UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

CERENCE INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Cerence Inc.

One Burlington Woods Drive

Suite 301A

Burlington, MA 01803

December 30, 2021

Dear Fellow Shareholders:

It was important in 2021 that the company build on the momentum after its first fiscal year as an independent business and the results speak for themselves. The company reported record revenue and surpassed expectations on nearly all key profitability metrics. The company’s leadership team did an exceptional job of navigating the ongoing challenges presented by the continuing impact of COVID-19, to deliver a year in which the company performed well financially, operationally and strategically.

Highlights from the fiscal year included:

COVID-19 has had a dramatic impact on our customers’ ability to produce automobiles thereby providing challenges to our business. This was first due to the shutdown of factories to prevent the spread of the disease, and second, due to shortages of key semiconductor components. With semiconductor content in cars rising at an exponential rate, the shortage of these components will continue to hamper auto production. On a positive note, demand for new cars remains high indicating that as the semiconductor shortage is resolved, production should ramp quickly. Independent third-party research firms expect the situation to improve as calendar year 2022 unfolds.

Our focus for the year ahead is on what the company can control and I am confident that the executive team, now led by Stefan Ortmanns as our new CEO, will continue to execute on a strategy that keeps Cerence as a central player in the evolution, and in some cases revolution, of a car’s infotainment system. The company remains a leader in conversational AI for the car, and we expect to extend that leadership through innovation and focus, even as we apply our core technology into new, adjacent markets.

As many of you are aware, Stefan Ortmanns was recently named the new CEO and a Director when, Sanjay Dhawan, our former CEO, resigned in December. I would like to thank Sanjay for his leadership and contributions and wish him success going forward. We were very fortunate to have someone of Stefan’s caliber in the company to immediately step into the role without disruption to the business. As the leader of the business that accounts for the vast majority of Cerence revenue today, the Board has come to know Stefan very well and has tremendous respect for his technical expertise, organizational leadership and deep customer contacts. We are truly excited about Stefan’s leadership and his ability to set the course for long-term, sustainable, growth for the company.

At the Annual Meeting, shareholders will be asked to vote on the matters described in the accompanying notice of annual meeting and proxy statement, as well as such other business that may properly come before the meeting and any adjournments or postponements thereof. Your vote is very important to us. Please review the instructions for each voting option described in the notice and in the proxy statement. Your prompt cooperation will be greatly appreciated.

Sincerely,

Arun Sarin
Chairman of the Board

Cerence Inc.

One Burlington Woods Drive

Suite 301A

Burlington, MA 01803

NOTICE OF THE 2022 ANNUAL MEETING OF SHAREHOLDERS

Dear Shareholders:

The 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) of Cerence Inc. (the “Company”) will be held on Wednesday, February 2, 2022 at 11:00 a.m. Eastern Time. The 2022 Annual Meeting will be a virtual shareholders meeting at www.proxydocs.com/CRNC being held for the following purposes:

The Board of Directors has fixed the close of business on December 14, 2021 as the record date for determination of shareholders entitled to notice of, and to vote at, the 2022 Annual Meeting and at any adjournments or postponements thereof. A list of shareholders entitled to vote at the 2022 Annual Meeting will be available at One Burlington Woods Drive, Suite 301A, Burlington, MA 01803 on the date of, and for ten days prior to, the 2022 Annual Meeting. To participate in the 2022 Annual Meeting virtually via the Internet, please visit www.proxydocs.com/CRNC. In order to attend, you must register in advance at www.proxydocs.com/CRNC prior to the deadline of February 1, 2022 at 5:00 pm Eastern Time. Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the meeting and will permit you to submit questions. You will not be able to attend the 2022 Annual Meeting in person. For instructions on how to vote your shares, please refer to the section titled “Voting” in the Proxy Statement and the enclosed proxy card.

The Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 accompanies this Notice of the 2022 Annual Meeting and the proxy statement. These documents also may be accessed free of charge at www.proxydocs.com/CRNC.

Please refer to the proxy statement for further information with respect to the business to be transacted at the 2022 Annual Meeting.

By Order of the Board of Directors,

Leanne Fitzgerald

Secretary

Burlington, Massachusetts

December 30, 2021

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS

OF CERENCE INC.

February 2, 2022

This proxy statement (this “Proxy Statement”) is furnished in connection with the solicitation by Cerence Inc. (“we,” “us,” “our,” “Cerence” or the “Company”) on behalf of the Board of Directors (the “Board” or the “Board of Directors”) of proxies for use at the 2022 Annual Meeting of Shareholders of the Company to be held virtually on Wednesday, February 2, 2022 at 11:00 a.m. Eastern Time, at www.proxydocs.com/CRNC (the “2022 Annual Meeting”). We intend to mail this Proxy Statement and the accompanying form of proxy to shareholders, on or about December 30, 2021.

PROXY STATEMENT SUMMARY

This Proxy Statement provides information for shareholders of Cerence, as part of the solicitation of proxies by the Company and its Board of Directors from holders of the outstanding shares of the Company’s common stock (“Common Stock”), for use at the 2022 Annual Meeting.

This summary highlights select information that is provided in more detail throughout this Proxy Statement. This summary does not contain all of the information you should consider before voting. You should read the full Proxy Statement before casting your vote.

2022 Annual Meeting

Voting Items

The following table summarizes the proposals to be considered at the 2022 Annual Meeting and the Board voting recommendations with respect to each proposal.

Business Overview

Cerence builds AI powered virtual assistants for the mobility/transportation market. Our primary target is the automobile market, but our solutions can apply to all forms of transportation, including, but not limited to, two-wheel vehicles, planes, tractors, cruise ships and elevators. Our solutions power natural conversational and intuitive interactions between vehicles, drivers and passengers, and the broader digital world. We are a premier provider of AI-powered assistants and innovations for connected and autonomous vehicles, including one of the world’s most popular software platforms for building automotive virtual assistants, such as “Hey BMW” and “Ni hao Banma”. Our customers include all major automobile original equipment manufacturers (“OEMs”) or their tier 1 suppliers worldwide, including BMW, Daimler, FCA Group, Ford, Geely, GM, Renault-Nissan, SAIC, Toyota, Volkswagen Group, Aptiv, Bosch, Continental, DENSO TEN, NIO, XPeng and Harman. 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 their brands and end users. Our vision is to enable a more enjoyable, safer journey for everyone.

Our platform utilizes industry-leading speech recognition, natural language understanding, speech signal enhancement, text-to-speech, and acoustic modeling technology to provide a conversational AI-based solution. Virtual assistants built with our platform can enable a wide variety of modes of human-vehicle interaction, including speech, touch, handwriting, gaze tracking and gesture recognition, and can support the integration of third-party virtual assistants into the in-vehicle experience.

