operating performance and current
and future liquidity both with and without these expenses. By
providing this information, we believe management and the users of
the financial statements are better able to understand the
financial results of what we consider to be our organic, continuing
operations. Included in these expenses are items such as other
charges (credits), net, losses from extinguishment of debt, and
changes in indemnification assets corresponding with the release of
pre-spin liabilities for uncertain tax positions.
Adjustments to income tax provision.
Adjustments to our GAAP income tax provision to
arrive at non-GAAP net income is determined based on our non-GAAP
pre-tax income. Additionally, as our non-GAAP profitability is
higher based on the non-GAAP adjustments, we adjust the GAAP tax
provision to remove valuation allowances and related effects based
on the higher level of reported non-GAAP profitability. We also
exclude from our non-GAAP tax provision certain discrete tax items
as they occur.
Bookings.
Bookings is defined as the amount of revenue we
expect to earn from an agreement with our customers for products
and services. To count as a booking, we expect there to be
persuasive evidence of an arrangement, which may be evidenced by a
legally binding document or documents, and that the collectability
of the amounts payable under the arrangement are reasonably
assured. The revenue we may actually recognize from our estimated
bookings is subject to multiple factors, including but not limited
to the timing of satisfying performance obligations, potential
terminations, or changes in the scope of programs utilizing our
technology and currency fluctuations. There is no comparable GAAP
financial measure.
Key Performance Indicators
We believe that providing key performance
indicators (“KPIs”), allows investors to gain insight into the way
management views the performance of the business. We further
believe that providing KPIs allows investors to better understand
information used by management to evaluate and measure such
performance. KPIs should not be considered superior to, or a
substitute for, operating results prepared in accordance with GAAP.
In assessing the performance of the business during the three
months ended June 30, 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 vehicles, 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 450 million cars shipped with Cerence
technology. Whether it’s connected cars, autonomous driving,
e-vehicles, or two-wheelers, Cerence is mapping the road ahead. For
more information, visit www.cerence.com.
Contact InformationRich 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 |
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
46,452 |
|
|
$ |
49,980 |
|
|
$ |
139,610 |
|
|
$ |
150,765 |
|
Connected services |
|
|
19,990 |
|
|
|
30,283 |
|
|
|
67,475 |
|
|
|
83,949 |
|
Professional services |
|
|
22,599 |
|
|
|
16,538 |
|
|
|
62,662 |
|
|
|
54,392 |
|
Total revenues |
|
|
89,041 |
|
|
|
96,801 |
|
|
|
269,747 |
|
|
|
289,106 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
|
585 |
|
|
|
863 |
|
|
|
1,692 |
|
|
|
2,718 |
|
Connected services |
|
|
5,391 |
|
|
|
6,108 |
|
|
|
16,766 |
|
|
|
19,960 |
|
Professional services |
|
|
18,173 |
|
|
|
14,985 |
|
|
|
51,448 |
|
|
|
48,632 |
|
Amortization of intangible assets |
