Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today
reported its third quarter fiscal year 2023 results for the quarter
ended June 30, 2023.
Results Summary
(1)
(in millions, except per share data)
|
Three Months Ended |
|
Nine Months Ended |
|
June 30, |
|
June 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
GAAP Revenue |
$61.7 |
|
$89.0 |
|
$213.7 |
|
$269.7 |
GAAP Gross Margin |
66.0% |
|
72.8% |
|
66.2% |
|
73.0% |
Non-GAAP Gross Margin |
66.5% |
|
73.7% |
|
67.7% |
|
75.3% |
GAAP Operating Margin |
-13.8% |
|
17.7% |
|
-14.6% |
|
16.7% |
Non-GAAP Operating Margin |
0.5% |
|
29.4% |
|
8.1% |
|
30.6% |
GAAP Net Loss |
($16.5) |
|
($99.3) |
|
($44.7) |
|
($80.7) |
GAAP Net Loss Margin |
-26.7% |
|
-111.5% |
|
-20.9% |
|
-29.9% |
Non-GAAP Net (Loss)
Income |
($1.7) |
|
$17.0 |
|
$10.8 |
|
$55.9 |
Adjusted EBITDA |
$2.8 |
|
$28.5 |
|
$24.9 |
|
$89.4 |
Adjusted EBITDA Margin |
4.5% |
|
32.0% |
|
11.7% |
|
33.2% |
GAAP Net Loss per Share -
diluted |
($0.41) |
|
($2.53) |
|
($1.11) |
|
($2.06) |
Non-GAAP Net
(Loss) Income per Share - diluted |
($0.04) |
|
$0.43 |
|
$0.27 |
|
$1.34 |
(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,
“Our focus on operational excellence and delivering on our
commitments continued to drive strong results in Q3, with revenue
for the quarter, as well as most of the key profitability metrics,
at or above the high end of our guidance range.”
“The core automotive business remained strong with the launch of
three new global OEM platforms in the quarter and continued growth
in emerging markets. And, we continue to make steady progress in
the two-wheeler market, with four starts-of-production in the
quarter and a key strategic win with a major Japanese brand.”
“As we look to the future of the in-car experience, we are
deeply focused on leveraging generative AI and large language
models at meaningful points in the Cerence product architecture.
Iqbal Arshad, Chief Technology Officer, and Nils Schanz, Chief
Product Officer, are keenly focused on a product strategy that
positions Cerence as the primary enabler for the coexistence of
large language models and consumer tech assistants in the car,
operating under a uniquely branded OEM experience that prioritizes
creating true value for end users.”
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 |
Q3FY23 |
Percent of worldwide auto
production with Cerence Technology (TTM) |
54% |
Average contract duration -
years (TTM): |
6.4 |
Repeatable software
contribution (TTM): |
72% |
Change in number of Cerence
connected cars shipped2 (TTM over prior year TTM) |
32% |
Change in billings per car3
(TTM over prior year TTM) (excludes Legacy contract4) |
-6% |
(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 13% over the same time period ended on
June 30, 2023. |
(3) |
The billings per car KPI has been
modified to exclude professional services in the calculation. |
(4) |
Legacy contract is a connected
services contract with Toyota acquired by Nuance through a 2013
acquisition. |
|
|
Fourth Quarter Fiscal Year
2023 Outlook
For the fiscal quarter ending September 30, 2023, revenue is
expected to be in the range of $72 million to $76 million. The
guidance includes approximately $13 million of fixed contracts,
bringing the total for the fiscal year to approximately $37
million.
GAAP Net Loss is expected to be in the range of ($13) million to
($9) million. Adjusted EBITDA is expected to be in the range of
approximately $10 million to $14 million.
For the full fiscal year ending September 30, 2023, the company
has raised the low end of the initial guidance with revenue now
expected to be in the range of $286 million to $290 million. GAAP
Net Loss is expected to be in the range of ($58) million to ($54)
million. Adjusted EBITDA is expected to be in the range of
approximately $34 million to $38 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 the
company’s website 90 minutes following the conference call at
https://www.cerence.com/investors/events-and-resources.