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Our software platform is a market leader for building integrated, branded and differentiated virtual assistants for automobiles. As a unified platform and common interface for automotive cognitive assistance, our software platform provides OEMs and suppliers with an important control point with respect to the mobility experience and their brand value. Our platform is fully customizable and designed to support our customers in creating their own ecosystem in the automobile and transforming the vehicle into a hub for numerous connected devices and services. Virtual assistants built with our software platform can address user requests across a wide variety of categories, such as navigation, control, media, communication and tools. Our software platform is comprised of edge computing and cloud-connected software components and a software framework linking these components together under a common programming interface. We implement our software platform for our customers through our professional services organization, which works with OEMs and suppliers to optimize our software for the requirements, configurations and acoustic characteristics of specific vehicle models.

Recent Event Highlights

Since October 1, 2019, we have been an independent publicly traded company on The Nasdaq Global Select Market under the symbol “CRNC,” after our former parent company, Nuance Communications, Inc. (“Nuance”), completed the legal and structural separation and distribution to its shareholders of all of our then outstanding shares (the “Spin-Off”).

Our solutions have been installed in more than 400 million automobiles to date, including over 40 million new vehicles in fiscal 2021 alone. Based on royalty reports provided by our customers and third-party reports of total vehicle production worldwide, we estimate that approximately 53% of all shipped cars during the fiscal year ended September 30, 2021 included Cerence technologies. Cerence hybrid solutions shipped on approximately 8.9 million vehicles during the fiscal year ended September 30, 2021. In aggregate, over 65 automobile brands worldwide use our solutions, covering over 70 languages and dialects, including English, German, Spanish, French, Mandarin, Cantonese and Shanghainese.

2021 Performance Update

We completed fiscal year 2021 delivering on our strategic and financial objectives and posting strong operational performance. Some of our highlights include:

Revenue: Our revenue for fiscal year 2021 under generally accepted accounting principles (“GAAP”) was $387.2 million, up 17.0% from $331.0 million in fiscal 2020.

Operating Margin. Our GAAP operating margin in fiscal 2021 was 15.7%, compared to 6.8% in fiscal 2020.

Cash Flow from Operations: Cash flow from operations in fiscal 2021 was $74.4 million, compared to $44.8 million in fiscal 2020.

Stock Performance Chart

Our stock performed well in fiscal 2021 as illustrated in the graph below. The graph below compares the cumulative total shareholder return of our common stock since October 1, 2019 with the Russell 2000 and the S&P Software & Services Select indices. The information presented assumes an initial investment of $100 on October 2, 2019, the date our common stock began regular-way trading on the Nasdaq Global Select Market. The graph shows the value that each of these investments would have had at the end of each quarter.

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The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our Common Stock.

Cerence’s Response to COVID-19

With the onset of the COVID-19 pandemic in 2020, we acted quickly to the circumstances and took multiple measures to promote the health and well-being of our employees in order to support our employees and customers.

Beyond implementing measures, such as enhanced hygiene, cleaning and sanitization protocols and early travel restrictions, we made the decision to have our employees in China work-from-home and then followed with a transition of nearly all of our employees to work-from-home, quickly transforming the way we do business to keep our employees, their families and communities safe. The manner in which we developed our internal systems during our first year as an independent company enabled us to quickly pivot to different work environments in an accelerated manner, while ensuring our employees remain engaged, highly productive and continuing to meet our business objectives and customer commitments.

Corporate Sustainability and Responsibility

We recognize the close connection between our success and our ability to make a positive impact on our customers, employees and our communities. These efforts help to make us an employer of choice and promote our brand, while increasing our ability to continuously improve our technologies and solutions which support profitable and responsible growth. We have recently published our first Environmental, Social and Governance Report (“ESG Report”) on our sustainability page at cerence.com/sustainability. The reference to our ESG Report is not intended to incorporate information in the report or from our website into this Proxy Statement by reference.

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Board of Directors

Our Board of Directors has a diverse mix of directors with complimentary qualifications, skills, expertise, experience and attributes, which is essential to ensuring effective oversight of our business strategy and corporate governance practices. The members of the Board are:

All of our non-employee directors have extensive professional experience. The chart below highlights specific areas in which we believe our directors have particularly deep experience relevant to our current profile and strategic needs.

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We value diversity and believe that diversity among the directors as to professional and personal experiences is desirable, and the chart below highlights the personal diversity of our Board members.

Corporate Governance

We are committed to good corporate governance, which we believe promotes the long-term interests of our shareholders, fosters sustained business success, and strengthens our Board of Directors and management accountability. We have the following practices in place to assist us in managing risk in order to promote the long-term interests of our shareholders.

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VOTING

Each share of Common Stock entitles the holder thereof to one vote on matters to be acted upon at the 2022 Annual Meeting, including the election of directors. Votes cast online or by proxy at the 2022 Annual Meeting will be tabulated by Mediant Communications, Inc., the Inspector of Elections. Any proxy that is voted according to the instructions included in the proxy card will be voted in accordance with the instructions thereon, and if no instructions are given, will be voted: (1) “FOR” the election of the three director nominees described in Proposal One, (2) “FOR” ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm described in Proposal Two, (3) “FOR” approval, on a non-binding, advisory basis, of the compensation of our named executive officers, as disclosed in this Proxy Statement and as described in Proposal Three, and (4) “ONE YEAR” as the preferred frequency for future non-binding, advisory shareholder votes on the compensation of our named executive officers. A shareholder may indicate when it votes by the Internet, by telephone or on the enclosed proxy that it is abstaining from voting on a particular matter (an “abstention”). A broker may indicate that it does not have discretionary authority as to certain shares to vote on a particular matter (a “broker non-vote”). Abstentions and broker non-votes are each tabulated separately.

The Inspector of Elections will determine whether or not a quorum is present at the 2022 Annual Meeting. In general, Delaware law and our By-laws provide that a majority of the shares of Common Stock issued and outstanding and entitled to vote, present online or represented by proxy, constitutes a quorum. Abstentions and broker non-votes of shares that are entitled to vote are treated as shares that are present online or represented by proxy for purposes of determining the presence of a quorum.

For Proposal 1 (Election of Class III Directors), each nominee receiving a majority of the votes cast will be elected. For this purpose, a majority of the votes cast means the number of votes cast for a director nominee must exceed the votes cast against that director nominee, with abstentions and broker non-votes not counted as a vote cast with respect to that director nominee. Each director nominee has provided an irrevocable resignation effective upon such person’s failure to receive a majority of the votes cast in an uncontested election. If such director nominee fails to receive a majority of the votes cast, then the Board shall consider such resignation and may either accept such resignation or reject such resignation and seek to address the underlying cause of the vote. The Board shall decide whether to accept or reject the resignation within 90 days following the certification of the shareholder vote. Once the Board makes this decision, the Company will promptly make a public announcement of the Board’s decision, including, in the event that the Board rejects the resignation, a statement regarding the reasons for its decision.

For Proposal 2 (Ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for fiscal year 2022), an affirmative vote of a majority of the shares of Common Stock, present online or represented by proxy, is required to approve the proposal. In determining whether this proposal has been approved, abstentions are treated as present online or represented by proxy and entitled to vote, but not as voting for such proposal, and hence have the same effect as votes against such proposal. Proposal 2 is considered a routine matter for which brokers have discretionary voting power.