|
|
103 |
|
|
|
1,879 |
|
|
|
2,879 |
|
|
|
5,637 |
|
Total cost of revenues |
|
|
24,252 |
|
|
|
23,835 |
|
|
|
72,785 |
|
|
|
76,947 |
|
Gross profit |
|
|
64,789 |
|
|
|
72,966 |
|
|
|
196,962 |
|
|
|
212,159 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
26,040 |
|
|
|
30,370 |
|
|
|
81,808 |
|
|
|
83,365 |
|
Sales and marketing |
|
|
8,299 |
|
|
|
9,534 |
|
|
|
22,487 |
|
|
|
28,097 |
|
General and administrative |
|
|
10,614 |
|
|
|
13,173 |
|
|
|
31,941 |
|
|
|
38,563 |
|
Amortization of intangible assets |
|
|
2,862 |
|
|
|
3,180 |
|
|
|
9,151 |
|
|
|
9,521 |
|
Restructuring and other costs, net |
|
|
1,197 |
|
|
|
1,760 |
|
|
|
6,586 |
|
|
|
2,777 |
|
Total operating expenses |
|
|
49,012 |
|
|
|
58,017 |
|
|
|
151,973 |
|
|
|
162,323 |
|
Income from operations |
|
|
15,777 |
|
|
|
14,949 |
|
|
|
44,989 |
|
|
|
49,836 |
|
Interest income |
|
|
243 |
|
|
|
34 |
|
|
|
416 |
|
|
|
68 |
|
Interest expense |
|
|
(3,815 |
) |
|
|
(3,294 |
) |
|
|
(10,602 |
) |
|
|
(10,569 |
) |
Other (expense) income,
net |
|
|
(478 |
) |
|
|
173 |
|
|
|
(764 |
) |
|
|
1,432 |
|
Income before income
taxes |
|
|
11,727 |
|
|
|
11,862 |
|
|
|
34,039 |
|
|
|
40,767 |
|
Provision for income
taxes |
|
|
110,994 |
|
|
|
6,064 |
|
|
|
114,738 |
|
|
|
2,865 |
|
Net (loss) income |
|
$ |
(99,267 |
) |
|
$ |
5,798 |
|
|
$ |
(80,699 |
) |
|
$ |
37,902 |
|
Net (loss) income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.53 |
) |
|
$ |
0.15 |
|
|
$ |
(2.06 |
) |
|
$ |
1.01 |
|
Diluted |
|
$ |
(2.53 |
) |
|
$ |
0.15 |
|
|
$ |
(2.06 |
) |
|
$ |
0.97 |
|
Weighted-average common share
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
39,313 |
|
|
|
37,825 |
|
|
|
39,113 |
|
|
|
37,664 |
|
Diluted |
|
|
39,313 |
|
|
|
39,296 |
|
|
|
39,113 |
|
|
|
39,135 |
|
|
CERENCE INC.Condensed Consolidated
Balance Sheets(in thousands, except per share amounts)
|
|
June 30, |
|
|
September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
108,454 |
|
|
|
128,428 |
|
Marketable securities |
|
|
18,890 |
|
|
|
30,435 |
|
Accounts receivable, net of allowances of $167 and $395 |
|
|
62,698 |
|
|
|
45,560 |
|
Deferred costs |
|
|
7,422 |
|
|
|
6,095 |
|
Prepaid expenses and other current assets |
|
|
57,689 |
|
|
|
76,530 |
|
Total current assets |
|
|
255,153 |
|
|
|
287,048 |
|
Long-term marketable securities |
|
|
8,784 |
|
|
|
7,339 |
|
Property and equipment, net |
|
|
38,027 |
|
|
|
31,505 |
|
Deferred costs |
|
|
24,308 |
|
|
|
31,702 |
|
Operating lease right of use assets |
|
|
16,641 |
|
|
|
14,901 |
|
Goodwill |
|
|
1,114,556 |
|
|
|
1,128,511 |
|
Intangible assets, net |
|
|
12,546 |
|
|
|
25,348 |
|
Deferred tax assets |
|
|
49,780 |
|
|
|
159,293 |
|
Other assets |
|
|
57,042 |
|
|
|
20,081 |
|
Total assets |
|
$ |
1,576,837 |
|
|
$ |
1,705,728 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
15,370 |
|
|
$ |
11,636 |
|
Deferred revenue |
|
|
75,166 |
|
|
|
78,394 |
|
Short-term operating lease liabilities |
|
|
5,486 |
|
|
|
4,562 |
|
Short-term debt |
|
|
9,375 |
|
|
|
6,250 |
|
Accrued expenses and other current liabilities |
|
|
48,990 |
|
|
|
64,467 |
|
Total current liabilities |
|
|
154,387 |
|
|
|
165,309 |
|
Long-term debt |
|
|
261,202 |
|
|
|
265,093 |
|
Deferred revenue, net of current portion |
|
|
173,519 |
|
|
|
198,343 |
|
Long-term operating lease liabilities |
|
|
13,021 |
|
