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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 22, 2021

 

CERENCE INC.

(Exact name of Registrant as Specified in Its Charter)

 

 

Delaware		001-39030		83-4177087
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)
1 Burlington Woods Drive, Suite 301A Burlington, Massachusetts				01803
(Address of Principal Executive Offices)				(Zip Code)

Registrant’s Telephone Number, Including Area Code: (857) 362-7300

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, $0.01 par value		CRNC		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

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Item 2.02 Results of Operations and Financial Condition.

On November 22, 2021, Cerence Inc. (the "Company") announced its financial results for the fiscal year ended September 30, 2021. The press release, including the financial information contained therein, is attached hereto as Exhibit 99.1, and is incorporated herein by reference.

Also on November 22, 2021, the Company used a presentation on its call with investors, discussing its financial results for the fiscal year ended September 30, 2021, and such earnings release presentation is furnished herewith as Exhibit 99.2. The press release and earnings release presentation include certain non-GAAP financial measures. A description of the non-GAAP measures, the reasons for their use, and GAAP to non-GAAP reconciliations are included in the press release and earnings release presentation.

The information in this Item 2.02 and the exhibit attached hereto are being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number		Description
99.1		Press Release announcing financial results dated November 22, 2021
99.2		Earnings Release Presentation dated November 22, 2021
104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Cerence Inc.
Date: November 22, 2021		By:	/s/ Mark Gallenberger
			Name: Mark Gallenberger
			Title: Chief Financial Officer

 

 

Exhibit 99.1

 

Cerence Announces Fourth Quarter and Fiscal Year 2021 Results

Fourth Quarter and Fiscal Year Highlights

BURLINGTON, Mass., November 22, 2021 – 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)

 

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

 

 

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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:

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 Call

The 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

 

 

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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 Statements

Statements 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 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.

 

 

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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.

 

 

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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:

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:

 

 

 

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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 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 September 30, 2021, our management has reviewed the following KPIs, each of which is described below:

 

 

 

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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 Information

Rich Yerganian

Cerence Inc.

Tel: 617-987-4799

Email: richard.yerganian@cerence.com

 

 

 

 

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CERENCE INC.

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CERENCE INC.

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CERENCE INC.

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CERENCE INC.

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CERENCE INC.

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CERENCE INC.

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

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CERENCE INC.

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

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CERENCE INC.

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Cerence Q4FY21 Earnings Call Presentation November 22, 2021 © 2021 Cerence Inc. Sanjay Dhawan, CEO Mark Gallenberger, CFO Rich Yerganian, VP of IR Exhibit 99.2

Forward-Looking Statements This material and any oral statements made in connection with this material include "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Statements made which provide the Company’s or management’s intentions, beliefs, expectations or predictions for the future are forward-looking statements and are inherently uncertain. The opinions, forecasts, projections or other statements other than statements of historical fact, including, without limitation, plans and objectives of management of the Company are forward-looking statements. It is important to note that actual results could differ materially from those discussed in such forward-looking statements. Important factors that could cause actual results to differ materially include the risk factors and other cautionary statements contained from time to time in the Company’s SEC filings, which may be obtained by contacting the Company or the SEC. These filings are also available through the Company’s web site at http://www.cerence.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

Cerence Delivers Strong Q4FY21….. Exceeded quarterly guidance on nearly all profitability metrics despite industry headwinds NOTE: Refer to the Appendix for more information on GAAP to non-GAAP reconciliations $0.20 GAAP EPS -diluted $0.66 Non-GAAP EPS -diluted 75.4% GAAP Gross Margin 78.1% Non-GAAP Gross Margin $8.0M GAAP Net Income $38.8M 39.6% Adjusted EBITDA $98.1M Revenue 7.5% Year Over Year Growth 3

… and Fiscal Year 2021 Met or exceeded original guidance on all metrics despite semi-shortages NOTE: Refer to the Appendix for more information on GAAP to non-GAAP reconciliations $1.17 GAAP EPS -diluted $2.53 Non-GAAP EPS -diluted 73.9% GAAP Gross Margin 77.3% Non-GAAP Gross Margin $45.9M GAAP Net Income $155.9M 40.3% Adjusted EBITDA $387.2M Revenue 17% Year Over Year Growth 4 $590M Bookings