For Proposal 3 (Approval, on a non-binding, advisory basis, of the compensation of our named executive officers), an affirmative vote of a majority of the shares of Common Stock present online or represented by proxy is required to approve the proposal. In determining whether this proposal has been approved, abstentions have no effect on such proposal. Because this proposal is a non-binding, advisory vote, the result will not be binding on our Board, our Compensation Committee, or us. Our Board and our Compensation Committee will consider the outcome of the vote when determining the compensation of our named executive officers. Proposal 3 is considered a non-routine matter for which broker non-votes are not considered to have been voted “For” or “Against” a particular proposal, and therefore will have no effect on Proposal 3.

For Proposal 4 (Indication, on a non-binding, advisory basis, of preferred frequency of future shareholder non-binding, advisory votes on the compensation of our named executive officers), the frequency receiving the highest number of votes from the voting power of shares of Common Stock present online or by proxy and entitled to vote will be considered the frequency preferred by the shareholders. In determining the result, abstentions have no effect on such proposal. Because this proposal is a non-binding, advisory vote, the result will not be binding on our Board, our Compensation Committee, or us. Our Board and our Compensation Committee will consider the outcome of the vote when determining how often we should submit to the shareholders future non-binding,

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advisory votes to approve the compensation of our named executive officers. Proposal 4 is considered a non-routine matter for which broker non-votes are not considered to have been voted “For” or “Against” a particular proposal, and therefore will have no effect on Proposal 4.

All shareholders may vote their shares over the Internet, by telephone or during the annual meeting by going to www.proxydocs.com/CRNC. If you requested and/or received a printed version of the proxy card, you may also vote by mail.

If you hold your shares through a bank, broker or other nominee, please see the materials they sent to you for information about how to vote before the meeting.

If you vote via the Internet or by telephone, your electronic vote authorizes the named proxies in the same manner as if you signed, dated and returned your proxy card. If you vote via the Internet or by telephone, do not return your proxy card.

VIRTUAL ANNUAL MEETING

The 2022 Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The meeting will only be conducted via live webcast.

In order to attend, you must register in advance at www.proxydocs.com/CRNC prior to the deadline of January 31, 2021 at 5:00 p.m. Eastern Time. Upon completing your registration, you will receive further instructions via email, including your unique link that will allow you to access the meeting and you will have the ability to submit questions, and vote at the meeting. Please be sure to follow instructions found on your proxy card, and/or Voting Instruction Form and subsequent instructions that will be delivered to you via email.

RECORD DATE AND SHARE OWNERSHIP

Holders of record of Common Stock as of the close of business on December 14, 2021 have the right to receive notice of and to vote at the 2022 Annual Meeting. On December 14, 2021, the Company had 39,162,339 shares of Common Stock issued and outstanding.

PROXIES

Proxies for use at the 2022 Annual Meeting are being solicited by the Company from its shareholders. Any person giving a proxy in the form accompanying this Proxy Statement has the power to revoke it at any time before its exercise by (1) filing with the Corporate Secretary of the Company a signed written statement revoking his, her or its proxy or (2) submitting an executed proxy bearing a date later than that of the proxy being revoked. A proxy also may be revoked by attendance at the 2022 Annual Meeting and voting online. Attendance at the 2022 Annual Meeting will not by itself constitute the revocation of a proxy.

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SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2023 ANNUAL MEETING OF SHAREHOLDERS

Shareholders may present proper proposals or nominations for consideration at the Company’s 2023 Annual Meeting of Shareholders (the “2023 Annual Meeting”) by submitting their proposals or nominations in writing to the Company’s Corporate Secretary in a timely manner. Our Amended and Restated By-laws require that certain information and acknowledgements with respect to the proposal or nomination be set forth in the shareholder’s notice. A copy of the relevant By-law provision is available upon written request to Cerence Inc., One Burlington Woods Drive, Suite 301A, Burlington, MA 01803, Attention: Investor Relations. In addition, the By-laws were filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on October 2, 2019 and may be accessed through the SEC’s website at www.sec.gov.

Inclusion of Shareholder Proposals in Proxy Statement

Proposals of shareholders that are intended to be presented at the 2023 Annual Meeting must comply with the requirements of SEC Rule 14a-8. A shareholder’s proposal must be delivered to or mailed and received by us no later than September 1, 2022 in order for it to be included in the Company’s proxy statement and form of proxy relating to the 2023 Annual Meeting.

Inclusion of Director Nominees in Proxy Statement

Our By-laws provide that a shareholder, or group of up to 20 shareholders, that has owned continuously for at least three years an aggregate of at least 3% of the outstanding Common Stock, may nominate and include in the Company’s proxy materials director nominees constituting up to the greater of two or 20% of the number of directors in office as of the deadline for such nomination, provided that the shareholder(s) and nominee(s) satisfy the requirements in the By-laws (a “proxy access nomination”). To be timely, a nomination notice and required information must be delivered to or mailed and received by the Company’s Corporate Secretary at our principal executive offices not less than 120 days nor more than 150 days prior to the anniversary of the date that the definitive proxy statement with respect to the preceding year’s annual meeting was first released to shareholders; provided, however, that in the event the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the shareholder to be timely must be so delivered or received no earlier than the 150^th day prior to such annual meeting and not later than the close of business on the later of (1) the 120^th day prior to such annual meeting or (2) the 10^th day following the date on which we publicly announce the meeting date. Assuming the date of our 2023 Annual Meeting is not so advanced or delayed, shareholders who wish to include a director nominee in our 2023 proxy statement must notify us no earlier than August 2, 2022 and no later than the close of business on September 1, 2022. Such notice must provide the information required by our By-laws.

Inclusion of Shareholder Proposals or Nominations in Annual Meeting Agenda but Not in Proxy Statement

A shareholder proposal or a nomination for director to be presented at the 2023 Annual Meeting that is not to be included in the Company’s proxy statement and form of proxy relating to the meeting must be delivered to or mailed and received by the Company’s Corporate Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the date of the immediately preceding annual meeting as first specified in the Company’s notice of meeting; provided, however, that in the event the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the shareholder to be timely must be so delivered or received no earlier than the 120^th day prior to such annual meeting and not later than the close of business on the later of the 90^th day prior to such annual meeting or the 10^th day following the date on which we publicly announce the meeting date. Assuming the date of our 2023 Annual Meeting is not so advanced or delayed, shareholders who wish to include a director nominee in our 2023 proxy statement must notify us no earlier than October 5, 2022 and no later than the close of business on November 4, 2022. Such notice must provide the information required by our By-laws.

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PROXY SOLICITATION COSTS

The expense of solicitation of proxies will be borne by the Company. In addition to solicitation of proxies by mail, certain officers, directors and Company employees, who will receive no additional compensation for their services, may solicit proxies by telephone or in person. The Company is required to request brokers and nominees who hold stock in their name to furnish this proxy material to beneficial owners of the stock and will reimburse such brokers and nominees for their reasonable out-of-pocket expenses in so doing. In addition, we have engaged Proxy Advisory Group LLC to assist in the solicitation of proxies and provide related advice and informational support for a service fee, plus the reimbursement of customary disbursements, which are not to exceed $35,000 in total.