Forward Looking Statements
Statements in this press release regarding:
Cerence’s future performance, results and financial condition;
expected growth; opportunities; business, industry and market
trends; strategy regarding fixed contracts and its impact on
financial results; backlog; demand for Cerence products; innovation
and new product offerings; and 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: the highly competitive and rapidly changing
market in which we operate; adverse conditions in the automotive
industry, the related supply chain and semiconductor shortage, or
the global economy more generally; the impacts of the COVID-19
pandemic on our and our customers’ businesses; 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;
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 cancellation or
postponement of existing 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; our strategy to increase cloud offerings; the inability
to recruit and retain qualified personnel; disruptions arising from
transitions in management personnel; cybersecurity and data privacy
incidents; failure to protect our intellectual property; defects or
interruptions in service with respect to our products; fluctuating
currency rates and interest rates; inflation; financial and credit
market volatility; and the other factors discussed in our most
recent Annual Report on Form 10-K for the fiscal year ended
September 30, 2022, quarterly reports on Form 10-Q, and other
filings with the Securities and Exchange Commission. We caution you
not to place undue reliance on any forward-looking statements,
which speak only as of the date made. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise, except as otherwise
required by law.
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, 2023 and
2022, 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 duplicate facilities, third-party fees relating to
the modification of our convertible debt, release of a
pre-acquisition contingency, and separation costs directly
attributable to the Cerence business becoming a standalone public
company.
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,
2023, 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.
- Change in billings per car: The rate
of growth calculated from the average billings per car based on a
TTM basis, excluding professional services, 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, AI-powered 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 475
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 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 |
|
|
Nine Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
License |
$ |
25,837 |
|
|
$ |
46,452 |
|
|
$ |
102,054 |
|
|
$ |
139,610 |
|
Connected services |
|
18,583 |
|
|
|
19,990 |
|
|
|
55,903 |
|
|
|
67,475 |
|
Professional services |
|
17,240 |
|
|
|
22,599 |
|
|
|
55,754 |
|
|
|
62,662 |
|
Total revenues |
|
61,660 |
|
|
|
89,041 |
|
|
|
213,711 |
|
|
|
269,747 |
|
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
License |
|
2,343 |
|
|
|
585 |
|
|
|
6,166 |
|
|
|
1,692 |
|
Connected services |
|
5,562 |
|
|
|
5,391 |
|
|
|
18,218 |
|
|
|
16,766 |
|
Professional services |
|
12,930 |
|
|
|
18,173 |
|
|
|
47,441 |
|
|
|
51,448 |
|
Amortization of intangible assets |
|
103 |
|
|
|
103 |
|
|
|
310 |
|
|
|
2,879 |
|
Total cost of revenues |
|