|
|
12,216 |
|
Other liabilities |
|
|
24,596 |
|
|
|
32,822 |
|
Total liabilities |
|
|
626,725 |
|
|
|
673,783 |
|
Stockholders' Equity: |
|
|
|
|
|
|
Common stock, $0.01 par value, 560,000 shares authorized; 39,316
and 38,025 shares issued and outstanding, respectively |
|
|
393 |
|
|
|
381 |
|
Accumulated other comprehensive (loss) income |
|
|
(21,055 |
) |
|
|
1,634 |
|
Additional paid-in capital |
|
|
1,023,896 |
|
|
|
1,002,353 |
|
(Accumulated deficit) Retained earnings |
|
|
(53,122 |
) |
|
|
27,577 |
|
Total stockholders' equity |
|
|
950,112 |
|
|
|
1,031,945 |
|
Total liabilities and stockholders' equity |
|
$ |
1,576,837 |
|
|
$ |
1,705,728 |
|
|
CERENCE INC.Condensed Consolidated
Statements of Cash Flows(in
thousands)
|
|
Nine Months Ended |
|
|
|
June 30, |
|
|
|
2022 |
|
|
2021 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(80,699 |
) |
|
$ |
37,902 |
|
Adjustments to reconcile net
(loss) income to net cash provided by operations: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
18,853 |
|
|
|
22,276 |
|
Benefit from credit loss reserve |
|
|
(414 |
) |
|
|
(412 |
) |
Stock-based compensation |
|
|
23,020 |
|
|
|
42,179 |
|
Non-cash interest expense |
|
|
3,922 |
|
|
|
3,730 |
|
Deferred tax provision (benefit) |
|
|
103,394 |
|
|
|
(3,812 |
) |
Other |
|
|
5,137 |
|
|
|
(1,590 |
) |
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
Accounts receivable |
|
|
(21,626 |
) |
|
|
(1,698 |
) |
Prepaid expenses and other assets |
|
|
(34,621 |
) |
|
|
(17,065 |
) |
Deferred costs |
|
|
3,753 |
|
|
|
5,078 |
|
Accounts payable |
|
|
4,638 |
|
|
|
2,906 |
|
Accrued expenses and other liabilities |
|
|
(2,698 |
) |
|
|
(4,026 |
) |
Deferred revenue |
|
|
(19,844 |
) |
|
|
(34,400 |
) |
Net cash provided by operating
activities |
|
|
2,815 |
|
|
|
51,068 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
Capital expenditures |
|
|
(14,418 |
) |
|
|
(8,055 |
) |
Purchases of marketable securities |
|
|
(21,153 |
) |
|
|
(33,800 |
) |
Sale and maturities of marketable securities |
|
|
31,003 |
|
|
|
9,000 |
|
Payments for equity investments |
|
|
(584 |
) |
|
|
(2,563 |
) |
Other investing activities |
|
|
1,735 |
|
|
|
702 |
|
Net cash used in investing
activities |
|
|
(3,417 |
) |
|
|
(34,716 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
Payments for long-term debt issuance costs |
|
|
- |
|
|
|
(520 |
) |
Principal payments of long-term debt |
|
|
(4,689 |
) |
|
|
(4,689 |
) |
Common stock repurchases for tax withholdings for net settlement of
equity awards |
|
|
(47,960 |
) |
|
|
(34,089 |
) |
Principal payment of lease liabilities arising from a finance
lease |
|
|
(289 |
) |
|
|
(326 |
) |
Proceeds from the issuance of common stock |
|
|
34,943 |
|
|
|
6,682 |
|
Net cash used in financing
activities |
|
|
(17,995 |
) |
|
|
(32,942 |
) |
Effects of exchange rate
changes on cash and cash equivalents |
|
|
(1,377 |
) |
|
|
1,363 |
|
Net change in cash and cash
equivalents |
|
|
(19,974 |
) |
|
|
(15,227 |
) |
Cash and cash equivalents at
beginning of period |
|
|
128,428 |
|
|
|
136,067 |
|
Cash and cash equivalents at
end of period |
|
$ |
108,454 |
|
|
$ |
120,840 |
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial
Measures(unaudited - in thousands)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
GAAP revenue |
|
$ |
89,041 |
|
|
$ |
