Headlines

Strong Core Business drives revenue and profitability
Cerence Co-Pilot wins four more customers, including two win-backs
Cerence Ride wins three more design awards for two-wheelers
Investor Day sets "Destination Next" long-term growth strategy

BURLINGTON, Mass., Feb. 08, 2023 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ:CRNC), AI for a world in motion, today reported its first quarter fiscal year 2023 results for the quarter ended December 31, 2022.

Results Summary ⁽¹⁾

(in millions, except per share data)

	Three Months Ended
	December 31,
	2022				2021
GAAP Revenue		$83.7				$94.4
GAAP Gross Margin			68.7	%			74.3	%
Non-GAAP Gross Margin			70.4	%			77.5	%
GAAP Operating Margin			-2.4	%			24.3	%
Non-GAAP Operating Margin			20.5	%			36.8	%
GAAP Net (Loss) Income		$(2.2		)		$19.0
Non-GAAP Net Income		$14.2				$25.3
Adjusted EBITDA		$19.7				$36.9
Adjusted EBITDA Margin			23.5	%			39.1	%
GAAP Net (Loss) Income per Share - diluted		$(0.05		)		$0.47
Non-GAAP Net Income per Share - diluted		$0.36				$0.59

⁽¹⁾Please refer to the "Discussion of Non-GAAP Financial Measures" and "Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures" included elsewhere in this release for more information regarding our use of non-GAAP financial measures.

Stefan Ortmanns, Chief Executive Officer at Cerence, commented, "We had a strong start to the fiscal year with revenue higher than projected in the core business due to stronger than expected contributions from connected services, professional services, and fixed contracts. The amount of fixed contracts are within the framework of the $40M targeted for the full fiscal year. Consumption of fixed contracts were lower than expected as well. The higher revenue for the quarter resulted in better-than-expected financial results."

"We had a number of key design wins in the quarter in both the automotive and two-wheeler markets, including two win-backs from competitors," continued Ortmanns. "These wins for Cerence Co-Pilot and Cerence Ride are important indicators of our future growth and our ability to meet the multi-year targets we set forth at our investor day event."

"While our customers are still navigating a cloudy macro environment due to issues such as semiconductor shortages, we remain confident in our full-year guidance. We remain focused on innovation, execution and delivery as we march toward Destination Next for Cerence," 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		Q1FY23
Percent of worldwide auto production with Cerence Technology (TTM)		52%
Average contract duration - years (TTM):		6.8
Repeatable software contribution (TTM):		73%
Change in number of Cerence connected cars shipped²(TTM over prior year TTM)		(7%)
Change in billings per car³(TTM over prior year TTM) (excludes Legacy contract⁴)		(2%)

(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 6% over the same time period ended on December 31, 2022.

(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.

Second Quarter Fiscal Year 2023 Outlook

For the fiscal quarter ending March 31, 2023, revenue is expected to be in the range of $64 million to $68 million. Adjusted EBITDA is expected to be in the range of approximately $1 million to $4 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 $275 million to $290 million. Adjusted EBITDA is expected to be in the range of approximately $27 million to $34 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.

First 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 website 90 minutes following the conference call at https://www.cerence.com/investors/events-and-resources.

Forward Looking Statements

Statements in this presentation regarding: Cerence's future performance, results and financial condition; expected growth; multi-year targets; 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; cost efficiency initiatives; 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; fluctuating currency rates and interest rates; inflation; 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.

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 months ended December 31, 2022 and 2021, our management has either included or excluded the following items in general categories, each of which is described below.

Adjusted EBITDA

Adjusted EBITDA is defined as net income attributable to Cerence Inc. before net income (loss) attributable to income tax (benefit) expense, other income (expense) items, net, depreciation and amortization expense, and excluding acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs, net or impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets, if any. From time to time we may exclude from Adjusted EBITDA the impact of events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance. Other income (expense) items, net include interest expense, interest income, and other income (expense), net (as stated in our Condensed Consolidated Statement of Operations). Our management and Board of Directors use this financial measure to evaluate our operating performance. It is also a significant performance measure in our annual incentive compensation programs.

Restructuring and other costs, net.

Restructuring and other charges, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business such as employee severance costs, costs for consolidating duplication facilities, and separation costs directly attributable to the Cerence business becoming a standalone public company.

Acquisition-related costs, net.

