Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today
reported its fourth quarter and fiscal year 2021 results for the
year ended September 30, 2021.
Results Summary
(1)(in millions, except per share data)
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
September 30, |
|
|
September 30, |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
GAAP Revenue |
|
$98.1 |
|
|
$91.2 |
|
|
$387.2 |
|
|
$331.0 |
GAAP Gross Margin |
|
75.4% |
|
|
72.0% |
|
|
73.9% |
|
|
67.4% |
Non-GAAP Gross Margin |
|
78.1% |
|
|
75.8% |
|
|
77.3% |
|
|
71.6% |
GAAP Operating Margin |
|
11.0% |
|
|
17.8% |
|
|
15.7% |
|
|
6.8% |
Non-GAAP Operating Margin |
|
37.2% |
|
|
42.1% |
|
|
37.8% |
|
|
32.3% |
GAAP Net Income (Loss) |
|
$8.0 |
|
|
$8.2 |
|
|
$45.9 |
|
|
$(18.3) |
Non-GAAP Net Income |
|
$28.4 |
|
|
$26.0 |
|
|
$107.2 |
|
|
$65.3 |
Adjusted EBITDA |
|
$38.8 |
|
|
$40.7 |
|
|
$155.9 |
|
|
$116.2 |
Adjusted EBITDA Margin |
|
39.6% |
|
|
44.6% |
|
|
40.3% |
|
|
35.1% |
GAAP Net Income (Loss) per Share
- diluted |
|
$0.20 |
|
|
$0.21 |
|
|
$1.17 |
|
|
$(0.50) |
Non-GAAP Net Income per Share -
diluted |
|
$0.66 |
|
|
$0.62 |
|
|
$2.53 |
|
|
$1.70 |
(1) Please refer to the “Discussion of Non-GAAP Financial
Measures” and “Reconciliations of GAAP Financial Measures to
Non-GAAP Financial Measures” included elsewhere in this release for
more information regarding our use of non-GAAP financial
measures.
Sanjay Dhawan, Chief Executive Officer of Cerence, stated, “We
finished the year strong, especially considering the production
challenges our customers are facing due to semiconductor shortages.
Our total company revenue grew 17% compared to the auto production
growth of 9% over the same time-period, which is testament to the
secular tailwinds, as well as, the innovative products and services
we continue to bring to market.”
Dhawan continued, “We had another strong year for bookings at
$590 million of which 20% were for our new products. These bookings
included some key strategic wins, such as VinFast, and included
multiple competitive takeaways. We also signed a contract with one
of the top elevator manufacturers in the world to deliver voice AI
technology and connected services creating the elevator of the
future. This represents a key opportunity for us to expand into a
new market with the potential to be a strong revenue contributor to
our FY24 target for the new mobility market.”
“As we look to fiscal year 2022, accounting for the industry
headwinds due to semiconductor shortages and notwithstanding the
approximately $23 million revenue reduction from the “legacy*”
contract, we still expect to grow above the IHS auto production
forecast. We expect to grow the business by continuing to deliver
innovative products and world-class services for our customers.
This focus on innovation and customer service allows us to maintain
our market leading position in conversational AI and connected
services for the transportation and mobility industries.” Dhawan
concluded.
* Legacy contract is a connected services contract with Toyota
acquired by Nuance through a 2013 acquisition
Cerence Key Performance Indicators
To help investors gain further insight into Cerence’s business
and its performance, management provides a set of key performance
indicators that includes:
Key Performance
Indicator1 |
|
|
Q4FY21 |
|
Percent of worldwide auto production with Cerence Technology
(TTM) |
|
|
|
53 |
% |
Average contract duration -
years (TTM): |
|
|
|
7.9 |
|
Repeatable software
contribution (TTM): |
|
|
|
81 |
% |
Change in number of Cerence
connected cars shipped2 (TTM over prior year TTM) |
|
|
|
20 |
% |
Growth in billings per car
(TTM over prior year TTM) (excludes legacy contract) |
|
|
|
8 |
% |
(1) Please refer to the “Key Performance Indicators” included
elsewhere in this release for more information regarding the
definition and our use of key performance indicators.(2) Based on
IHS Markit data, global auto production increased 9% over the same
time period ended September 30, 2021.
First Quarter and Full Year
Fiscal 2022 Outlook For the
fiscal quarter ending December 31, 2021, revenue is expected to be
in the range of $91M to $96M which is flat year-over-year at the
midpoint, while IHS auto production forecast is expected to be down
21% for the same period. Adjusted EBITDA is expected to be in the
range of approximately $31M to $35M. The adjusted EBITDA guidance
excludes acquisition-related costs, amortization of acquired
intangible assets, stock-based compensation, and restructuring and
other costs.
The full-year guidance is for revenue to be in the range of
$400M to $425M representing a 7% increase at the midpoint compared
to the prior year. The guidance reflects an expected reduction of
$23M in revenue related to our “legacy” contract. Adjusting for the
“legacy” decline, our revenue is expected to increase 12%
year-over-year at the midpoint, while IHS auto production forecast
is expected to be flat for the same period. Adjusted EBITDA for the
full year is expected to be in the range of approximately $144M to
$163M. Additional details regarding guidance will be provided on
the earnings call.