Innovation is Key to Future Growth New Product Launches FY21 Karaoke Ride Just Talk Connect Browse Tour Guide EVD Swype Drive 2.0 Extend Building Mobility Look

Industry Recognition of Cerence Leadership Baidu Maps Award Jin Yan (Golden Wild Goose) Awards Gaogong Auto Golden Globe Award Automotive News PACE Award 2021 Project Voice Awards Informa Tech Automotive Award Best Ecological Cooperation Developer of 2020 Leading Intelligent Voice Supplier Award -first half year of 2021 voice supply share leader 2021 China AI Innovative Technology Award 2021 China AI Innovative Enterprise For Cerence Pay, Cerence’s In-Car Payment Product Outstanding Achievement of the Year Voice Developer of the Year Sanjay Dhawan named Voice/AI Executive of the Year Independent Voice AI Company of the Year Automotive Voice AI Developer of the Year Best Use of Synthetic Voices Software Supplier of the Year

Key win in the two-wheeler market First win in the building mobility market Strong bookings for new products and services 14 new logo wins, including 5 competitive takeaways (3 in China) Record number of 174 SoPs (Start of Production) Building a Strong Foundation for Growth

KPIs Indicate Sustainable Growth Potential 81% Repeatable software revenue contribution (TTM) +20% Change in number of Cerence cloud-connected cars shipped (TTM over prior year TTM change in auto production for the same period according to IHS data is 9%) +8% Growth in billings per car (TTM over prior year TTM, and excludes legacy contract) Of worldwide Auto production with Cerence Technology (TTM) Average Contract Duration in years (TTM) 53% 7.9 NOTE: Refer to the Appendix for more information on KPI definitions

Adoption KPIs on a Strong Positive Trend Covid-19 Impact Transactions are defined as the number of initiated user interactions with the Company's cloud computing platforms.

Long-Term Goal | Key Provider of AI for Mobility Road Cabin Driver

11 Financial Summary Financial Summary

12 Footnote: Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations Q4 Exceeded Guidance on Most Profitability Metrics

Revenue Growth Powered by License and Pro Services 1Fixed license revenue includes prepaid and minimum commitment deals. 2Excluding a one-time accounting adjustment of $1.7M to correct an amortization schedule, year-over-year growth would have been 18%

14 Footnote: Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations FY21 Exceeded Guidance on Nearly All Metrics

Revenue Growth Powered by License and Pro Services 1Fixed license revenue includes prepaid and minimum commitment deals. 2Excluding a one-time accounting adjustment of $1.7M to correct an amortization schedule, year-over-year growth would have been 36%

Backlog Increased by $200M to a Record of Approximately $2 Billion (1) These figures are estimates and based on existing customer contracts and management estimates about future vehicle shipments. The revenue that we actually recognize from our backlog is subject to several factors, including the number and timing of vehicles our customers ship, potential terminations or changes in scope of customer contracts and currency fluctuations Backlog as of September 30, 20211 24 Enables High Revenue Visibility and Stability

Legacy Contract Revenue Schedule Legacy (Toyota) contract dates back to 2013 One-off contract for providing connected services Customer transitioned to “New” connected services model $M

FY22 Full Year Guidance Footnote: (a) Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations (b) Pro forma adjusted growth rate excluding the $23M decline in legacy connected revenue in FY22

Q1FY22 Guidance Footnote: Non-GAAP excludes acquisition-related costs, amortization of acquired intangible assets, restructuring expense, and stock-based compensation.  Refer to the Appendix for more information on GAAP to non-GAAP reconciliations

Thank you. 20 © 2021 Cerence Inc.

Appendix 21

Non-GAAP Financial Measures – Definitions 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 and twelve 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.  

Non-GAAP Financial Measures – Definitions 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 recent years, 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: 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. 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. 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.

Non-GAAP Financial Measures – Definitions 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 follow (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. 24

KPI Measures – Definitions 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 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 trailing twelve month comparison while excluding legacy contract and adjusted for prepay usage.

Q4FY21 Reconciliations of GAAP to non-GAAP Results (unaudited - in thousands, except per share data) (unaudited - in thousands, except per share data) 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% 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

Calculation of Repeatable Revenue Software Contribution (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%

Q1FY22 and FY22 Reconciliations of GAAP to non-GAAP Guidance (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%

Q1FY22 and FY22 Reconciliations of GAAP to non-GAAP Guidance (unaudited - in thousands, except per share data)