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PROPOSAL ONE

ELECTION OF CLASS III DIRECTORS

Our Board of Directors is currently divided into three classes. Our Amended and Restated Certificate of Incorporation provides that, until the 2023 Annual Meeting (the annual meeting in the year that is three years after the Spin-Off), our Board will be so divided into three classes, with each class consisting, as nearly as may be possible, of one-third of the total number of directors. The directors designated as Class III directors have terms expiring at the 2022 Annual Meeting, and the directors designated as Class I directors stood for election at the 2020 Annual Meeting of Shareholders and have terms expiring at our 2023 Annual Meeting. The directors designated as Class II stood for election at the 2021 Annual Meeting of Shareholders, and have terms expiring at our 2023 Annual Meeting. As a result, beginning at the 2023 Annual Meeting, all of our directors will stand for election each year for annual terms, and our Board will no longer be divided into three classes.

At the 2022 Annual Meeting, three directors will be elected to the Board. The Nominating & Governance Committee of the Board of Directors recommended, and the Board of Directors approved, Stefan Ortmanns, Kristi Ann Matus and Arun Sarin as nominees for election at the 2022 Annual Meeting as Class III directors. The term of office of each person elected as a Class III director will continue until the 2023 Annual Meeting or until a successor has been duly elected and qualified or until his or her earlier resignation or removal.

The names of and certain biographical information about the directors in each of the three classes are set forth below. The information below also includes the specific experience, qualifications, attributes and skills that led to our Board’s conclusion that the nominees should serve as a director of Cerence or, with respect to each director who is not standing for election at the 2022 Annual Meeting, that the Board would expect to consider if it were making a conclusion currently as to whether he or she should serve as a director. There are no family relationships among any of our directors or executive officers.

Information Regarding the Nominees for Election as Class III Directors

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Information Regarding the Continuing Directors

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Recommendation of the Board

THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF STEFAN ORTMANNS, KRISTI ANN MATUS AND ARUN SARIN TO SERVE AS CLASS III DIRECTORS.

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CORPORATE GOVERNANCE

Corporate Governance Overview

We are committed to good corporate governance, which we believe promotes the long-term interests of our shareholders and strengthens our Board of Directors and management accountability. Highlights of our corporate governance practices include the following:

Framework

We have developed a corporate governance framework designed to ensure our Board has the opportunity, authority and practices to review, advise and evaluate our business operations and make decisions independent of management. Our goal is to align the interests of directors, management and shareholders and comply with or exceed the requirement of Nasdaq, and applicable laws and regulations. The framework establishes the practices our Board follows with respect to Board meetings, involvement of senior management, director compensation, CEO performance evaluation, management succession planning and Board committees.

Board Leadership Structure

Our current leadership structure splits the roles of CEO and Chairman, with Mr. Sarin serving as our independent Chairman. Our Corporate Governance Guidelines provide our Board of Directors with flexibility to select the appropriate leadership structure based on the specific needs of our business and the best interests of our shareholders. If the Chairperson of the Board is not independent, the Board will appoint a Lead Independent Director upon the recommendation of the Nominating & Governance Committee, which will be a director who qualifies as independent under the applicable rules of Nasdaq.

Independence of our Board

Having an independent Board is core to our governance practices. Our Board is comprised of seven directors. The Board has determined that Mr. Sarin, Ms. Budnik, Mr. Jha, Ms. Matus and Mr. Nietzel are independent under the director

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independence standards of Nasdaq and the SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In making these determinations, the Board solicited information from each of our directors regarding whether such director, or any member of his or her immediate family, had a direct or indirect material interest in any transaction involving Cerence or its former parent, or received personal benefits outside the scope of such person’s normal consideration.

Key Elements of Board Independence

Corporate Governance Guidelines

The Board is governed by its Corporate Governance Guidelines, which were adopted by the Board in September 2019 and are available under “Governance – Documents & Charters” in the Investors section of our website, www.cerence.com. These guidelines cover, among other items, the following significant topics:

Board Selection Process and Qualifications.    The Nominating & Governance Committee is responsible for reviewing the appropriate skills and characteristics required of prospective Board members and is responsible for recommending to the Board candidates for directorship. The Nominating & Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that will best serve the interests of the Company and its shareholders. Among the criteria the Board may consider are experience and diversity, and, with respect to diversity, the Board may consider such factors as gender, race, ethnicity, differences in professional background, experience at policy making levels in business, finance and technology and other areas, education, skill, and other individual qualities and attributes. The Board endorses the value of seeking qualified directors from backgrounds relevant to the Company’s mission, strategy and business operations and perceived needs of the Board at a given time.

Director’s Eligibility, Education, and Term of Office.    Directors may not serve on the board of directors of more than four other public companies without first obtaining specific approval from the Board. Each director is required to notify the Chairman and the Chair of the Nominating & Governance Committee prior to accepting service on the board of any other company. Each director also is required to notify the Chairman and the Chair of the Nominating & Governance Committee upon a change in principal professional responsibilities. The Nominating & Governance Committee may consider such change of status in recommending to the Board whether the director should continue serving as a member of the Board. The Board encourages, and the Company will reimburse the costs associated with, directors participating in continuing director education. The Board does not presently believe that it should establish term limits or a

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mandatory retirement age, as term limits and mandatory retirement ages may result in the loss of long-serving directors who over time have developed unique and valuable insights into our business and therefore can provide a significant contributions to the Board. As an alternative to term limits or a mandatory retirement age, the Board will routinely evaluate the directors and evaluate the need for changes to Board composition based on an analysis of skills and experience necessary for the Company.

Board Leadership.    The leadership of the Board shall include a Chairman of the Board and, if the Chairman of the Board is not independent, there shall be a Lead Independent Director recommended by the Nominating & Governance Committee who shall be independent under the applicable rules of Nasdaq. The Chairman of the Board or the Lead Independent Director, as applicable, shall serve as the focal point for independent directors in resolving conflicts with the CEO, or other independent directors, and coordinating feedback to the CEO on behalf of independent directors regarding business issues and Board management.

Committees.    The current committee structure of the Board includes the following standing committees: Audit, Compensation and Nominating & Governance. Additional committees may be created or disbanded upon approval of the Board. The Nominating & Governance Committee recommends, and the full Board approves, the composition of the Board’s standing committees. The charter of each standing committee is subject to review periodically to determine that the charter continues to address the purposes for which the committee was formed.

Committees of the Board of Directors

The composition, duties and responsibilities of the standing committees of our Board of Directors are as set forth below. Each of these committees has a written charter approved by our Board. Copies of these committee charters are available, without charge, upon request in writing to Cerence Inc., One Burlington Woods Drive, Suite 301A, Burlington, MA 01803, Attention: Corporate Secretary, or under “Governance – Documents & Charters” in the Investors section of our website, www.cerence.com.

The table below provides current membership for each standing committee of the Board.