Fourth Quarter Conference CallThe company will
host a live conference call and webcast with slides to discuss the
results today at 10:00 a.m. Eastern Time/7:00 a.m. Pacific Time.
Interested investors and analysts are invited to dial into the
conference call by using 1.844.467.7116 (domestic) or
+1.409.983.9838 (international) and entering the pass code 6829375.
Webcast access will be available on the Investor Information
section of the company’s website at
https://www.cerence.com/investors/events-and-resources.
The teleconference replay will be available through November 29,
2021. The replay dial-in number is 1.855.859.2056 (domestic) or
+1.404.537.3406 (international) using pass code 6829375. A replay
of the webcast can be accessed by visiting our web site 90 minutes
following the conference call at
https://www.cerence.com/investors/events-and-resources.
Forward Looking StatementsStatements in this
presentation regarding Cerence’s future performance, results and
financial condition, expected growth, business and market trends,
and innovation and our management’s future expectations, beliefs,
goals, plans or prospects constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Any statements that are not statements of historical fact
(including statements containing the words “believes,” “plans,”
“anticipates,” “expects,” “intends” or “estimates” or similar
expressions) should also be considered to be forward-looking
statements. Although we believe forward-looking statements are
based upon reasonable assumptions, such statements involve known
and unknown risk, uncertainties and other factors, which may cause
actual results or performance of the company to be materially
different from any future results or performance expressed or
implied by such forward-looking statements including but not
limited to: impacts of the COVID-19 pandemic on our and our
customer’s businesses; the highly competitive and rapidly changing
market in which we operate; adverse conditions in the automotive
industry, the related supply chain, or the global economy more
generally; our ability to control and successfully manage our
expenses and cash position; our strategy to increase cloud
offerings; escalating pricing pressures from our customers; our
failure to win, renew or implement service contracts; the loss of
business from any of our largest customers; effects of customer
defaults; our inability to successfully introduce new products,
applications and services; the inability to recruit and retain
qualified personnel; cybersecurity and data privacy incidents;
fluctuating currency rates; and the other factors discussed in our
most recent Annual Report on Form 10-K, quarterly reports on Form
10-Q, and other filings with the Securities and Exchange
Commission. We disclaim any obligation to update any
forward-looking statements as a result of developments occurring
after the date of this document.
Discussion of Non-GAAP Financial MeasuresWe
believe that providing the non-GAAP information in addition to the
GAAP presentation, allows investors to view the financial results
in the way management views the operating results. We further
believe that providing this information allows investors to not
only better understand our financial performance, but more
importantly, to evaluate the efficacy of the methodology and
information used by management to evaluate and measure such
performance. The non-GAAP information should not be considered
superior to, or a substitute for, financial statements prepared in
accordance with GAAP.
We utilize a number of different financial measures, both GAAP
and non-GAAP, in analyzing and assessing the overall performance of
the business, for making operating decisions and for forecasting
and planning for future periods. While our management uses these
non-GAAP financial measures as a tool to enhance their
understanding of certain aspects of our financial performance, our
management does not consider these measures to be a substitute for,
or superior to, the information provided by GAAP financial
statements.
Consistent with this approach, we believe that disclosing
non-GAAP financial measures to the readers of our financial
statements provides such readers with useful supplemental data
that, while not a substitute for GAAP financial statements, allows
for greater transparency in the review of our financial and
operational performance. In assessing the overall health of the
business during the three and twelve months ended September 30,
2021 and 2020, our management has either included or excluded the
following items in general categories, each of which is described
below.
Adjusted EBITDA Adjusted EBITDA is defined as net income
attributable to Cerence Inc. before net income (loss) attributable
to income tax (benefit) expense, other income (expense) items, net,
depreciation and amortization expense, and excluding
acquisition-related costs, amortization of acquired intangible
assets, stock-based compensation, and restructuring and other
costs, net or impairment charges related to fixed and intangible
assets and gains or losses on the sale of long-lived assets, if
any. From time to time we may exclude from Adjusted EBITDA the
impact of events, gains, losses or other charges (such as
significant legal settlements) that affect the period-to-period
comparability of our operating performance. Other income (expense)
items, net include interest expense, interest income, and other
income (expense), net (as stated in our Consolidated Statement of
Operations). Our management and Board of Directors use this
financial measure to evaluate our operating performance. It is also
a significant performance measure in our annual incentive
compensation programs. Restructuring and other costs,
net.Restructuring and other charges, net include restructuring
expenses as well as other charges that are unusual in nature, are
the result of unplanned events, and arise outside the ordinary
course of our business such as employee severance costs, costs for
consolidating duplication facilities, and separation costs directly
attributable to the Cerence business becoming a standalone public
company.
Acquisition-related costs, net.In the past, we have completed a
number of acquisitions, which result in operating expenses, which
would not otherwise have been incurred. We provide supplementary
non-GAAP financial measures, which exclude certain transition,
integration and other acquisition-related expense items resulting
from acquisitions, to allow more accurate comparisons of the
financial results to historical operations, forward looking
guidance and the financial results of less acquisitive peer
companies. We consider these types of costs and adjustments, to a
great extent, to be unpredictable and dependent on a significant
number of factors that are outside of our control. Furthermore, we
do not consider these acquisition-related costs and adjustments to
be related to the organic continuing operations of the acquired
businesses and are generally not relevant to assessing or
estimating the long-term performance of the acquired assets. In
addition, the size, complexity and/or volume of past acquisitions,
which often drives the magnitude of acquisition related costs, may
not be indicative of the size, complexity and/or volume of future
acquisitions. By excluding acquisition-related costs and
adjustments from our non-GAAP measures, management is better able
to evaluate our ability to utilize our existing assets and estimate
the long-term value that acquired assets will generate for us. We
believe that providing a supplemental non-GAAP measure, which
excludes these items allows management and investors to consider
the ongoing operations of the business both with, and without, such
expenses.
