Cerence Inc. Files 10-Q for Period Ending December 31, 2023

TL;DR

<b>Cerence Inc. has filed its Q1 2024 10-Q report, detailing financial activities and corporate structure.</b>

AI Summary

Cerence Inc. (CRNC) filed a Quarterly Report (10-Q) with the SEC on February 8, 2024. Cerence Inc. filed its 10-Q report for the quarterly period ended December 31, 2023. The filing covers the first quarter of fiscal year 2024. The company's principal executive offices are located at 25 Mall Road, Suite 416, Burlington, MA 01803. Cerence Inc. was formerly known as Cerence LLC and Diamond SpinCo, LLC. The filing references various credit agreements and debt securities, including convertible senior notes.

Why It Matters

For investors and stakeholders tracking Cerence Inc., this filing contains several important signals. This filing provides investors with the latest financial performance and operational updates for Cerence Inc. for the first quarter of fiscal year 2024. Understanding the details within this 10-Q is crucial for assessing the company's financial health, debt obligations, and strategic direction.

Risk Assessment

Risk Level: medium — Cerence Inc. shows moderate risk based on this filing. The company's financial structure involves multiple credit facilities and convertible senior notes, indicating a degree of financial leverage and complexity that warrants careful monitoring.

Analyst Insight

Review the detailed financial statements and debt disclosures in the 10-Q to understand Cerence Inc.'s current financial position and future obligations.

Key Numbers

• 20231231 — Period End Date (Conformed period of report)
• 20240208 — Filing Date (Filed as of date)
• Q1 — Quarter (Fiscal quarter)
• 001-39030 — SEC File Number (SEC file number)

Key Players & Entities

• Cerence Inc. (company) — Filer name
• 20231231 (date) — Conformed period of report
• 20240208 (date) — Filed as of date
• 25 MALL ROAD, SUITE 416 (address) — Business address street 1
• BURLINGTON (address) — Business address city
• MA (address) — Business address state
• 01803 (address) — Business address zip
• Cerence LLC (company) — Former company name

Forward-Looking Statements

• Cerence will continue to focus on cost-cutting measures to improve profitability. (Cerence Inc.) — medium confidence, target: 2024-09-30
• The company will explore further asset sales to bolster its financial position. (Cerence Inc.) — low confidence, target: 2024-09-30

FAQ

Risk Factors

• Credit Agreements [medium — financial]: The company is party to various credit agreements, including a Senior Secured First Lien Revolving Credit Facility and a Four Year Senior Secured Term Loan Facility.
• Convertible Senior Notes [medium — financial]: Cerence Inc. has issued convertible senior notes, including a 3.00% Convertible Senior Notes Due 2025 and a 1.50% Convertible Senior Notes Due 2028.

Key Dates

• 2023-12-31: Quarter End — End of the reporting period for the 10-Q filing.
• 2024-02-08: Filing Date — Date the 10-Q was officially filed with the SEC.

Glossary

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC). (Provides investors with a timely update on the company's financial performance and condition.)

Convertible Senior Notes

Debt securities that can be converted into shares of the issuer's common stock. (Represents a form of debt financing with potential equity dilution implications.)

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share CRNC The Nasdaq Global Se

Filing Documents

• crnc-20231231.htm (10-Q) — 2040KB
• crnc-ex31_1.htm (EX-31.1) — 16KB
• crnc-ex31_2.htm (EX-31.2) — 16KB
• crnc-ex32_1.htm (EX-32.1) — 8KB
• crnc-ex32_2.htm (EX-32.2) — 8KB
• 0000950170-24-012642.txt (&nbsp;) — 10152KB
• crnc-20231231.xsd (EX-101.SCH) — 1537KB
• crnc-20231231_htm.xml (XML) — 1940KB

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 36 Item 4.

Controls and Procedures

Controls and Procedures 38 PART II. OTHER INFORMATION 39 Item 1.

Legal Proceedings

Legal Proceedings 39 Item 1A.

Risk Factors

Risk Factors 40 Item 5 Other Information 40 Item 6. Exhibits 41

Signatures

Signatures 42 i CAUTIONARY STATEMENT CONCERNIN G FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q ("Form 10-Q"), filed by Cerence Inc. together with its consolidated subsidiaries, "Cerence," the "Company," "we," "us" or "our" unless the context indicates otherwise, contains "forward-looking statements" that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions, plans and projections about our business, operations, industry, financial results, financial condition, strategy, goals or prospects. Forward-looking statements often include words such as "anticipates," "estimates," "expects," "projects," "forecasts," "intends," "plans," "continues," "believes," "may," "will," "goals" and words and terms of similar substance in connection with discussions of our business and future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Although we believe that the forward-looking statements contained in this Form 10-Q are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to: adverse conditions in the automotive industry or the global economy more generally, including as a result of the COVID-19 pandemic, the conflict between Russia and Ukraine and the ongoing conflict between Israel and Hamas, and inflation and rising interest rates; the continuation of the

—FINANCI AL INFORMATION

PART I—FINANCI AL INFORMATION

Condensed Consolidated Financi al Statements

Item 1. Condensed Consolidated Financi al Statements. CERENCE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited) Three Months Ended December 31, 2023 2022 Revenues: License $ 20,823 $ 45,417 Connected services 96,820 18,394 Professional services 20,692 19,847 Total revenues 138,335 83,658 Cost of revenues: License 1,604 1,614 Connected services 7,303 6,542 Professional services 17,325 17,924 Amortization of intangible assets 103 103 Total cost of revenues 26,335 26,183 Gross profit 112,000 57,475 Operating expenses: Research and development 33,306 29,494 Sales and marketing 6,071 9,162 General and administrative 12,793 14,257 Amortization of intangible assets 545 2,350 Restructuring and other costs, net 705 4,189 Total operating expenses 53,420 59,452 Income (loss) from operations 58,580 ( 1,977 ) Interest income 1,432 870 Interest expense ( 3,236 ) ( 3,514 ) Other income, net 1,422 3,713 Income (loss) before income taxes 58,198 ( 908 ) Provision for income taxes 34,341 1,250 Net income (loss) $ 23,857 $ ( 2,158 ) Net income (loss) per share: Basic $ 0.58 $ ( 0.05 ) Diluted $ 0.53 $ ( 0.05 ) Weighted-average common share outstanding: Basic 41,186 39,962 Diluted 49,255 39,962 Refer to accompanying Notes to the unaudited condensed consolidated financial statements. 3 CERENC E INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited) Three Months Ended December 31, 2023 2022 Net income (loss) $ 23,857 $ ( 2,158 ) Other comprehensive income: Foreign currency translation adjustments 4,280 9,162 Pension adjustments, net 27 26 Net unrealized gains on available-for-sale securities 163 99 Total other comprehensive income 4,470

Business

Business Cerence Inc. (referred to in this Quarterly Report on Form 10-Q as "we," "our," "us," "ourselves," the "Company" or "Cerence") is a global, premier provider of AI-powered assistants and innovations for connected and autonomous vehicles. Our customers include all major automobile original equipment manufacturers ("OEMs"), or their tier 1 suppliers worldwide. We deliver our solutions on a white-label basis, enabling our customers to deliver customized virtual assistants with unique, branded personalities and ultimately strengthening the bond between automobile brands and end users. We generate revenue primarily by selling software licenses and cloud-connected services. In addition, we generate professional services revenue from our work with OEMs and suppliers during the design, development and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. Note 2. Significant Accounting Policies Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, as well as those of our wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements. The condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for