Director

Audit

Compensation

Governance and Nominating

Arun Sarin

Thomas Beaudoin

Marianne Budnik

Sanjay Jha

Kristi Ann Matus

Alfred Nietzel

Stefan Ortmanns

  Chair                   Member                   Financial expert

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Functions of the Committees

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Compensation Committee Interlocks and Insider Participation

During fiscal year 2021, Mr. Jha (Chair), Mr. Nietzel and Ms. Budnik served as members of the Compensation Committee. None of the members of the Compensation Committee has been or is an officer or employee of the Company or had any other relationships with us requiring disclosure herein. In addition, none of the Company’s executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on the Board or Compensation Committee.

Meeting Attendance

Each quarter, our Board holds two-day meetings. Committee meetings occur the first day before the Board meeting. At each quarterly Board meeting, time is set aside for the independent directors to meet without management present. Our Board met 11 times during fiscal year 2021.

In fiscal year 2021, the Board and committees of the Board held a total of 31 meetings. Each director attended 100% of the meetings of the full Board and the committees of which they were members in fiscal year 2021.

Although we do not have a formal policy regarding attendance by members of the Board at our annual meeting of shareholders, directors are encouraged to attend the annual shareholders meeting. All directors attended the 2021 Annual Meeting.

Consideration of Director Nominees

The Nominating & Governance Committee will consider properly submitted shareholder nominations for candidates for membership on the Board as well as candidates recommended for consideration by the Nominating & Governance Committee. Any shareholder nominations must comply with the requirements of the Company’s Amended and Restated By-laws. In addition, shareholder nominations should be submitted within the timeframe as specified under Shareholder Proposals and Director Nominations for the 2023 Annual Meeting above for inclusion in the proxy materials or agenda, as appropriate, and addressed to: Cerence Inc., One Burlington Woods Drive, Suite 301A, Burlington, MA 01803, Attention: Corporate Secretary.

A shareholder that instead desires to merely recommend a candidate for consideration by the Nominating & Governance Committee shall direct the recommendation in writing to Cerence Inc., One Burlington Woods Drive, Suite 301A, Burlington, MA 01803, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the nominating person’s ownership of Company stock.

The Board believes that candidates for director should have certain minimum qualifications, including: (1) the highest personal and professional ethics and integrity; (2) skills that are complementary to those of the existing Board; (3) proven achievement and competence in the nominee’s field; (4) relevant expertise upon which to be able to offer meaningful advice and guidance to management and make significant contributions to the Company’s success; (5) sufficient time to devote to affairs of the Company and contribute to the Company’s goals; (6) demonstrated excellence in their field; (7) the ability to exercise sound business judgment; (8) the ability to meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to Audit Committee members; and (9) an understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities.

Communication with the Board of Directors

Although we do not have a formal policy regarding communications with our Board, we have provided instructions so that shareholders who are interested in communicating with our Board will be able to do so by writing to us at Cerence Inc., One Burlington Woods Drive. Suite 301A, Burlington, MA 01803, Attention: Corporate Secretary. Shareholders who would like their submission directed to a particular member of our Board may so specify.

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Code of Business Conduct and Ethics

We have adopted a written Code of Business Conduct and Ethics that is designed to deter wrongdoing and to promote, among other things:

A copy of the Company’s Code of Business Conduct and Ethics is available under “Governance – Documents & Charters” in the Investors section of our website, www.cerence.com.

Derivatives Trading, Hedging and Pledging Policies

We prohibit our employees and members of the Board from speculating in our equity securities, including the use of short sales or any trading in publicly available options or derivative securities with respect to Cerence stock. In addition, we prohibit our employees and members of the Board from purchasing Cerence stock on margin (i.e., borrowing money from a brokerage firm, bank or other entity in order to buy Cerence stock).

Board’s Role in Risk Oversight

The Board has an active role, as a whole and also at the committee level, in overseeing management of Company risk. This role is one of informed oversight rather than direct management of risk. The Board reviews and consults with management on strategic direction, challenges and risks faced by the Company. The Board also reviews and discusses with management quarterly financial results and forecasts. The Audit Committee oversees management of financial risks, including investment and foreign currency fluctuation risk mitigation policies and risks. The Board’s oversight on cybersecurity includes updates from senior management and the Company’s experts in areas such as cybersecurity threats, and technologies and solutions both deployed internally and for the benefit of the Company’s customers, including technologies, and policies and procedures to address these risks. The Compensation Committee of the Board is responsible for overseeing the management of risks relating to and arising from the Company’s compensation plans and arrangements. These committees provide regular reports—generally on a quarterly basis—to the full Board.

Management has responsibility for the direct management and oversight of legal, financial, cybersecurity, privacy and commercial compliance matters, which includes identifying areas of risk and implementing policies, procedures and practices to mitigate the identified risks. Additionally, the CFO and General Counsel provide periodic reports to the Audit Committee concerning financial, tax, legal and compliance related risks and the Company’s experts report to the Board on cybersecurity. Management also provides the Audit Committee with periodic reports on the Company’s compliance programs and efforts, investment policy and practices, and compliance with debt covenants. Management and the Compensation Committee’s compensation consultant provide analysis of risks related to the Company’s compensation programs and practices to the Compensation Committee.

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COMPENSATION OF NON-EMPLOYEE DIRECTORS

In fiscal year 2021, we compensated our non-employee directors with an annual cash retainer of $100,000, plus an annual equity grant with a grant date fair value of $125,000, as well as reimbursement for travel or other expenses incurred in connection with their service. The Chairman of the Board receives an additional annual cash retainer of $80,000, the Chair of the Audit Committee receives an additional annual cash retainer of $15,000, the Chair of the Compensation Committee receives an additional annual cash retainer of $12,500, and the Chair of the Nominating & Governance Committee receives an additional annual cash retainer of $10,000.

Annual equity grants vest in full on the one-year anniversary of the date of grant and the initial sign-on grants vest in equal installments on the first three anniversaries of the date of grant.

FISCAL 2021 DIRECTOR COMPENSATION TABLE

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EXECUTIVE OFFICERS

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

We became a public company on October 1, 2019, and we have previously filed our prior proxy statements under the reduced reporting rules applicable to emerging growth companies. As of the close of fiscal year 2021, we ceased to be an emerging growth company and, therefore, this year we have included additional detail regarding executive compensation that was previously not required.

This Compensation Discussion and Analysis (the “CD&A”) discusses our compensation policies and determinations that apply to our Named Executive Officers. When we refer to our Named Executive Officers, or NEOs, we are referring to the following individuals whose fiscal year 2021 compensation is set forth below in the Fiscal 2021 Summary Compensation Table and subsequent compensation tables.

Mr. Dhawan resigned from his role as President and Chief Executive Officer and as a member of the Board as of December 15, 2021. Dr. Stefan Ortmanns, who previously served as Executive Vice President and General Manager Core Auto BU, was appointed as the new President and Chief Executive Officer and as a member of the Board as of December 15, 2021. Mr. Dhawan is included as a Named Executive Officer in this Proxy Statement pursuant to applicable SEC rules.