20,938 |
|
|
|
24,252 |
|
|
|
72,135 |
|
|
|
72,785 |
|
Gross profit |
|
40,722 |
|
|
|
64,789 |
|
|
|
141,576 |
|
|
|
196,962 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
30,202 |
|
|
|
26,040 |
|
|
|
88,190 |
|
|
|
81,808 |
|
Sales and marketing |
|
4,277 |
|
|
|
8,299 |
|
|
|
21,656 |
|
|
|
22,487 |
|
General and administrative |
|
13,019 |
|
|
|
10,614 |
|
|
|
46,453 |
|
|
|
31,941 |
|
Amortization of intangible assets |
|
553 |
|
|
|
2,862 |
|
|
|
5,297 |
|
|
|
9,151 |
|
Restructuring and other costs, net |
|
1,172 |
|
|
|
1,197 |
|
|
|
11,075 |
|
|
|
6,586 |
|
Total operating expenses |
|
49,223 |
|
|
|
49,012 |
|
|
|
172,671 |
|
|
|
151,973 |
|
(Loss) income from
operations |
|
(8,501 |
) |
|
|
15,777 |
|
|
|
(31,095 |
) |
|
|
44,989 |
|
Interest income |
|
1,207 |
|
|
|
243 |
|
|
|
3,240 |
|
|
|
416 |
|
Interest expense |
|
(4,120 |
) |
|
|
(3,815 |
) |
|
|
(11,637 |
) |
|
|
(10,602 |
) |
Other income (expense),
net |
|
(2,030 |
) |
|
|
(478 |
) |
|
|
2,757 |
|
|
|
(764 |
) |
(Loss) income before income
taxes |
|
(13,444 |
) |
|
|
11,727 |
|
|
|
(36,735 |
) |
|
|
34,039 |
|
Provision for income
taxes |
|
3,011 |
|
|
|
110,994 |
|
|
|
7,967 |
|
|
|
114,738 |
|
Net loss |
$ |
(16,455 |
) |
|
$ |
(99,267 |
) |
|
$ |
(44,702 |
) |
|
$ |
(80,699 |
) |
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.41 |
) |
|
$ |
(2.53 |
) |
|
$ |
(1.11 |
) |
|
$ |
(2.06 |
) |
Diluted |
$ |
(0.41 |
) |
|
$ |
(2.53 |
) |
|
$ |
(1.11 |
) |
|
$ |
(2.06 |
) |
Weighted-average common share
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
40,324 |
|
|
|
39,313 |
|
|
|
40,167 |
|
|
|
39,113 |
|
Diluted |
|
40,324 |
|
|
|
39,313 |
|
|
|
40,167 |
|
|
|
39,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE INC.Condensed Consolidated
Balance Sheets(in thousands, except per share amounts)
|
June 30, |
|
|
September 30, |
|
|
2023 |
|
|
2022 |
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
86,100 |
|
|
|
94,847 |
|
Marketable securities |
|
16,717 |
|
|
|
20,317 |
|
Accounts receivable, net of allowances of $4,048 and $157 |
|
56,984 |
|
|
|
45,073 |
|
Deferred costs |
|
7,585 |
|
|
|
7,098 |
|
Prepaid expenses and other current assets |
|
51,748 |
|
|
|
60,184 |
|
Total current assets |
|
219,134 |
|
|
|
227,519 |
|
Long-term marketable securities |
|
13,194 |
|
|
|
11,584 |
|
Property and equipment, net |
|
34,924 |
|
|
|
37,707 |
|
Deferred costs |
|
20,875 |
|
|
|
22,451 |
|
Operating lease right of use assets |
|
13,445 |
|
|
|
14,702 |
|
Goodwill |
|
904,910 |
|
|
|
890,802 |
|
Intangible assets, net |
|
4,644 |
|
|
|
9,700 |
|
Deferred tax assets |
|
52,198 |
|
|
|
51,989 |
|
Other assets |
|
48,854 |
|
|
|
52,039 |
|
Total assets |
$ |
1,312,178 |
|
|
$ |
1,318,493 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
16,118 |
|
|
$ |
10,372 |
|
Deferred revenue |
|
75,296 |
|
|
|
72,662 |
|
Short-term operating lease liabilities |
|
5,505 |
|
|
|
5,071 |
|
Short-term debt |
|
24,700 |
|
|
|
10,938 |
|
Accrued expenses and other current liabilities |
|
46,802 |
|
|
|
47,990 |
|
Total current liabilities |
|
168,421 |
|
|
|
147,033 |
|
Long-term debt |
|
254,702 |
|
|
|
259,436 |
|
Deferred revenue, net of current portion |
|
153,002 |
|
|
|
165,972 |
|
Long-term operating lease liabilities |
|
9,330 |
|
|
|
11,375 |
|
Other liabilities |
|
23,909 |
|
|
|
21,727 |
|
Total liabilities |
|
609,364 |
|
|