These acquisition-related costs fall into the following
categories: (i) transition and integration costs; (ii) professional
service fees and expenses; and (iii) acquisition-related
adjustments. Although these expenses are not recurring with respect
to past acquisitions, we generally will incur these expenses in
connection with any future acquisitions. These categories are
further discussed as follows:
(i) Transition and integration
costs. Transition and integration costs include retention payments,
transitional employee costs, and earn-out payments treated as
compensation expense, as well as the costs of integration-related
activities, including services provided by third-parties.
(ii) Professional service fees and
expenses. Professional service fees and expenses include financial
advisory, legal, accounting and other outside services incurred in
connection with acquisition activities, and disputes and regulatory
matters related to acquired entities.
(iii) Acquisition-related
adjustments. Acquisition-related adjustments include adjustments to
acquisition-related items that are required to be marked to fair
value each reporting period, such as contingent consideration, and
other items related to acquisitions for which the measurement
period has ended, such as gains or losses on settlements of
pre-acquisition contingencies.
Amortization of acquired intangible assets. We exclude the
amortization of acquired intangible assets from non-GAAP expense
and income measures. These amounts are inconsistent in amount and
frequency and are significantly impacted by the timing and size of
acquisitions. Providing a supplemental measure which excludes these
charges allows management and investors to evaluate results “as-if”
the acquired intangible assets had been developed internally rather
than acquired and, therefore, provides a supplemental measure of
performance in which our acquired intellectual property is treated
in a comparable manner to our internally developed intellectual
property. Although we exclude amortization of acquired intangible
assets from our non-GAAP expenses, we believe that it is important
for investors to understand that such intangible assets contribute
to revenue generation. Amortization of intangible assets that
relate to past acquisitions will recur in future periods until such
intangible assets have been fully amortized. Future acquisitions
may result in the amortization of additional intangible assets.
Non-cash expenses.We provide non-GAAP information relative to
the following non-cash expenses: (i) stock-based compensation; and
(ii) non-cash interest. These items are further discussed as
follows:
(i) Stock-based compensation. Because
of varying valuation methodologies, subjective assumptions and the
variety of award types, we exclude stock-based compensation from
our operating results. We evaluate performance both with and
without these measures because compensation expense related to
stock-based compensation is typically non-cash and awards granted
are influenced by the Company’s stock price and other factors such
as volatility that are beyond our control. The expense related to
stock-based awards is generally not controllable in the short-term
and can vary significantly based on the timing, size and nature of
awards granted. As such, we do not include such charges in
operating plans. Stock-based compensation will continue in future
periods.
(ii) Non-cash interest. We exclude
non-cash interest because we believe that excluding this expense
provides management, as well as other users of the financial
statements, with a valuable perspective on the cash-based
performance and health of the business, including the current
near-term projected liquidity. Non-cash interest expense will
continue in future periods.
Other expenses.We exclude certain other expenses that result
from unplanned events outside the ordinary course of continuing
operations, in order to measure operating performance and current
and future liquidity both with and without these expenses. By
providing this information, we believe management and the users of
the financial statements are better able to understand the
financial results of what we consider to be our organic, continuing
operations. Included in these expenses are items such as other
charges (credits), net, losses from extinguishment of debt, and
changes in indemnification assets corresponding with the release of
pre-spin liabilities for uncertain tax positions.
Bookings. Bookings is defined as the amount of revenue we expect
to earn from an agreement with our customers for products and
services. To count as a booking, we expect there to be persuasive
evidence of an arrangement, which may be evidenced by a legally
binding document or documents, and that the collectability of the
amounts payable under the arrangement are reasonably assured. The
revenue we may actually recognize from our estimated bookings is
subject to multiple factors, including but not limited to the
timing of satisfying performance obligations, potential
terminations, or changes in the scope of programs utilizing our
technology and currency fluctuations. There is no comparable GAAP
financial measure.
Key performance indicatorsWe believe that
providing key performance indicators (“KPIs”), allows investors to
gain insight into the way management views the performance of the
business. We further believe that providing KPIs allows investors
to better understand information used by management to evaluate and
measure such performance. KPIs should not be considered superior
to, or a substitute for, operating results prepared in accordance
with GAAP. In assessing the performance of the business during the
three months ended September 30, 2021, our management has reviewed
the following KPIs, each of which is described below:
- Percent of worldwide auto production
with Cerence Technology: The number of Cerence enabled cars shipped
as compared to IHS Markit car production data.
- Average contract duration: The
weighted average annual period over which we expect to recognize
the estimated revenues from new license and connected contracts
signed during the quarter, calculated on a trailing twelve months
(“TTM”) basis and presented in years.