While the discussion in the CD&A is focused on our NEOs, many of our executive compensation programs apply broadly across our senior leadership team.

Executive Summary

Fiscal Year 2021 Financial Highlights

Notwithstanding ongoing challenges due to the impact of the semiconductor shortage on auto production and continuing headwinds due to the pandemic, fiscal year 2021 was a strong year for the Company.

New CEO Compensation Arrangements

Dr. Stefan Ortmanns was appointed as our President and Chief Executive Officer effective December 15, 2021. In his capacity as President and CEO, Dr. Ortmanns will receive a base salary of EUR 530,000. In addition, Dr. Ortmanns will be eligible to participate in the Company’s Short Term Incentive Plan (“STIP”) with a target opportunity equal to 100% of his base salary and a maximum opportunity equal to 200% of his base salary. Further, Dr. Ortmanns will be eligible for

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a grant of long-term incentive awards under the Company’s 2019 Equity Incentive Plan (the “Plan”), with the type and form of any such awards and the relevant terms and conditions to be determined by the Compensation Committee at the time of grant. Subject to the approval of the Compensation Committee, with respect to fiscal year 2022, Dr. Ortmanns will receive a long-term incentive award with a target aggregate value of $5,000,000. Such award will consist of 50% time-based restricted stock units (“RSUs”) and 50% performance-based restricted stock units (“PSUs”). Dr. Ortmanns also will receive an EUR 200,000 sign-on bonus, which will be repayable to the Company if Dr. Ortmanns voluntarily leaves the Company or his employment is terminated for “cause” within one year following his appointment as CEO.

Dr. Ortmann’s compensation package as President and CEO was determined by the Compensation Committee in consultation with the Compensation Committee’s independent compensation consultant FW Cook, and after reviewing benchmarking for similar roles.

Shareholder Engagement

The Compensation Committee, and the Board of Directors, remain committed to a pay-for-performance philosophy tying compensation to the achievement of the Company’s operational, financial, and strategic objectives that are core to the creation of sustainable long-term shareholder value. As a high-growth technology company in a highly dynamic and competitive sector, it is critically important that we maintain a market-competitive executive compensation program that enables us to attract and retain talent, both at the senior leadership level and throughout the Company.

We value the views of our shareholders and intend to maintain a compensation framework that is both responsive to investor expectations and in line with sound governance practices. During the fall of 2021, for the first time as an independent company, we conducted a formal shareholder outreach process specifically in the context of our executive compensation program.

We reached out to our 20 largest investors representing 64.8% of our outstanding shares of Common Stock, as well as the major proxy advisory firms. Most investors indicated that a meeting on executive compensation matters was not required at this time, but we had the opportunity to meet with representatives from one large institutional shareholder, Institutional Shareholder Services (ISS) and Glass Lewis. We discussed a range of topics, including our response to the COVID-19 pandemic, our corporate governance and executive compensation practices, and potential changes to our incentive compensation program.

Each meeting was led by a member of the Compensation Committee and a summary of the discussion topics is provided below. The feedback from the meetings was shared with the full Board.

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Please see discussion under “Fiscal Year 2022 Compensation Program Changes” for a summary of the changes being made to the Company’s short-term and long-term incentive programs to align our compensation design with the feedback received from our shareholders.

Key Fiscal Year 2021 Compensation Actions

The primary elements of our total direct compensation program for Mr. Dhawan, our former CEO, and the other NEOs and a summary of the actions taken by the Compensation Committee during fiscal year 2021 are set forth below.

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Our Executive Compensation Philosophy

The Compensation Committee believes that our executive compensation program should reward actions and behaviors that drive shareholder value creation. The Compensation Committee seeks to foster these objectives through a compensation system that focuses heavily on variable, performance- based incentives that create a balanced focus on our short-term and long-term financial, operational and strategic goals. To that end, the Compensation Committee’s goal is to implement an executive compensation program that is built upon the following objectives:

The targeted mix of total direct compensation we established at the beginning of fiscal year 2021 for Mr. Dhawan, our former CEO, and the other NEOs is illustrated below. We believe the mix of compensation, the allocation between cash and equity, the time horizon between short-term and long-term, and the differentiation between fixed and variable compensation collectively provide appropriate incentives to motivate near-term performance, while providing significant incentives to keep executives focused on longer-term corporate goals that drive shareholder value.

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The table below describes the Company’s pay components, along with the role and factors for determining each pay component applicable to our NEOs in fiscal year 2021.

Compensation Governance

We are committed to good compensation governance, which we believe promotes the long-term interests of our shareholders, fosters sustained business success, and strengthens Board and management accountability. We have the following practices in place to promote the long-term interests of our shareholders.

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HOW WE DETERMINE EXECUTIVE COMPENSATION

Oversight Responsibilities for Executive Compensation

The table below summarizes the key oversight responsibilities for executive compensation.

Peer Group Selection and Market Data

In evaluating the total compensation of our Named Executive Officers, our Compensation Committee, using information provided by Aon, established a peer group of publicly traded companies. Developing a compensation peer group for the Company for compensation comparison purposes is challenging because there are few automotive artificial intelligence companies that are publicly-traded, stand-alone, U.S.-based and size-appropriate. Nonetheless, we endeavored to establish a peer group that provides appropriate reference points for compensation data for evaluating the competitiveness of our compensation program.

Our fiscal year 2021 peer group was selected based on a balance of the following criteria:

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Based on these criteria, our peer group for fiscal year 2021, as approved by our Compensation Committee, was comprised of the following 18 companies:

Based on data compiled by Aon at the time of the peer group review, our revenues and market capitalization were at the 55^th and 40^th percentiles, respectively, in relation to the peer group.

As an additional reference, our Compensation Committee also used data from the Radford Global Technology executive compensation survey (the “Radford Survey”) to evaluate the competitive market when formulating its recommendation for the total direct compensation packages for our executive officers. The Radford Survey provides compensation market intelligence and is widely used within the technology industry. The Compensation Committee does not review the specific companies included in the Radford Survey and the data presented to the Compensation Committee is general and not specific to any particular subset of companies.

Due to the nature of our business, we also compete for executive talent with companies outside our peer group, including public companies that are larger and more established than we are or that possess greater resources than we do, and with smaller private companies that may be able to offer greater compensation potential. In setting compensation, the Compensation Committee considers each executive’s level and job performance, his or her duties and responsibilities at the Company compared to the duties and responsibilities of executive officers in similar positions at the peer group companies and in the survey data, and other circumstances unique to the Company, and evaluates whether the compensation elements and levels provided to our executives are generally appropriate relative to their responsibilities at the Company and compensation elements and levels provided to their counterparts in the peer group or within survey data. The Compensation Committee considers both objective and subjective criteria to evaluate Company and individual performance, which allows it to exercise informed judgment and not rely solely on rigid benchmarks. Accordingly, the Compensation Committee does not formulaically tie compensation decisions to any particular range or percentile level of total compensation paid to executives at the peer group companies or survey data.