|
605,543 |
|
Stockholders' Equity: |
|
|
|
|
|
Common stock, $0.01 par value, 560,000 shares authorized; 40,333
and 39,430 shares issued and outstanding, respectively |
|
403 |
|
|
|
394 |
|
Accumulated other comprehensive loss |
|
(24,652 |
) |
|
|
(33,737 |
) |
Additional paid-in capital |
|
1,049,173 |
|
|
|
1,029,542 |
|
Accumulated deficit |
|
(322,110 |
) |
|
|
(283,249 |
) |
Total stockholders' equity |
|
702,814 |
|
|
|
712,950 |
|
Total liabilities and stockholders' equity |
$ |
1,312,178 |
|
|
$ |
1,318,493 |
|
|
|
|
|
|
|
|
|
CERENCE INC.Condensed Consolidated
Statements of Cash Flows(in
thousands)
|
Nine Months Ended |
|
|
June 30, |
|
|
2023 |
|
|
2022 |
|
Cash flows from
operating activities: |
|
|
|
|
|
Net loss |
$ |
(44,702 |
) |
|
$ |
(80,699 |
) |
Adjustments to reconcile net
loss to net cash (used in) provided by operations: |
|
|
|
|
|
Depreciation and amortization |
|
13,151 |
|
|
|
18,853 |
|
Provision for (benefit from) credit loss reserve |
|
3,626 |
|
|
|
(414 |
) |
Stock-based compensation |
|
31,801 |
|
|
|
23,020 |
|
Non-cash interest expense |
|
1,450 |
|
|
|
3,922 |
|
Loss on debt extinguishment |
|
1,333 |
|
|
|
- |
|
Deferred tax benefit |
|
1,536 |
|
|
|
103,394 |
|
Unrealized foreign currency transaction (gain) losses |
|
(5,441 |
) |
|
|
4,854 |
|
Other |
|
(4,004 |
) |
|
|
283 |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
Accounts receivable |
|
(10,951 |
) |
|
|
(21,626 |
) |
Prepaid expenses and other assets |
|
19,902 |
|
|
|
(34,621 |
) |
Deferred costs |
|
2,511 |
|
|
|
3,753 |
|
Accounts payable |
|
4,799 |
|
|
|
4,638 |
|
Accrued expenses and other liabilities |
|
(334 |
) |
|
|
(2,698 |
) |
Deferred revenue |
|
(18,437 |
) |
|
|
(19,844 |
) |
Net cash (used in) provided by
operating activities |
|
(3,760 |
) |
|
|
2,815 |
|
Cash flows from
investing activities: |
|
|
|
|
|
Capital expenditures |
|
(3,597 |
) |
|
|
(14,418 |
) |
Purchases of marketable securities |
|
(18,025 |
) |
|
|
(21,153 |
) |
Sale and maturities of marketable securities |
|
20,200 |
|
|
|
31,003 |
|
Payments for equity investments |
|
- |
|
|
|
(584 |
) |
Other investing activities |
|
(1,024 |
) |
|
|
1,735 |
|
Net cash used in investing
activities |
|
(2,446 |
) |
|
|
(3,417 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
Proceeds from revolving credit facility |
|
24,700 |
|
|
|
- |
|
Proceeds from long-term debt, net of discount |
|
190,000 |
|
|
|
- |
|
Payments for long-term debt issuance costs |
|
(16,786 |
) |
|
|
- |
|
Principal payments of long-term debt |
|
(198,438 |
) |
|
|
(4,689 |
) |
Common stock repurchases for tax withholdings for net settlement of
equity awards |
|
(4,834 |
) |
|
|
(47,960 |
) |
Principal payment of lease liabilities arising from a finance
lease |
|
(355 |
) |
|
|
(289 |
) |
Proceeds from the issuance of common stock |
|
4,687 |
|
|
|
34,943 |
|
Net cash used in financing
activities |
|
(1,026 |
) |
|
|
(17,995 |
) |
Effects of exchange rate
changes on cash and cash equivalents |
|
(1,515 |
) |
|
|
(1,377 |
) |
Net change in cash and cash
equivalents |
|
(8,747 |
) |
|
|
(19,974 |
) |
Cash and cash equivalents at
beginning of period |
|
94,847 |
|
|
|
128,428 |
|
Cash and cash equivalents at
end of period |
$ |
86,100 |
|
|
$ |
108,454 |
|
|
|
|
|
|
|
|
|
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, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