- Repeatable software contribution:
The percentage of repeatable revenues as compared to total GAAP
revenue in the quarter on a TTM basis. Repeatable revenues are
defined as the sum of License and Connected Services revenues.
- Change in number of Cerence
connected cars shipped: The year over year change in the number of
cars shipped with Cerence connected solutions. Amounts calculated
on a TTM basis.
- Growth in billings per car: The rate
of growth calculated from the average billings per car based on a
TTM basis, excluding legacy contract and adjusted for prepay
usage.
See the tables at the end of this press release for non-GAAP
reconciliations to the most directly comparable GAAP measures.
To learn more about Cerence, visit www.cerence.com, and follow
the company on LinkedIn and Twitter.
About Cerence Inc.Cerence (NASDAQ: CRNC) is the
global industry leader in creating unique, moving experiences for
the mobility world. As an innovation partner to the world’s leading
automakers and mobility OEMs, it is helping advance the future of
connected mobility through intuitive, powerful interaction between
humans and their cars, two-wheelers, and even elevators, connecting
consumers’ digital lives to their daily journeys no matter where
they are. Cerence’s track record is built on more than 20 years of
knowledge and more than 400 million cars shipped with Cerence
technology. Whether it’s connected cars, autonomous driving,
e-vehicles, or buildings, Cerence is mapping the road ahead. For
more information, visit www.cerence.com.
Contact InformationRich YerganianCerence
Inc.Tel: 617-987-4799Email: richard.yerganian@cerence.com
CERENCE INC.Consolidated
Statements of Operations(in thousands, except per
share data)
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
$ |
51,418 |
|
|
$ |
46,425 |
|
|
$ |
202,183 |
|
|
$ |
164,268 |
|
Connected service |
|
|
25,585 |
|
|
|
25,360 |
|
|
|
109,534 |
|
|
|
97,469 |
|
Professional service |
|
|
21,073 |
|
|
|
19,457 |
|
|
|
75,465 |
|
|
|
69,230 |
|
Total revenues |
|
|
98,076 |
|
|
|
91,242 |
|
|
|
387,182 |
|
|
|
330,967 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
|
826 |
|
|
|
439 |
|
|
|
3,544 |
|
|
|
2,783 |
|
Connected service |
|
|
5,767 |
|
|
|
7,026 |
|
|
|
25,727 |
|
|
|
31,768 |
|
Professional service |
|
|
15,655 |
|
|
|
16,190 |
|
|
|
64,287 |
|
|
|
64,963 |
|
Amortization of intangible assets |
|
|
1,879 |
|
|
|
1,929 |
|
|
|
7,516 |
|
|
|
8,337 |
|
Total cost of revenues |
|
|
24,127 |
|
|
|
25,584 |
|
|
|
101,074 |
|
|
|
107,851 |
|
Gross profit |
|
|
73,949 |
|
|
|
65,658 |
|
|
|
286,108 |
|
|
|
223,116 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
28,705 |
|
|
|
22,001 |
|
|
|
112,070 |
|
|
|
88,899 |
|
Sales and marketing |
|
|
10,586 |
|
|
|
8,569 |
|
|
|
38,683 |
|
|
|
33,398 |
|
General and administrative |
|
|
18,416 |
|
|
|
12,930 |
|
|
|
56,979 |
|
|
|
49,386 |
|
Amortization of intangible assets |
|
|
3,169 |
|
|
|
3,168 |
|
|
|
12,690 |
|
|
|
12,544 |
|
Restructuring and other costs, net |
|
|
2,315 |
|
|
|
2,733 |
|
|
|
5,092 |
|
|
|
16,458 |
|
Total operating expenses |
|
|
63,191 |
|
|
|
49,401 |
|
|
|
225,514 |
|
|
|
200,685 |
|
Income from operations |
|
|
10,758 |
|
|
|
16,257 |
|
|
|
60,594 |
|
|
|
22,431 |
|
Interest income |
|
|
41 |
|
|
|
22 |
|
|
|
109 |
|
|
|
585 |
|
Interest expense |
|
|
(3,428 |
) |
|
|
(3,694 |
) |
|
|
(13,997 |
) |
|
|
(22,737 |
) |
Other income (expense), net |
|
|
131 |
|
|
|
(2,953 |
) |
|
|
1,563 |
|
|
|
(23,319 |
) |
Income (loss) before income
taxes |
|
|
7,502 |
|
|
|
9,632 |
|
|
|
48,269 |
|
|
|
(23,040 |
) |
Provision for (benefit from)
income taxes |
|
|
(489 |
) |
|
|
1,425 |
|
|
|
2,376 |
|
|
|
(4,724 |
) |
Net income (loss) |
|
$ |
7,991 |
|
|
$ |
8,207 |
|
|
$ |
45,893 |
|
|
$ |
(18,316 |
) |
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
0.21 |
|
|
|
0.22 |