Looking ahead to fiscal year 2022 – Based on the advice and analysis of FW Cook, our peer group for fiscal year 2022, as approved by our Compensation Committee, will be comprised of the following 17 companies:

Based on data compiled by FW Cook at the time of the peer group review, our revenues and market capitalization were at the 52^nd and 59^th percentiles, respectively, in relation to the new peer group.

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Fiscal Year 2021 Named Executive Officer Compensation

Base Salary

Base salaries are a fixed amount paid to each executive for performing his or her normal duties and responsibilities. We determine the amount based on the executive’s overall performance, level of responsibility, pay grade and competitive compensation practices. Based on these criteria, in fiscal year 2021, our Named Executive Officers received the annual salary increases set forth in the table below. Annual base salary increases for Messrs. Dhawan and Gallenberger and Ms. Fitzgerald were effective December 27, 2020 and the annual base salary increase for Dr. Ortmanns was effective January 1, 2021.

Short-Term Incentive Plan (STIP)

The Compensation Committee has designed our executive compensation program to provide that a significant level of each executive officer’s compensation opportunity is performance-based. Accordingly, our Named Executive Officers, are eligible to receive annual performance-based bonuses under our STIP based on the achievement of performance objectives established at the beginning of the fiscal year.

The annual performance-based cash incentive that each Named Executive Officer is eligible to receive is based on the individual’s target bonus, as a percentage of base salary. The Compensation Committee reviews the target annual bonus opportunities each year to ensure they are competitive. The target annual incentive opportunity as a percent of annual base salary for each of our NEOs in fiscal year 2021 was as follows:

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The Compensation Committee undertakes a rigorous review and analysis to establish annual performance goals under the STIP. For fiscal year 2021, the Compensation Committee established the following goals and payout levels under the STIP:

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The threshold, target and maximum performance and payout opportunities under the fiscal year 2021 STIP (subject to interpolation between points), along with the actual performance achieved and related payout percentage, are set forth below:

The Compensation Committee considered the individual performance of the Named Executive Officers and determined that it was achieved at target levels and, accordingly, that there should be no upward or downward adjustment to the formulaic financial score above.

The annual STIP bonuses earned by our NEOs for fiscal year 2021 are set forth in the table below. For fiscal year 2021, the annual STIP bonuses were paid 75% in the form of Cerence Common Stock and 25% in the form of cash (any bonus paid in excess of targeted payout was in the form of Common Stock).

Long-Term Incentive Program

We provide long-term incentive compensation to our Named Executive Officers, including the named executive officers, under our LTIP in the form of RSUs and PSUs. These awards are designed to align the interests of our executive officers with those of our shareholders, and to improve our long-term profitability and stability through the attraction and retention of superior talent.

The Compensation Committee believes the commitment to grant a mix of time-based and performance-based equity awards enhances our ability to retain our executive officers by providing a portion of their long-term incentive in the form of equity awards that will be fully earned only if they remain with us for several years. The value of equity awards granted to each Named Executive Officer is intended to be market competitive and reflective of each executive’s skill set, experience, role and responsibilities.

Each executive officer has an annual long-term equity incentive target grant denoted in terms of a dollar value, which is allocated equally between PSUs and RSUs. The dollar value is converted into an equivalent number of RSUs and target number of PSUs based on the average closing price of the Company’s Common Stock during the 20 trading day period preceding the grant date (closing price on grant date included). The use of an average Common Stock closing price for purposes of converting dollar value targets into shares is intended to reduce the impact of short-term stock price volatility on individual awards, thereby mitigating the risk of a windfall or impairment to the award opportunity.

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During fiscal year 2021, the Compensation Committee approved the annual PSU and RSU grants set forth in the table below.

Details on the types of equity awards granted are provided in the table below.

The performance measures and weightings for the fiscal year 2021 PSU awards are as follows:

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Outstanding PSU Awards

The following tables show the performance metrics and weighting that the Compensation Committee set for the second tranche of the fiscal year 2020 PSUs and the first tranche of the fiscal year 2021 PSUs and the degree of attainment of the goals and resulting outcome.

Fiscal 2020 PSUs: Second Tranche Earned During the Fiscal 2021 Performance Period

Fiscal 2021 PSUs: First Tranche Earned During the Fiscal 2021 Performance Period

The target number of PSUs and actual number of earned PSUs for each fiscal year of the performance period is summarized in the table below:

Fiscal Year 2022 Compensation Program Changes

Our compensation programs focus our leadership team on key areas that drive the business forward and align with the long-term interests of our shareholders. The Compensation Committee regularly reviews and discusses plan performance at each meeting. The Compensation Committee considers many factors when electing to make changes for future incentive plans, including market trends, input from its independent compensation consultant and shareholder feedback. For fiscal year 2022, the Compensation Committee is making significant changes both to the short-term and long-term incentive programs to continue driving performance and better align our compensation design with the feedback received from our shareholders.

Fiscal Year 2022 STIP Changes

The fiscal year 2022 STIP will consist of both financial measures and strategic objectives:

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The Compensation Committee views customer and employee metrics as important indicators of ongoing creation of long-term value and future success.

Fiscal Year 2022 LTIP Changes

Historically, our PSUs had “re-testing” and “kicker” features; specifically, (i) PSUs that are not earned in one performance period remained eligible to be earned in a future performance period and (ii) if maximum performance targets were met in each of the three performance periods, additional “kicker” PSUs would be earned. Based on feedback from shareholders, the fiscal year 2022 PSUs eliminate the re-testing and kicker provisions.

In addition, based on feedback from shareholders, the fiscal year 2022 PSUs will reflect the following elements:

Fiscal Year 2022 Compensation Snapshot

Based on the foregoing, the Company’s fiscal year 2022 executive compensation program can be summarized as follows:

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Other Compensation and Governance Matters

Change of Control and Severance Agreements

The Company has entered into Change of Control and Severance Agreements (the “NEO Severance Agreements”) with each of our Named Executive Officers. The Compensation Committee believes that these severance benefits: (1) help secure the continued employment and dedication of our Named Executive Officers; (2) are protective of the Company, as severance payments are conditioned on a separation and release agreement in favor of the Company and compliance with confidentiality and restrictive covenant agreements; and (3) are important as a recruitment and retention device, as many of the companies with which we compete for executive talent have similar agreements in place for their senior management. Consistent with market practices, the NEO Severance Agreements do not include change of control-related tax gross-ups.

As noted earlier in the Proxy Statement, Sanjay Dhawan resigned as President and Chief Executive Officer and director of the Company on December 14, 2021, effective December 15, 2021. In connection with his departure, Mr. Dhawan entered into a Separation and Release Agreement with the Company (the “Separation Agreement”) under which Mr. Dhawan has agreed to provide transition assistance as requested by the Company for up to 12 months. For further information regarding the Separation Agreement, see the section below entitled “Agreements with Mr. Dhawan”. Mr. Dhawan’s NEO Severance Agreement terminated in connection with his resignation.