GAAP revenue |
$ |
61,660 |
|
|
$ |
89,041 |
|
|
$ |
213,711 |
|
|
$ |
269,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
$ |
40,722 |
|
|
$ |
64,789 |
|
|
$ |
141,576 |
|
|
$ |
196,962 |
|
Stock-based compensation |
|
163 |
|
|
|
722 |
|
|
|
2,699 |
|
|
|
3,384 |
|
Amortization of intangible assets |
|
103 |
|
|
|
103 |
|
|
|
310 |
|
|
|
2,879 |
|
Non-GAAP gross
profit |
$ |
40,988 |
|
|
$ |
65,614 |
|
|
$ |
144,585 |
|
|
$ |
203,225 |
|
GAAP gross
margin |
|
66.0 |
% |
|
|
72.8 |
% |
|
|
66.2 |
% |
|
|
73.0 |
% |
Non-GAAP gross
margin |
|
66.5 |
% |
|
|
73.7 |
% |
|
|
67.7 |
% |
|
|
75.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating (loss)
income |
$ |
(8,501 |
) |
|
$ |
15,777 |
|
|
$ |
(31,095 |
) |
|
$ |
44,989 |
|
Stock-based compensation* |
|
6,974 |
|
|
|
6,253 |
|
|
|
31,801 |
|
|
|
19,020 |
|
Amortization of intangible assets |
|
656 |
|
|
|
2,965 |
|
|
|
5,607 |
|
|
|
12,030 |
|
Restructuring and other costs, net* |
|
1,172 |
|
|
|
1,197 |
|
|
|
11,075 |
|
|
|
6,586 |
|
Non-GAAP operating
income |
$ |
301 |
|
|
$ |
26,192 |
|
|
$ |
17,388 |
|
|
$ |
82,625 |
|
GAAP operating
margin |
|
-13.8 |
% |
|
|
17.7 |
% |
|
|
-14.6 |
% |
|
|
16.7 |
% |
Non-GAAP operating
margin |
|
0.5 |
% |
|
|
29.4 |
% |
|
|
8.1 |
% |
|
|
30.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
loss |
$ |
(16,455 |
) |
|
$ |
(99,267 |
) |
|
$ |
(44,702 |
) |
|
$ |
(80,699 |
) |
Stock-based compensation* |
|
6,974 |
|
|
|
6,253 |
|
|
|
31,801 |
|
|
|
19,020 |
|
Amortization of intangible assets |
|
656 |
|
|
|
2,965 |
|
|
|
5,607 |
|
|
|
12,030 |
|
Restructuring and other costs, net* |
|
1,172 |
|
|
|
1,197 |
|
|
|
11,075 |
|
|
|
6,586 |
|
Depreciation |
|
2,462 |
|
|
|
2,314 |
|
|
|
7,544 |
|
|
|
6,823 |
|
Total other expense, net |
|
(4,943 |
) |
|
|
(4,050 |
) |
|
|
(5,640 |
) |
|
|
(10,950 |
) |
Provision for income taxes |
|
3,011 |
|
|
|
110,994 |
|
|
|
7,967 |
|
|
|
114,738 |
|
Adjusted
EBITDA |
$ |
2,763 |
|
|
$ |
28,506 |
|
|
$ |
24,932 |
|
|
$ |
89,448 |
|
GAAP net loss
margin |
|
-26.7 |
% |
|
|
-111.5 |
% |
|
|
-20.9 |
% |
|
|
-29.9 |
% |
Adjusted EBITDA
margin |
|
4.5 |
% |
|
|
32.0 |
% |
|
|
11.7 |
% |
|
|
33.2 |
% |
* - $4.0 million in
stock-based compensation is included in Restructuring and other
costs, net during Q1'22. |
|
|
|
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, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
GAAP net loss |
$ |
(16,455 |
) |
|
$ |
(99,267 |
) |
|
$ |
(44,702 |
) |
|
$ |
(80,699 |
) |
Stock-based compensation* |
|
6,974 |
|
|
|
6,253 |
|
|
|
31,801 |
|
|
|
19,020 |
|
Amortization of intangible assets |
|
656 |
|
|
|
2,965 |
|
|
|
5,607 |
|
|
|
12,030 |
|
Restructuring and other costs, net* |
|
1,172 |
|
|
|
1,197 |
|
|
|
11,075 |
|
|
|
6,586 |
|
Loss on debt extinguishment |
|
1,333 |
|
|
|
- |
|
|
|
1,333 |
|
|
|
- |
|
Non-cash interest expense |
|
540 |
|
|
|
1,327 |
|
|
|
1,450 |
|
|
|
3,922 |
|
Indemnification asset release |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,302 |
|
Other |
|
(25 |
) |
|
|
- |
|
|
|
(844 |
) |
|
|
- |
|
Adjustments to income tax expense |
|
4,144 |
|
|
|
104,487 |
|
|
|
5,107 |
|
|
|
93,768 |
|
Non-GAAP net (loss)
income |
$ |
(1,661 |
) |
|
$ |
16,962 |
|
|
$ |
10,827 |
|
|
$ |
55,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to common shareholders - basic and diluted |
$ |
(16,455 |