In the past, we have completed a number of acquisitions, which result in operating expenses, which would not otherwise have been incurred. We provide supplementary non-GAAP financial measures, which exclude certain transition, integration and other acquisition-related expense items resulting from acquisitions, to allow more accurate comparisons of the financial results to historical operations, forward looking guidance and the financial results of less acquisitive peer companies. We consider these types of costs and adjustments, to a great extent, to be unpredictable and dependent on a significant number of factors that are outside of our control. Furthermore, we do not consider these acquisition-related costs and adjustments to be related to the organic continuing operations of the acquired businesses and are generally not relevant to assessing or estimating the long-term performance of the acquired assets. In addition, the size, complexity and/or volume of past acquisitions, which often drives the magnitude of acquisition related costs, may not be indicative of the size, complexity and/or volume of future acquisitions. By excluding acquisition-related costs and adjustments from our non-GAAP measures, management is better able to evaluate our ability to utilize our existing assets and estimate the long-term value that acquired assets will generate for us. We believe that providing a supplemental non-GAAP measure, which excludes these items allows management and investors to consider the ongoing operations of the business both with, and without, such expenses.

These acquisition-related costs fall into the following categories: (i) transition and integration costs; (ii) professional service fees and expenses; and (iii) acquisition-related adjustments. Although these expenses are not recurring with respect to past acquisitions, we generally will incur these expenses in connection with any future acquisitions. These categories are further discussed as follows:

(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 December 31, 2022, our management has reviewed the following KPIs, each of which is described below:

Percent of worldwide auto production with Cerence Technology: The number of Cerence enabled cars shipped as compared to IHS Markit car production data.
Average contract duration: The weighted average annual period over which we expect to recognize the estimated revenues from new license and connected contracts signed during the quarter, calculated on a trailing twelve months ("TTM") basis and presented in years.
Repeatable software contribution: The percentage of repeatable revenues as compared to total GAAP revenue in the quarter on a TTM basis. Repeatable revenues are defined as the sum of License and Connected Services revenues.
Change in number of Cerence connected cars shipped: The year over year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis.
Growth in billings per car: The rate of growth calculated from the average billings per car based on a TTM basis, excluding 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, 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 Information

Rich Yerganian

Senior Vice President of Investor Relations

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

CERENCE INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended
	December 31,
	2022			2021
Revenues:
License	$	45,417		$	46,850
Connected services		18,394			28,159
Professional services		19,847			19,417
Total revenues		83,658			94,426
Cost of revenues:
License		1,614			721
Connected services		6,542			5,724
Professional services		17,924			15,903
Amortization of intangible assets		103			1,879
Total cost of revenues		26,183			24,227
Gross profit		57,475			70,199
Operating expenses:
Research and development		29,494			25,792
Sales and marketing		9,162			5,879
General and administrative		14,257			7,527
Amortization of intangible assets		2,350			3,154
Restructuring and other costs, net		4,189			4,915
Total operating expenses		59,452			47,267
(Loss) income from operations		(1,977	)		22,932
Interest income		870			90
Interest expense		(3,514	)		(3,427	)
Other income (expense), net		3,713			(252	)
(Loss) income before income taxes		(908	)		19,343
Provision for income taxes		1,250			299
Net (loss) income	$	(2,158	)	$	19,044
Net (loss) income per share:
Basic	$	(0.05	)	$	0.49
Diluted	$	(0.05	)	$	0.47
Weighted-average common share outstanding:
Basic		39,962			38,839
Diluted		39,962			44,370

CERENCE INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

	December 31,			September 30,
	2022			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	90,657			94,847
Marketable securities		16,515			20,317
Accounts receivable, net of allowances of $171 and $157		66,438			45,073
Deferred costs		7,784			7,098
Prepaid expenses and other current assets		60,884			60,184
Total current assets		242,278			227,519
Long-term marketable securities		13,066			11,584
Property and equipment, net		36,947			37,707
Deferred costs		21,818			22,451
Operating lease right of use assets		16,184			14,702
Goodwill		901,963			890,802
Intangible assets, net		7,713			9,700
Deferred tax assets		53,939			51,989
Other assets		54,380			52,039
Total assets	$	1,348,288		$	1,318,493
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	19,103		$	10,372
Deferred revenue		75,822			72,662
Short-term operating lease liabilities		5,759			5,071
Short-term debt		12,500			10,938
Accrued expenses and other current liabilities		52,156			47,990
Total current liabilities		165,340			147,033
Long-term debt		267,346			259,436
Deferred revenue, net of current portion		162,293			165,972
Long-term operating lease liabilities		12,067			11,375
Other liabilities		21,391			21,727
Total liabilities		628,437			605,543
Stockholders' Equity:
Common stock, $0.01 par value, 560,000 shares authorized; 40,017 and 39,430 shares issued and outstanding, respectively		400			394
Accumulated other comprehensive loss		(24,450	)		(33,737	)
Additional paid-in capital		1,023,467			1,029,542
Accumulated deficit		(279,566	)		(283,249	)
Total stockholders' equity		719,851			712,950
Total liabilities and stockholders' equity	$	1,348,288		$	1,318,493