96,801 |
|
|
$ |
269,747 |
|
|
$ |
289,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
64,789 |
|
|
$ |
72,966 |
|
|
$ |
196,962 |
|
|
$ |
212,159 |
|
Stock-based compensation |
|
|
722 |
|
|
|
1,708 |
|
|
|
3,384 |
|
|
|
4,945 |
|
Amortization of intangible assets |
|
|
103 |
|
|
|
1,879 |
|
|
|
2,879 |
|
|
|
5,637 |
|
Non-GAAP gross
profit |
|
$ |
65,614 |
|
|
$ |
76,553 |
|
|
$ |
203,225 |
|
|
$ |
222,741 |
|
GAAP gross
margin |
|
|
72.8 |
% |
|
|
75.4 |
% |
|
|
73.0 |
% |
|
|
73.4 |
% |
Non-GAAP gross
margin |
|
|
73.7 |
% |
|
|
79.1 |
% |
|
|
75.3 |
% |
|
|
77.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
15,777 |
|
|
$ |
14,949 |
|
|
$ |
44,989 |
|
|
$ |
49,836 |
|
Stock-based compensation* |
|
|
6,253 |
|
|
|
14,710 |
|
|
|
19,020 |
|
|
|
42,179 |
|
Amortization of intangible assets |
|
|
2,965 |
|
|
|
5,059 |
|
|
|
12,030 |
|
|
|
15,158 |
|
Restructuring and other costs, net* |
|
|
1,197 |
|
|
|
1,760 |
|
|
|
6,586 |
|
|
|
2,777 |
|
Non-GAAP operating
income |
|
$ |
26,192 |
|
|
$ |
36,478 |
|
|
$ |
82,625 |
|
|
$ |
109,950 |
|
GAAP operating
margin |
|
|
17.7 |
% |
|
|
15.4 |
% |
|
|
16.7 |
% |
|
|
17.2 |
% |
Non-GAAP operating
margin |
|
|
29.4 |
% |
|
|
37.7 |
% |
|
|
30.6 |
% |
|
|
38.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss)
income |
|
$ |
(99,267 |
) |
|
$ |
5,798 |
|
|
$ |
(80,699 |
) |
|
$ |
37,902 |
|
Stock-based compensation* |
|
|
6,253 |
|
|
|
14,710 |
|
|
|
19,020 |
|
|
|
42,179 |
|
Amortization of intangible assets |
|
|
2,965 |
|
|
|
5,059 |
|
|
|
12,030 |
|
|
|
15,158 |
|
Restructuring and other costs, net* |
|
|
1,197 |
|
|
|
1,760 |
|
|
|
6,586 |
|
|
|
2,777 |
|
Depreciation |
|
|
2,314 |
|
|
|
2,270 |
|
|
|
6,823 |
|
|
|
7,118 |
|
Total other income (expense), net |
|
|
(4,050 |
) |
|
|
(3,087 |
) |
|
|
(10,950 |
) |
|
|
(9,069 |
) |
Provision for income taxes |
|
|
110,994 |
|
|
|
6,064 |
|
|
|
114,738 |
|
|
|
2,865 |
|
Adjusted
EBITDA |
|
$ |
28,506 |
|
|
$ |
38,748 |
|
|
$ |
89,448 |
|
|
$ |
117,068 |
|
GAAP net (loss) income
margin |
|
|
-111.5 |
% |
|
|
6.0 |
% |
|
|
-29.9 |
% |
|
|
13.1 |
% |
Adjusted EBITDA
margin |
|
|
32.0 |
% |
|
|
40.0 |
% |
|
|
33.2 |
% |
|
|
40.5 |
% |
* - $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 |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
GAAP net (loss) income |
|
$ |
(99,267 |
) |
|
$ |
5,798 |
|
|
$ |
(80,699 |
) |
|
$ |
37,902 |
|
Stock-based compensation* |
|
|
6,253 |
|
|
|
14,710 |
|
|
|
19,020 |
|
|
|
42,179 |
|
Amortization of intangible assets |
|
|
2,965 |
|
|
|
5,059 |
|
|
|
12,030 |
|
|
|
15,158 |
|
Restructuring and other costs, net* |
|
|
1,197 |
|
|
|
1,760 |
|
|
|
6,586 |
|
|
|
2,777 |
|
Non-cash interest expense |
|
|
1,327 |
|
|
|
1,276 |
|
|
|
3,922 |
|
|
|
3,730 |
|
Indemnification asset release |
|
|
- |
|
|
|
- |
|
|
|
1,302 |
|
|
|
- |
|
Adjustments to income tax expense |
|
|
104,487 |
|
|
|
(2,517 |
) |
|
|
93,768 |
|
|
|
(22,984 |
) |
Non-GAAP net
income |
|
$ |
16,962 |
|
|
$ |
26,086 |
|
|
$ |
55,929 |
|
|
$ |
78,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributed to common shareholders - basic and
diluted |
|
$ |
(99,267 |
) |
|
$ |
5,798 |
|
|
$ |
(80,699 |
) |
|
$ |
37,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
16,962 |
|
|
$ |
26,086 |
|
|
$ |
55,929 |
|
|
$ |
78,762 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
- |
|
|