) |
|
$ |
(99,267 |
) |
|
$ |
(44,702 |
) |
|
$ |
(80,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributed to common shareholders - basic |
$ |
(1,661 |
) |
|
$ |
16,962 |
|
|
$ |
10,827 |
|
|
$ |
55,929 |
|
Interest on the Notes, net of tax |
|
- |
|
|
|
- |
|
|
|
|
|
|
3,024 |
|
Net (loss) income attributed to common shareholders - diluted |
$ |
(1,661 |
) |
|
$ |
16,962 |
|
|
$ |
10,827 |
|
|
$ |
58,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic and diluted |
|
40,324 |
|
|
|
39,313 |
|
|
|
40,167 |
|
|
|
39,113 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
40,324 |
|
|
|
39,313 |
|
|
|
40,167 |
|
|
|
39,113 |
|
Adjustment for diluted shares |
|
- |
|
|
|
- |
|
|
|
197 |
|
|
|
5,046 |
|
Weighted-average common shares outstanding - diluted |
|
40,324 |
|
|
|
39,313 |
|
|
|
40,364 |
|
|
|
44,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share - diluted |
$ |
(0.41 |
) |
|
$ |
(2.53 |
) |
|
$ |
(1.11 |
) |
|
$ |
(2.06 |
) |
Non-GAAP net (loss) income per share -
diluted |
$ |
(0.04 |
) |
|
$ |
0.43 |
|
|
$ |
0.27 |
|
|
$ |
1.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net cash (used
in) provided by operating activities |
$ |
(8,197 |
) |
|
$ |
(3,928 |
) |
|
$ |
(3,760 |
) |
|
$ |
2,815 |
|
Capital expenditures |
|
(1,520 |
) |
|
|
(4,433 |
) |
|
|
(3,597 |
) |
|
|
(14,418 |
) |
Free Cash
Flow |
$ |
(9,717 |
) |
|
$ |
(8,361 |
) |
|
$ |
(7,357 |
) |
|
$ |
(11,603 |
) |
* - $4.0 million
in stock-based compensation is included in Restructuring and other
costs, net during Q1'22. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands)
|
Q3FY23 |
|
|
Q2FY23 |
|
|
Q1FY23 |
|
|
Q4FY22 |
|
GAAP revenues |
$ |
61,660 |
|
|
$ |
68,393 |
|
|
$ |
83,658 |
|
|
$ |
58,144 |
|
Less: Professional services
revenue |
|
17,240 |
|
|
|
18,667 |
|
|
|
19,847 |
|
|
|
21,048 |
|
Non-GAAP Repeatable
revenues |
$ |
44,420 |
|
|
$ |
49,726 |
|
|
$ |
63,811 |
|
|
$ |
37,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP revenues
TTM |
$ |
271,855 |
|
|
|
|
|
|
|
|
|
|
Less: Professional services
revenue TTM |
|
76,802 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Repeatable
revenues TTM |
$ |
195,053 |
|
|
|
|
|
|
|
|
|
|
Repeatable software
contribution |
|
72 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands)
|
Q4 2023 |
|
|
FY2023 |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP revenue |
$ |
72,000 |
|
|
$ |
76,000 |
|
|
$ |
285,700 |
|
|
$ |
289,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP gross
profit |
$ |
50,500 |
|
|
$ |
54,500 |
|
|
$ |
192,100 |
|
|
$ |
196,100 |
|
Stock-based compensation |
|
1,000 |
|
|
|
1,000 |
|
|
|
3,700 |
|
|
|
3,700 |
|
Amortization of intangible assets |
|
100 |
|
|
|
100 |
|
|
|
400 |
|
|
|
400 |
|
Non-GAAP gross
profit |
$ |
51,600 |
|
|
$ |
55,600 |
|
|
$ |
196,200 |
|
|
$ |
200,200 |
|
GAAP gross
margin |
|
70 |
% |
|
|
72 |
% |
|
|
67 |
% |
|
|
68 |
% |
Non-GAAP gross
margin |
|
72 |
% |
|
|
73 |
% |
|
|
69 |
% |
|
|
69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating
loss |
$ |
(5,800 |
) |
|
$ |
(1,800 |
) |
|
$ |
(37,000 |
) |
|
$ |
(33,000 |
) |
Stock-based compensation |
|
11,800 |
|
|
|
11,800 |
|
|
|
43,600 |
|
|
|
43,600 |
|
Amortization of intangible assets |
|
600 |
|
|
|
600 |
|
|
|
6,200 |
|
|
|
6,200 |
|
Restructuring and other costs, net |
|
800 |
|
|
|
800 |
|
|
|
11,900 |
|
|
|
11,900 |
|