|
|
|
1.22 |
|
|
|
(0.50 |
) |
Diluted |
|
|
0.20 |
|
|
|
0.21 |
|
|
|
1.17 |
|
|
|
(0.50 |
) |
Weighted-average common share
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
38,015 |
|
|
|
36,765 |
|
|
|
37,752 |
|
|
|
36,428 |
|
Diluted |
|
|
39,748 |
|
|
|
39,041 |
|
|
|
39,289 |
|
|
|
36,428 |
|
CERENCE INC.Consolidated Balance
Sheets(in thousands, except per share amounts)
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
128,428 |
|
|
$ |
136,067 |
|
Marketable securities |
|
|
30,435 |
|
|
|
11,662 |
|
Accounts receivable, net of allowances of $395 and $1,394 at
September 30, 2021 and September 30, 2020, respectively |
|
|
45,560 |
|
|
|
50,900 |
|
Deferred costs |
|
|
6,095 |
|
|
|
7,256 |
|
Prepaid expenses and other current assets |
|
|
76,530 |
|
|
|
44,220 |
|
Total current assets |
|
|
287,048 |
|
|
|
250,105 |
|
Long-term marketable securities |
|
|
7,339 |
|
|
|
- |
|
Property and equipment, net |
|
|
31,505 |
|
|
|
29,529 |
|
Deferred costs |
|
|
31,702 |
|
|
|
38,161 |
|
Operating lease right of use assets |
|
|
14,901 |
|
|
|
20,096 |
|
Goodwill |
|
|
1,128,511 |
|
|
|
1,128,198 |
|
Intangible assets, net |
|
|
25,348 |
|
|
|
45,616 |
|
Deferred tax assets |
|
|
159,293 |
|
|
|
160,974 |
|
Other assets |
|
|
20,081 |
|
|
|
14,938 |
|
Total assets |
|
$ |
1,705,728 |
|
|
$ |
1,687,617 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
11,636 |
|
|
$ |
8,447 |
|
Deferred revenue |
|
|
78,394 |
|
|
|
112,156 |
|
Short-term operating lease liabilities |
|
|
4,562 |
|
|
|
5,700 |
|
Short-term debt |
|
|
6,250 |
|
|
|
6,250 |
|
Accrued expenses and other current liabilities |
|
|
64,467 |
|
|
|
66,078 |
|
Total current liabilities |
|
|
165,309 |
|
|
|
198,631 |
|
Long-term debt, net of discounts and issuance costs |
|
|
265,093 |
|
|
|
266,872 |
|
Deferred revenue, net of current portion |
|
|
198,343 |
|
|
|
212,573 |
|
Long-term operating lease liabilities |
|
|
12,216 |
|
|
|
17,821 |
|
Other liabilities |
|
|
32,822 |
|
|
|
31,649 |
|
Total liabilities |
|
|
673,783 |
|
|
|
727,546 |
|
Stockholders' Equity: |
|
|
|
|
|
|
|
|
Common stock, $0.01 par value, 560,000 shares authorized as of
September 30, 2021; 38,025 shares issued and outstanding as of
September 30, 2021 |
|
|
381 |
|
|
|
369 |
|
Accumulated other comprehensive income |
|
|
1,634 |
|
|
|
3,711 |
|
Additional paid-in capital |
|
|
1,002,353 |
|
|
|
974,307 |
|
Retained earnings (accumulated deficit) |
|
|
27,577 |
|
|
|
(18,316 |
) |
Total stockholders' equity |
|
|
1,031,945 |
|
|
|
960,071 |
|
Total liabilities and stockholders' equity |
|
$ |
1,705,728 |
|
|
$ |
1,687,617 |
|
CERENCE INC.Consolidated Statements of
Cash Flows(in thousands)
|
|
Twelve Months Ended |
|
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
45,893 |
|
|
$ |
(18,316 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
29,661 |
|
|
|
30,041 |
|
(Benefit from) provision for doubtful accounts |
|
|
(415 |
) |
|
|
704 |
|
Stock-based compensation expense |
|
|
60,555 |
|
|
|
47,285 |
|
Non-cash interest expense |
|
|
5,013 |
|
|
|
5,286 |
|
Loss on debt extinguishment |
|
|
- |
|
|
|
19,279 |
|
Deferred tax benefit |
|
|
(4,419 |
) |
|
|
(10,568 |
) |
Other |
|
|
(606 |
) |
|
|
- |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
5,751 |
|
|
|
15,154 |
|
Prepaid expenses and other assets |
|
|
(30,661 |
) |
|
|
(30,311 |
) |
Deferred costs |
|
|
6,984 |
|
|
|
(1,381 |
) |
Accounts payable |
|
|
3,411 |
|
|
|
(2,430 |
) |
Accrued expenses and other liabilities |
|
|
(1,125 |
) |
|
|
26,040 |
|
Deferred revenue |
|
|
(45,653 |
) |
|
|
(35,994 |
) |
Net cash provided by operating
activities |
|
|
74,389 |
|
|
|
44,789 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(12,047 |
) |
|
|
(19,012 |
) |
Purchases of marketable securities |
|
|
(42,471 |
) |
|
|
(11,663 |
) |
Sale and maturities of marketable securities |