|
988 |
|
|
|
3,024 |
|
|
|
2,965 |
|
Net income attributed to common shareholders - diluted |
|
$ |
16,962 |
|
|
$ |
27,074 |
|
|
$ |
58,953 |
|
|
$ |
81,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic |
|
|
39,313 |
|
|
|
37,825 |
|
|
|
39,113 |
|
|
|
37,664 |
|
Adjustment for diluted shares |
|
|
- |
|
|
|
1,471 |
|
|
|
- |
|
|
|
1,471 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,313 |
|
|
|
39,296 |
|
|
|
39,113 |
|
|
|
39,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
39,313 |
|
|
|
37,825 |
|
|
|
39,113 |
|
|
|
37,664 |
|
Adjustment for diluted shares |
|
|
- |
|
|
|
6,148 |
|
|
|
5,046 |
|
|
|
6,148 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,313 |
|
|
|
43,973 |
|
|
|
44,159 |
|
|
|
43,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss) income per share - diluted |
|
$ |
(2.53 |
) |
|
$ |
0.15 |
|
|
$ |
(2.06 |
) |
|
$ |
0.97 |
|
Non-GAAP net income per share - diluted |
|
$ |
0.43 |
|
|
$ |
0.62 |
|
|
$ |
1.34 |
|
|
$ |
1.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net cash (used
in) provided by operating activities |
|
$ |
(3,928 |
) |
|
$ |
24,059 |
|
|
$ |
2,815 |
|
|
$ |
51,068 |
|
Capital expenditures |
|
|
(4,433 |
) |
|
|
(2,874 |
) |
|
|
(14,418 |
) |
|
|
(8,055 |
) |
Free Cash
Flow |
|
$ |
(8,361 |
) |
|
$ |
21,185 |
|
|
$ |
(11,603 |
) |
|
$ |
43,013 |
|
* - $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)
|
|
Q3FY22 |
|
|
Q2FY22 |
|
|
Q1FY22 |
|
|
Q4FY21 |
|
GAAP revenues |
|
$ |
89,041 |
|
|
$ |
86,280 |
|
|
$ |
94,426 |
|
|
$ |
98,076 |
|
Less: Professional services
revenue |
|
|
22,599 |
|
|
|
20,646 |
|
|
|
19,417 |
|
|
|
21,073 |
|
Non-GAAP Repeatable
revenues |
|
$ |
66,442 |
|
|
$ |
65,634 |
|
|
$ |
75,009 |
|
|
$ |
77,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
TTM |
|
$ |
367,823 |
|
|
|
|
|
|
|
|
|
|
Less: Professional services
revenue TTM |
|
|
83,735 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Repeatable
revenues TTM |
|
$ |
284,088 |
|
|
|
|
|
|
|
|
|
|
Repeatable software
contribution |
|
|
77 |
% |
|
|
|
|
|
|
|
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands)
|
|
Q4 2022 |
|
|
FY2022 |
|
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP revenue |
|
$ |
52,000 |
|
|
$ |
58,000 |
|
|
$ |
322,000 |
|
|
$ |
328,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
27,200 |
|
|
$ |
33,200 |
|
|
$ |
224,700 |
|
|
$ |
230,700 |
|
Stock-based compensation |
|
|
800 |
|
|
|
800 |
|
|
|
3,900 |
|
|
|
3,900 |
|
Amortization of intangible assets |
|
|
100 |
|
|
|
100 |
|
|
|
3,000 |
|
|
|
3,000 |
|
Non-GAAP gross
profit |
|
$ |
28,100 |
|
|
$ |
34,100 |
|
|
$ |
231,600 |
|
|
$ |
237,600 |
|
GAAP gross
margin |
|
|
52 |
% |
|
|
57 |
% |
|
|
70 |
% |
|
|
70 |
% |
Non-GAAP gross
margin |
|
|
54 |
% |
|
|
59 |
% |
|
|
72 |
% |
|
|
72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating (loss)
income |
|
$ |
(25,700 |
) |
|
$ |
(19,700 |
) |
|
$ |
19,500 |
|
|
$ |
25,500 |
|
Stock-based compensation |
|
|
6,500 |
|
|
|
6,500 |
|
|
|
25,600 |
|
|
|
25,600 |
|
Amortization of intangible assets |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
14,500 |
|
|
|
14,500 |
|
Restructuring and other costs, net |
|
|
3,300 |
|
|
|
3,300 |
|
|
|
9,900 |
|
|
|
9,900 |
|
Non-GAAP operating
(loss) income |
|
$ |
(13,400 |
) |
|
$ |
(7,400 |
) |
|
$ |
69,500 |
|
|
$ |
75,500 |
|