Non-GAAP operating
income |
$ |
7,400 |
|
|
$ |
11,400 |
|
|
$ |
24,700 |
|
|
$ |
28,700 |
|
GAAP operating
margin |
|
-8 |
% |
|
|
-2 |
% |
|
|
-13 |
% |
|
|
-11 |
% |
Non-GAAP operating
margin |
|
10 |
% |
|
|
15 |
% |
|
|
9 |
% |
|
|
10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
loss |
$ |
(12,700 |
) |
|
$ |
(8,700 |
) |
|
$ |
(57,500 |
) |
|
$ |
(53,500 |
) |
Stock-based compensation |
|
11,800 |
|
|
|
11,800 |
|
|
|
43,600 |
|
|
|
43,600 |
|
Amortization of intangible assets |
|
600 |
|
|
|
600 |
|
|
|
6,200 |
|
|
|
6,200 |
|
Restructuring and other costs, net |
|
800 |
|
|
|
800 |
|
|
|
11,900 |
|
|
|
11,900 |
|
Depreciation |
|
2,100 |
|
|
|
2,100 |
|
|
|
9,700 |
|
|
|
9,700 |
|
Total other income (expense), net |
|
(1,900 |
) |
|
|
(1,900 |
) |
|
|
(7,500 |
) |
|
|
(7,500 |
) |
Provision for income taxes |
|
5,000 |
|
|
|
5,000 |
|
|
|
13,000 |
|
|
|
13,000 |
|
Adjusted
EBITDA |
$ |
9,500 |
|
|
$ |
13,500 |
|
|
$ |
34,400 |
|
|
$ |
38,400 |
|
GAAP net loss
margin |
|
-18 |
% |
|
|
-11 |
% |
|
|
-20 |
% |
|
|
-18 |
% |
Adjusted EBITDA
margin |
|
13 |
% |
|
|
18 |
% |
|
|
12 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CERENCE INC.Reconciliations of GAAP
Financial Measures to Non-GAAP Financial Measures
(cont.)(unaudited - in thousands, except per share
data)
|
Q4 2023 |
|
|
FY2023 |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
GAAP net loss |
$ |
(12,700 |
) |
|
$ |
(8,700 |
) |
|
$ |
(57,500 |
) |
|
$ |
(53,500 |
) |
Stock-based compensation |
|
11,800 |
|
|
|
11,800 |
|
|
|
43,600 |
|
|
|
43,600 |
|
Amortization of intangibles |
|
600 |
|
|
|
600 |
|
|
|
6,200 |
|
|
|
6,200 |
|
Restructuring and other costs, net |
|
800 |
|
|
|
800 |
|
|
|
11,900 |
|
|
|
11,900 |
|
Loss on debt extinguishment |
|
- |
|
|
|
- |
|
|
|
1,300 |
|
|
|
1,300 |
|
Non-cash interest expense |
|
1,400 |
|
|
|
1,400 |
|
|
|
2,900 |
|
|
|
2,900 |
|
Other |
|
- |
|
|
|
- |
|
|
|
(900 |
) |
|
|
(900 |
) |
Adjustments to income tax expense |
|
1,400 |
|
|
|
1,400 |
|
|
|
6,600 |
|
|
|
6,600 |
|
Non-GAAP net
income |
$ |
3,300 |
|
|
$ |
7,300 |
|
|
$ |
14,100 |
|
|
$ |
18,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS: |
|
|
|
|
|
|
|
|
|
|
|
GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to common shareholders - basic and diluted |
$ |
(12,700 |
) |
|
$ |
(8,700 |
) |
|
$ |
(57,500 |
) |
|
$ |
(53,500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Numerator: |
|
|
|
|
|
|
|
|
|
|
|
Net income attributed to common shareholders - basic and
diluted |
$ |
3,300 |
|
|
$ |
7,300 |
|
|
$ |
14,100 |
|
|
$ |
18,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic and diluted |
|
40,400 |
|
|
|
40,400 |
|
|
|
40,200 |
|
|
|
40,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Denominator: |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding- basic |
|
40,400 |
|
|
|
40,400 |
|
|
|
40,200 |
|
|
|
40,200 |
|
Adjustment for diluted shares |
|
1,200 |
|
|
|
1,200 |
|
|
|
400 |
|
|
|
400 |
|
Weighted-average common shares outstanding - diluted |
|
41,600 |
|
|
|
41,600 |
|
|
|
40,600 |
|
|
|
40,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net loss per share - diluted |
$ |
(0.31 |
) |
|
$ |
(0.22 |
) |
|
$ |
(1.43 |
) |
|
$ |
(1.33 |
) |
Non-GAAP net income per share - diluted |
$ |
0.08 |
|
|
$ |
0.18 |
|
|
$ |
0.35 |
|
|
$ |
0.45 |
|
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