CERENCE INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Three Months Ended
	December 31,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(2,158	)	$	19,044
Adjustments to reconcile net (loss) income to net cash (used in) provided by operations:
Depreciation and amortization		5,008			7,210
Benefit from credit loss reserve		-			(418	)
Stock-based compensation		12,472			5,841
Non-cash interest expense		444			1,301
Deferred tax benefit		(164	)		(1,455	)
Other		(5,980	)		551
Changes in operating assets and liabilities:
Accounts receivable		(16,651	)		7,555
Prepaid expenses and other assets		3,261			(19,707	)
Deferred costs		1,586			1,509
Accounts payable		7,820			(3,153	)
Accrued expenses and other liabilities		(255	)		(2,797	)
Deferred revenue		(7,501	)		(10,336	)
Net cash (used in) provided by operating activities		(2,118	)		5,145
Cash flows from investing activities:
Capital expenditures		(683	)		(4,410	)
Purchases of marketable securities		(7,081	)		(3,593	)
Sale and maturities of marketable securities		9,500			5,706
Other investing activities		(219	)		559
Net cash provided by (used in) investing activities		1,517			(1,738	)
Cash flows from financing activities:
Payments for long-term debt issuance costs		(403	)		-
Principal payments of long-term debt		(1,563	)		(1,563	)
Common stock repurchases for tax withholdings for net settlement of equity awards		(2,643	)		(44,573	)
Principal payment of lease liabilities arising from a finance lease		(165	)		(155	)
Proceeds from the issuance of common stock		1,723			32,139
Net cash used in financing activities		(3,051	)		(14,152	)
Effects of exchange rate changes on cash and cash equivalents		(538	)		(447	)
Net change in cash and cash equivalents		(4,190	)		(11,192	)
Cash and cash equivalents at beginning of period		94,847			128,428
Cash and cash equivalents at end of period	$	90,657		$	117,236

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures

(unaudited - in thousands)

	Three Months Ended
	December 31,
	2022			2021
GAAP revenue	$	83,658		$	94,426

GAAP gross profit	$	57,475		$	70,199
Stock-based compensation		1,349			1,092
Amortization of intangible assets		103			1,879
Non-GAAP gross profit	$	58,927		$	73,170
GAAP gross margin		68.7	%		74.3	%
Non-GAAP gross margin		70.4	%		77.5	%

GAAP operating (loss) income	$	(1,977	)	$	22,932
Stock-based compensation*		12,472			1,841
Amortization of intangible assets		2,453			5,033
Restructuring and other costs, net*		4,189			4,915
Non-GAAP operating income	$	17,137		$	34,721
GAAP operating margin		-2.4	%		24.3	%
Non-GAAP operating margin		20.5	%		36.8	%

GAAP net (loss) income	$	(2,158	)	$	19,044
Stock-based compensation*		12,472			1,841
Amortization of intangible assets		2,453			5,033
Restructuring and other costs, net*		4,189			4,915
Depreciation		2,555			2,177
Total other income (expense), net		1,069			(3,589	)
Provision for income taxes		1,250			299
Adjusted EBITDA	$	19,692		$	36,898
GAAP net (loss) income margin		-2.6	%		20.2	%
Adjusted EBITDA margin		23.5	%		39.1	%
* - $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
	December 31,
	2022			2021
GAAP net (loss) income	$	(2,158	)	$	19,044
Stock-based compensation*		12,472			1,841
Amortization of intangible assets		2,453			5,033
Restructuring and other costs, net*		4,189			4,915
Non-cash interest expense		444			1,301
Indemnification asset release		-			1,302
Adjustments to income tax expense		(3,184	)		(8,108	)
Non-GAAP net income	$	14,216		$	25,328

Adjusted EPS:
GAAP Numerator:
Net (loss) income attributed to common shareholders - basic	$	(2,158	)	$	19,044
Interest on Convertible Senior Notes, net of tax		-			1,911
Net (loss) income attributed to common shareholders - diluted	$	(2,158	)	$	20,955

Non-GAAP Numerator:
Net income attributed to common shareholders - basic	$	14,216		$	25,328
Interest on Convertible Senior Notes, net of tax		-			1,019
Net income attributed to common shareholders - diluted	$	14,216		$	26,347

GAAP Denominator:
Weighted-average common shares outstanding - basic		39,962			38,839
Adjustment for diluted shares		-			5,531
Weighted-average common shares outstanding - diluted		39,962			44,370