|
|
16,350 |
|
|
|
- |
|
Purchase of debt securities |
|
|
(2,000 |
) |
|
|
- |
|
Payments for equity securities |
|
|
(2,563 |
) |
|
|
- |
|
Other investing activities |
|
|
1,100 |
|
|
|
- |
|
Net cash used in investing
activities |
|
|
(41,631 |
) |
|
|
(30,675 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Net transactions with Parent |
|
|
- |
|
|
|
12,964 |
|
Distributions to Parent |
|
|
- |
|
|
|
(152,978 |
) |
Proceeds from long-term debt, net of discount |
|
|
- |
|
|
|
547,719 |
|
Payments for long-term debt issuance costs |
|
|
(520 |
) |
|
|
(6,402 |
) |
Principal payments of long-term debt |
|
|
(6,252 |
) |
|
|
(271,563 |
) |
Common stock repurchases for tax withholdings for net settlement of
equity awards |
|
|
(45,769 |
) |
|
|
(9,369 |
) |
Principal payments of lease liabilities arising from a finance
lease |
|
|
(486 |
) |
|
|
(136 |
) |
Proceeds from the issuance of common stock |
|
|
11,522 |
|
|
|
1,318 |
|
Net cash (used in) provided by
financing activities |
|
|
(41,505 |
) |
|
|
121,553 |
|
Effects of exchange rate
changes on cash and cash equivalents |
|
|
1,108 |
|
|
|
400 |
|
Net change in cash and cash
equivalents |
|
|
(7,639 |
) |
|
|
136,067 |
|
Cash and cash equivalents at
the beginning of the period |
|
|
136,067 |
|
|
|
- |
|
Cash and cash equivalents at
the end of the period |
|
$ |
128,428 |
|
|
$ |
136,067 |
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial
Measures(unaudited - in thousands)
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
GAAP revenue |
|
$ |
98,076 |
|
|
$ |
91,242 |
|
|
$ |
387,182 |
|
|
$ |
330,967 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
73,949 |
|
|
$ |
65,658 |
|
|
$ |
286,108 |
|
|
$ |
223,116 |
|
Stock-based compensation |
|
|
815 |
|
|
|
1,588 |
|
|
|
5,760 |
|
|
|
5,573 |
|
Amortization of intangible assets |
|
|
1,879 |
|
|
|
1,929 |
|
|
|
7,516 |
|
|
|
8,337 |
|
Non-GAAP gross
profit |
|
$ |
76,643 |
|
|
$ |
69,175 |
|
|
$ |
299,384 |
|
|
$ |
237,026 |
|
GAAP gross
margin |
|
|
75.4 |
% |
|
|
72.0 |
% |
|
|
73.9 |
% |
|
|
67.4 |
% |
Non-GAAP gross
margin |
|
|
78.1 |
% |
|
|
75.8 |
% |
|
|
77.3 |
% |
|
|
71.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
10,758 |
|
|
$ |
16,257 |
|
|
$ |
60,594 |
|
|
$ |
22,431 |
|
Stock-based compensation |
|
|
18,376 |
|
|
|
14,331 |
|
|
|
60,555 |
|
|
|
47,285 |
|
Amortization of intangible assets |
|
|
5,048 |
|
|
|
5,097 |
|
|
|
20,206 |
|
|
|
20,881 |
|
Restructuring and other costs, net |
|
|
2,315 |
|
|
|
2,733 |
|
|
|
5,092 |
|
|
|
16,458 |
|
Non-GAAP operating
income |
|
$ |
36,497 |
|
|
$ |
38,418 |
|
|
$ |
146,447 |
|
|
$ |
107,055 |
|
GAAP operating
margin |
|
|
11.0 |
% |
|
|
17.8 |
% |
|
|
15.7 |
% |
|
|
6.8 |
% |
Non-GAAP operating
margin |
|
|
37.2 |
% |
|
|
42.1 |
% |
|
|
37.8 |
% |
|
|
32.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss) |
|
$ |
7,991 |
|
|
$ |
8,207 |
|
|
$ |
45,893 |
|
|
$ |
(18,316 |
) |
Stock-based compensation |
|
|
18,376 |
|
|
|
14,331 |
|
|
|
60,555 |
|
|
|
47,285 |
|
Amortization of intangible assets |
|
|
5,048 |
|
|
|
5,097 |
|
|
|
20,206 |
|
|
|
20,881 |
|
Restructuring and other costs, net |
|
|
2,315 |
|
|
|
2,733 |
|
|
|
5,092 |
|
|
|
16,458 |
|
Depreciation |
|
|
2,337 |
|
|
|
2,240 |
|
|
|
9,455 |
|
|
|
9,160 |
|
Total other income (expense), net |
|
|
(3,256 |
) |
|
|
(6,625 |
) |
|
|
(12,325 |
) |
|
|
(45,471 |
) |
Provision for (benefit from) income taxes |
|
|
(489 |
) |
|
|
1,425 |
|
|
|
2,376 |
|
|
|
(4,724 |
) |
Adjusted
EBITDA |
|
$ |
38,834 |
|
|
$ |
40,658 |
|
|
$ |
155,902 |
|
|
$ |
116,215 |
|
GAAP net income (loss)
margin |
|
|
8.1 |
% |
|
|
9.0 |
% |
|
|
11.9 |
% |
|
|
-5.5 |
% |
Adjusted EBITDA
margin |
|
|
39.6 |
% |
|
|
44.6 |
% |
|
|
40.3 |
% |
|
|
35.1 |
% |
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands, except per share
data)
|
|
Three Months Ended |
|
|