GAAP operating
margin |
|
|
-49 |
% |
|
|
-34 |
% |
|
|
6 |
% |
|
|
8 |
% |
Non-GAAP operating
margin |
|
|
-26 |
% |
|
|
-13 |
% |
|
|
22 |
% |
|
|
23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss)
income |
|
$ |
(32,800 |
) |
|
$ |
(26,100 |
) |
|
$ |
(113,200 |
) |
|
$ |
(106,500 |
) |
Stock-based compensation |
|
|
6,500 |
|
|
|
6,500 |
|
|
|
25,600 |
|
|
|
25,600 |
|
Amortization of intangible assets |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
14,500 |
|
|
|
14,500 |
|
Restructuring and other costs, net |
|
|
3,300 |
|
|
|
3,300 |
|
|
|
9,900 |
|
|
|
9,900 |
|
Depreciation |
|
|
3,000 |
|
|
|
3,000 |
|
|
|
9,800 |
|
|
|
9,800 |
|
Total other income (expense), net |
|
|
(3,700 |
) |
|
|
(3,700 |
) |
|
|
(14,600 |
) |
|
|
(14,600 |
) |
Provision for income taxes |
|
|
3,300 |
|
|
|
2,600 |
|
|
|
118,000 |
|
|
|
117,300 |
|
Adjusted
EBITDA |
|
$ |
(10,500 |
) |
|
$ |
(4,500 |
) |
|
$ |
79,200 |
|
|
$ |
85,200 |
|
GAAP net (loss) income
margin |
|
|
-63 |
% |
|
|
-45 |
% |
|
|
-35 |
% |
|
|
-33 |
% |
Adjusted EBITDA
margin |
|
|
-20 |
% |
|
|
-8 |
% |
|
|
25 |
% |
|
|
26 |
% |
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands, except per share
data)
|
|
Q4 2022 |
|
FY2022 |
|
|
Low |
|
High |
|
Low |
|
High |
GAAP net (loss) income |
|
$ |
(32,800 |
) |
|
$ |
(26,100 |
) |
|
$ |
(113,200 |
) |
|
$ |
(106,500 |
) |
Stock-based compensation |
|
|
6,500 |
|
|
|
6,500 |
|
|
|
25,600 |
|
|
|
25,600 |
|
Amortization of intangibles |
|
|
2,500 |
|
|
|
2,500 |
|
|
|
14,500 |
|
|
|
14,500 |
|
Restructuring and other costs, net |
|
|
3,300 |
|
|
|
3,300 |
|
|
|
9,900 |
|
|
|
9,900 |
|
Non-cash interest expense |
|
|
1,400 |
|
|
|
1,400 |
|
|
|
5,300 |
|
|
|
5,300 |
|
Indemnification asset release |
|
|
- |
|
|
|
- |
|
|
|
1,300 |
|
|
|
1,300 |
|
Adjustments to income tax expense |
|
|
6,400 |
|
|
|
4,600 |
|
|
|
100,300 |
|
|
|
97,900 |
|
Non-GAAP net (loss)
income |
|
$ |
(12,700 |
) |
|
$ |
(7,800 |
) |
|
$ |
43,700 |
|
|
$ |
48,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributed to common shareholders |
|
$ |
(32,800 |
) |
|
$ |
(26,100 |
) |
|
$ |
(113,200 |
) |
|
$ |
(106,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributed to common shareholders |
|
$ |
(12,700 |
) |
|
$ |
(7,800 |
) |
|
$ |
43,700 |
|
|
$ |
48,000 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
- |
|
|
|
- |
|
|
|
4,000 |
|
|
|
4,000 |
|
Net (loss) income attributed to common shareholders - diluted |
|
$ |
(12,700 |
) |
|
$ |
(7,800 |
) |
|
$ |
47,700 |
|
|
$ |
52,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic and diluted |
|
|
39,400 |
|
|
|
39,400 |
|
|
|
39,200 |
|
|
|
39,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
39,400 |
|
|
|
39,400 |
|
|
|
39,200 |
|
|
|
39,200 |
|
Adjustment for diluted shares |
|
|
- |
|
|
|
- |
|
|
|
5,000 |
|
|
|
5,000 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,400 |
|
|
|
39,400 |
|
|
|
44,200 |
|
|
|
44,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net (loss) income per share - diluted |
|
$ |
(0.83 |
) |
|
$ |
(0.66 |
) |
|
$ |
(2.89 |
) |
|
$ |
(2.72 |
) |
Non-GAAP net (loss) income per share -
diluted |
|
$ |
(0.32 |
) |
|
$ |
(0.20 |
) |
|
$ |
1.08 |
|
|
$ |
1.17 |
|
Cerence (NASDAQ:CRNC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Cerence (NASDAQ:CRNC)
Historical Stock Chart
From Apr 2023 to Apr 2024