Non-GAAP Denominator:
Weighted-average common shares outstanding- basic		39,962			38,839
Adjustment for diluted shares		-			5,531
Weighted-average common shares outstanding - diluted		39,962			44,370

GAAP net (loss) income per share - diluted	$	(0.05	)	$	0.47
Non-GAAP net income per share - diluted	$	0.36		$	0.59

GAAP net cash (used in) provided by operating activities	$	(2,118	)	$	5,145
Capital expenditures		(683	)		(4,410	)
Free Cash Flow	$	(2,801	)	$	735
* - $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)

	Q1FY23			Q4FY22		Q3FY22		Q2FY22
GAAP revenues	$	83,658		$	58,144	$	89,041	$	86,280
Less: Professional services revenue		19,847			21,048		22,599		20,646
Non-GAAP Repeatable revenues	$	63,811		$	37,096	$	66,442	$	65,634

GAAP revenues TTM	$	317,123
Less: Professional services revenue TTM		84,140
Non-GAAP Repeatable revenues TTM	$	232,983
Repeatable software contribution		73	%

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

(unaudited - in thousands)

	Q2 2023						FY2023
	Low			High			Low			High
GAAP revenue	$	64,000		$	68,000		$	275,000		$	290,000

GAAP gross profit	$	38,200		$	42,200		$	172,300		$	187,300
Stock-based compensation		1,300			1,300			5,400			5,400
Amortization of intangible assets		100			100			400			400
Non-GAAP gross profit	$	39,600		$	43,600		$	178,100		$	193,100
GAAP gross margin		60	%		62	%		63	%		65	%
Non-GAAP gross margin		62	%		64	%		65	%		67	%

GAAP operating loss	$	(23,700	)	$	(20,200	)	$	(49,500	)	$	(42,500	)
Stock-based compensation		12,400			12,400			49,500			49,500
Amortization of intangible assets		2,500			2,500			6,100			6,100
Restructuring and other costs, net		6,500			6,500			9,800			9,800
Non-GAAP operating (loss) income	$	(2,300	)	$	1,200		$	15,900		$	22,900
GAAP operating margin		-37	%		-30	%		-18	%		-15	%
Non-GAAP operating margin		-4	%		2	%		6	%		8	%

GAAP net loss	$	(32,300	)	$	(28,800	)	$	(69,700	)	$	(62,700	)
Stock-based compensation		12,400			12,400			49,500			49,500
Amortization of intangible assets		2,500			2,500			6,100			6,100
Restructuring and other costs, net		6,500			6,500			9,800			9,800
Depreciation		3,000			3,000			11,100			11,100
Total other income (expense), net		(2,700	)		(2,700	)		(7,100	)		(7,100	)
Provision for income taxes		5,900			5,900			13,100			13,100
Adjusted EBITDA	$	700		$	4,200		$	27,000		$	34,000
GAAP net loss margin		-50	%		-42	%		-25	%		-22	%
Adjusted EBITDA margin		1	%		6	%		10	%		12	%

CERENCE INC.

Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)

(unaudited - in thousands, except per share data)

	Q2 2023						FY2023
	Low			High			Low			High
GAAP net loss	$	(32,300	)	$	(28,800	)	$	(69,700	)	$	(62,700	)
Stock-based compensation		12,400			12,400			49,500			49,500
Amortization of intangibles		2,500			2,500			6,100			6,100
Restructuring and other costs, net		6,500			6,500			9,800			9,800
Non-cash interest expense		500			500			1,900			1,900
Adjustments to income tax expense		3,200			2,400			(600	)		(2,100	)
Non-GAAP net (loss) income	$	(7,200	)	$	(4,500	)	$	(3,000	)	$	2,500

Adjusted EPS:
GAAP Numerator:
Net loss attributed to common shareholders	$	(32,300	)	$	(28,800	)	$	(69,700	)	$	(62,700	)

Non-GAAP Numerator:
Net (loss) income attributed to common shareholders	$	(7,200	)	$	(4,500	)	$	(3,000	)	$	2,500

GAAP Denominator:
Weighted-average common shares outstanding - basic and diluted		40,200			40,200			40,200			40,200

Non-GAAP Denominator:
Weighted-average common shares outstanding - basic and diluted		40,200			40,200			40,200			40,200

GAAP net loss per share - diluted	$	(0.80	)	$	(0.72	)	$	(1.73	)	$	(1.56	)
Non-GAAP net (loss) income per share - diluted	$	(0.18	)	$	(0.11	)	$	(0.07	)	$	0.06

Cerence Announces First Quarter Fiscal Year 2023 Results