Twelve Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
GAAP net income (loss) |
|
$ |
7,991 |
|
|
$ |
8,207 |
|
|
$ |
45,893 |
|
|
$ |
(18,316 |
) |
Stock-based compensation |
|
|
18,376 |
|
|
|
14,331 |
|
|
|
60,555 |
|
|
|
47,285 |
|
Amortization of intangible assets |
|
|
5,048 |
|
|
|
5,097 |
|
|
|
20,206 |
|
|
|
20,881 |
|
Restructuring and other costs, net |
|
|
2,315 |
|
|
|
2,733 |
|
|
|
5,092 |
|
|
|
16,458 |
|
Loss on debt extinguishment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19,279 |
|
Non-cash interest expense |
|
|
1,283 |
|
|
|
1,261 |
|
|
|
5,013 |
|
|
|
5,286 |
|
Indemnification asset release |
|
|
- |
|
|
|
1,215 |
|
|
|
- |
|
|
|
1,215 |
|
Adjustments to income tax expense |
|
|
(6,599 |
) |
|
|
(6,841 |
) |
|
|
(29,582 |
) |
|
|
(26,742 |
) |
Non-GAAP net
income |
|
$ |
28,414 |
|
|
$ |
26,003 |
|
|
$ |
107,177 |
|
|
$ |
65,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributed to common shareholders |
|
$ |
7,991 |
|
|
$ |
8,207 |
|
|
$ |
45,893 |
|
|
$ |
(18,316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
28,414 |
|
|
$ |
26,003 |
|
|
$ |
107,177 |
|
|
$ |
65,346 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
1,019 |
|
|
|
998 |
|
|
|
4,043 |
|
|
|
1,323 |
|
Net income attributed to common shareholders - diluted |
|
$ |
29,433 |
|
|
$ |
27,001 |
|
|
$ |
111,220 |
|
|
$ |
66,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic |
|
|
38,015 |
|
|
|
36,765 |
|
|
|
37,752 |
|
|
|
36,428 |
|
Adjustment for diluted shares |
|
|
1,733 |
|
|
|
2,276 |
|
|
|
1,537 |
|
|
|
- |
|
Weighted-average common shares outstanding - diluted |
|
|
39,748 |
|
|
|
39,041 |
|
|
|
39,289 |
|
|
|
36,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
38,015 |
|
|
|
36,765 |
|
|
|
37,752 |
|
|
|
36,428 |
|
Adjustment for diluted shares |
|
|
6,410 |
|
|
|
6,952 |
|
|
|
6,214 |
|
|
|
2,747 |
|
Weighted-average common shares outstanding - diluted |
|
|
44,425 |
|
|
|
43,717 |
|
|
|
43,966 |
|
|
|
39,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income (loss) per share - diluted |
|
$ |
0.20 |
|
|
$ |
0.21 |
|
|
$ |
1.17 |
|
|
$ |
(0.50 |
) |
Non-GAAP net income per share - diluted |
|
$ |
0.66 |
|
|
$ |
0.62 |
|
|
$ |
2.53 |
|
|
$ |
1.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net cash provided by
operating activities |
|
$ |
23,321 |
|
|
$ |
26,212 |
|
|
$ |
74,389 |
|
|
$ |
44,789 |
|
Capital expenditures |
|
|
(3,992 |
) |
|
|
(2,937 |
) |
|
|
(12,047 |
) |
|
|
(19,012 |
) |
Free Cash
Flow |
|
$ |
19,329 |
|
|
$ |
23,275 |
|
|
$ |
62,342 |
|
|
$ |
25,777 |
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands)
|
|
Q4FY21 |
|
|
Q3FY21 |
|
|
Q2FY21 |
|
|
Q1FY21 |
|
GAAP revenues |
|
$ |
98,076 |
|
|
$ |
96,801 |
|
|
$ |
98,662 |
|
|
$ |
93,643 |
|
Less: Professional services
revenue |
|
|
21,073 |
|
|
|
16,538 |
|
|
|
16,555 |
|
|
|
21,299 |
|
Non-GAAP Repeatable
revenues |
|
$ |
77,003 |
|
|
$ |
80,263 |
|
|
$ |
82,107 |
|
|
$ |
72,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
TTM |
|
$ |
387,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Professional services
revenue TTM |
|
|
75,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Repeatable
revenues TTM |
|
$ |
311,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Repeatable software
contribution |
|
|
81 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands)
|
|
Q1 2022 |
|
|
FY2022 |
|
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP revenue |
|
$ |
91,000 |
|
|
$ |
96,000 |
|
|
$ |
400,000 |
|
|
$ |
425,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
|
$ |
66,000 |
|
|
$ |
71,000 |
|
|
$ |
298,000 |
|
|
$ |
321,000 |
|
Stock-based compensation |
|
|
1,300 |
|
|
|
1,300 |
|
|
|
5,600 |
|
|
|
5,600 |
|
Amortization of intangible
assets |
|
|
1,900 |
|
|
|
1,900 |
|
|
|
3,000 |
|
|
|
3,000 |
|
Non-GAAP gross
profit |
|
$ |
69,200 |
|
|
$ |
74,200 |
|
|
$ |
306,600 |
|
|
$ |
329,600 |
|
GAAP gross
margin |
|
|
73 |
% |
|
|
74 |
% |
|
|
75 |
% |
|
|
76 |
% |
Non-GAAP gross
margin |
|
|
76 |
% |
|
|
77 |
% |
|
|
77 |
% |
|
|
78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
income |
|
$ |
11,800 |
|
|
$ |
15,300 |
|
|
$ |
67,400 |
|
|
$ |
86,300 |
|
Stock-based compensation |
|
|
10,900 |
|
|
|
10,900 |
|
|
|
48,200 |
|
|
|
48,200 |
|
Amortization of intangible
assets |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs,
net |
|
|
1,100 |
|
|
|
1,100 |
|
|
|
2,300 |
|
|
|
2,300 |
|
Non-GAAP operating
income |
|
$ |
28,800 |
|
|
$ |
32,300 |
|
|
$ |
132,600 |
|
|
$ |
151,500 |
|
GAAP operating
margin |
|
|
13 |
% |
|
|
16 |
% |
|
|
17 |
% |
|
|
20 |
% |
Non-GAAP operating
margin |
|
|
32 |
% |
|
|
34 |
% |
|
|
33 |
% |
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
income |
|
$ |
8,000 |
|
|
$ |
10,200 |
|
|
$ |
33,900 |
|
|
$ |
43,000 |
|
Stock-based compensation |
|
|
10,900 |
|
|
|
10,900 |
|
|
|
48,200 |
|
|
|
48,200 |
|
Amortization of intangible
assets |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs,
net |
|
|
1,100 |
|
|
|
1,100 |
|
|
|
2,300 |
|
|
|
2,300 |
|
Depreciation |
|
|
2,300 |
|
|
|
2,300 |
|
|
|
11,400 |
|
|
|
11,400 |
|
Total other income (expense),
net |
|
|
(3,400 |
) |
|
|
(3,400 |
) |
|
|
(13,500 |
) |
|
|
(13,500 |
) |
Provision for income
taxes |
|
|
400 |
|
|
|
1,700 |
|
|
|
20,000 |
|
|
|
29,800 |
|
Adjusted
EBITDA |
|
$ |
31,100 |
|
|
$ |
34,600 |
|
|
$ |
144,000 |
|
|
$ |
162,900 |
|
GAAP net income
margin |
|
|
9 |
% |
|
|
11 |
% |
|
|
8 |
% |
|
|
10 |
% |
Adjusted EBITDA
margin |
|
|
34 |
% |
|
|
36 |
% |
|
|
36 |
% |
|
|
38 |
% |
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands, except per share
data)
|
|
Q1 2022 |
|
|
FY2022 |
|
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP net income |
|
$ |
8,000 |
|
|
$ |
10,200 |
|
|
$ |
33,900 |
|
|
$ |
43,000 |
|
Stock-based compensation |
|
|
10,900 |
|
|
|
10,900 |
|
|
|
48,200 |
|
|
|
48,200 |
|
Amortization of intangible
assets |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
14,700 |
|
|
|
14,700 |
|
Restructuring and other costs,
net |
|
|
1,100 |
|
|
|
1,100 |
|
|
|
2,300 |
|
|
|
2,300 |
|
Non-cash interest expense |
|
|
1,300 |
|
|
|
1,300 |
|
|
|
5,300 |
|
|
|
5,300 |
|
Income tax impact of Non-GAAP
adjustments |
|
|
(6,400 |
) |
|
|
(6,000 |
) |
|
|
(11,100 |
) |
|
|
(5,100 |
) |
Non-GAAP net
income |
|
$ |
19,900 |
|
|
$ |
22,500 |
|
|
$ |
93,300 |
|
|
$ |
108,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
8,000 |
|
|
$ |
10,200 |
|
|
$ |
33,900 |
|
|
$ |
43,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders |
|
$ |
19,900 |
|
|
$ |
22,500 |
|
|
$ |
93,300 |
|
|
$ |
108,400 |
|
Interest on Convertible Senior Notes, net of tax |
|
|
1,000 |
|
|
|
1,000 |
|
|
|
4,000 |
|
|
|
4,000 |
|
Net income attributed to common shareholders - diluted |
|
$ |
20,900 |
|
|
$ |
23,500 |
|
|
$ |
97,300 |
|
|
$ |
112,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic |
|
|
38,800 |
|
|
|
38,800 |
|
|
|
39,200 |
|
|
|
39,200 |
|
Adjustment for diluted shares |
|
|
900 |
|
|
|
900 |
|
|
|
900 |
|
|
|
900 |
|
Weighted-average common shares outstanding - diluted |
|
|
39,700 |
|
|
|
39,700 |
|
|
|
40,100 |
|
|
|
40,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
|
38,800 |
|
|
|
38,800 |
|
|
|
39,200 |
|
|
|
39,200 |
|
Adjustment for diluted shares |
|
|
5,600 |
|
|
|
5,600 |
|
|
|
5,600 |
|
|
|
5,600 |
|
Weighted-average common shares outstanding - diluted |
|
|
44,400 |
|
|
|
44,400 |
|
|
|
44,800 |
|
|
|
44,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income per share - diluted |
|
$ |
0.20 |
|
|
$ |
0.26 |
|
|
$ |
0.85 |
|
|
$ |
1.07 |
|
Non-GAAP net income per share - diluted |
|
$ |
0.47 |
|
|
$ |
0.53 |
|
|
$ |
2.17 |
|
|
$ |
2.51 |
|
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