Additional information regarding the NEO Severance Agreements, including a quantification of benefits that would have been received by each Named Executive Officer had his or her employment terminated on September 30, 2021, is provided under “Fiscal 2021 Potential Payments upon Termination or Change in Control.”

Retirement, Health, Welfare, Perquisites and Personal Benefits

Our Named Executive Officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, flexible spending accounts, short and long-term disability and life insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans. Our U.S.-based Named Executive Officers are also eligible to participate in a separate long-term disability plan and life insurance plan and are eligible to receive reimbursement of financial planning and tax preparation fees and an annual executive physical.

We sponsor a 401(k) defined contribution plan in which our U.S.-based Named Executive Officers are eligible to participate, subject to limits imposed by the Internal Revenue Code (the “Code”), to the same extent as our other U.S. based regular employees. We provide matching contributions under the 401(k) plan for all employees, including the Named Executive Officers.

Stock Ownership Guidelines

In November 2019, the Board of Directors approved stock ownership guidelines for our Named Executive Officers and non-employee directors, and in November 2020 the Board of Directors approved amendments of an administrative nature to our stock ownership guidelines. These guidelines were adopted to align the interests of our executive officers and non-employee directors with the interests of our shareholders and also to promote the Company’s commitment to sound corporate governance practices.

Under the stock ownership guidelines, the target share ownership levels are five times base salary for our CEO, two times base salary for our other Named Executive Officers, and three times the annual cash retainer for the non-employee directors. The following shares count towards satisfaction of the guidelines: shares owned outright by the executive or non-employee director or his or her immediate family members residing in the same household; shares held in trust for the benefit of the executive or non-employee director or his or her family and shares held through an ERISA qualified benefit plan or through the Cerence 2019 Employee Stock Purchase Plan maintained by the Company. Unvested performance awards, unexercised stock options, “make-whole” stock awards arising from prior employment, or unvested stock awards granted pursuant to the Company’s short-term incentive program do not count for purposes of satisfying the guidelines.

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Each Named Executive Officer and non-employee director must achieve the guideline amount within five years of becoming subject to the guidelines. In addition, until an individual has reached the appropriate target level, an executive is required to retain 25% of the net shares, except as expressly stated in our stock ownership guidelines, most notably, in the case or “make-whole awards,” received as a result of the exercise of stock options or vesting of equity awards, and a non-employee director is required to retain 25% of the net shares received as a result of the exercise of stock options or vesting of RSUs. Satisfaction of the stock ownership guidelines is calculated on a yearly basis at the end of the calendar year.

As of the most recent fiscal year end, all our non-employee directors and Named Executive Officers are in compliance with the guideline and met their stock ownership requirement.

Clawback Policy

The Compensation Committee adopted a clawback policy in the event the Company is required to prepare an accounting restatement due to material non-compliance with a financial reporting requirement under the federal securities laws. If a current or former executive officer engaged in fraud or misconduct that caused or contributed to the need for the restatement, the Compensation Committee may, in its discretion and to the full extent permitted by applicable listing standard and governing law, require reimbursement of any annual incentive or performance based awards earned by, such executive officer during the three-year period preceding the date on which the Company is required to prepare the restatement, which is in excess of what would have been paid or earned by such executive officer had the financial results been properly reported.

Insider Trading Policy

Our insider trading policy applies to all our employees and directors, including our Named Executive Officers. The policy prohibits these individuals from effecting “short sales” of our Common Stock. These individuals also may not trade in derivatives in our securities (such as put and call options). These individuals are also prohibited from holding shares of our Common Stock in margin accounts.

Risk Assessment

At the beginning of fiscal year 2021, the Compensation Committee reviewed and evaluated the Company’s executive and employee compensation practices and concluded, based on this review, that any risks associated with such practices are not likely to have a material adverse effect on the Company.

Tax Deductibility Policy

The Compensation Committee takes into consideration the potential tax deductibility of the compensation as one of the factors to be considered when establishing our executive compensation program. However, the Compensation Committee believes that its primary focus should be to structure a compensation program that attracts, retains and rewards our executive officers who are critical to our success. Accordingly, the Compensation Committee retains the flexibility necessary to provide cash and equity-based compensation in line with its compensation philosophy and competitive practices, even if these amounts are not fully tax deductible.

COMPENSATION COMMITTEE REPORT

Our Compensation Committee has reviewed and discussed the section entitled “Compensation Discussion and Analysis” with our management. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the section entitled “Compensation Discussion and Analysis” be included in this Proxy Statement, which will be incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.

Respectfully submitted by the Compensation Committee of the Board of Directors.

Sanjay Jha, Chair

Marianne Budnik

Alfred Nietzel

The material in this report is not “soliciting material,” is furnished to, but not deemed “filed” with, the SEC and is not deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, other than the Company’s Annual Report on Form 10-K, where it shall be deemed to be “furnished,” whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

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FISCAL 2021 SUMMARY COMPENSATION TABLE

The Summary Compensation Table shows the compensation paid to or earned by the Named Executive Officers listed below for the fiscal years indicated under Nuance’s compensation programs and plans for fiscal year 2019, and under Cerence’s compensation programs and plans for fiscal years 2020 and 2021.

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FISCAL 2021 GRANTS OF PLAN-BASED AWARDS TABLE

The following table sets forth grants of plan-based awards to our Named Executive Officers during the fiscal year ended September 30, 2021.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth all outstanding equity awards held by our Named Executive Officers as of September 30, 2021. The equity awards were all in the form of RSUs and PSUs. For purposes of valuing the outstanding awards, the amounts below are based on a per-share price of $96.11 for the Cerence Common Stock, which was the closing market price of the Cerence Common Stock as reported on Nasdaq on September 30, 2021, the last business day of the fiscal year.

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FISCAL 2021 OPTION EXERCISES AND STOCK VESTED TABLE

The following table sets forth the stock awards that vested, and the value realized upon vesting, by the Named Executive Officers during fiscal 2021.

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Pension or Non-Qualified Deferred Compensation Plans

The Company had no pension plans or non-qualified deferred compensation arrangements in which the Named Executive Officers participated during fiscal 2021.

Agreements with Mr. Dhawan

2019 Nuance Offer Letter

On February 14, 2019, and subsequently amended on August 26, 2019, Nuance entered into an offer letter with Sanjay Dhawan providing for his employment initially as Advisor to the Auto Division of Nuance and, upon the completion of the Spin-Off, as Chief Executive Officer of Cerence. Mr. Dhawan’s offer letter provided Mr. Dhawan with a starting annual base salary of $600,000 and an initial cash incentive target opportunity equal to 100% of his annual base salary, prorated with respect to fiscal year 2019, and up to 150% of his annual cash base salary for subsequent years beyond 2019.

2021 Change of Control and Severance Agreement

On February 3, 2021, the Company entered into a new Change of Control and Severance Agreement with Mr. Dhawan (the “Dhawan Severance Agreement”). The Dhawan Severance Agreement provided for an initial three-year term and for automatic renewal of additional three-year terms unless the Company or Mr. Dhawan provided timely notice of non-renewal.

Pursuant to the Dhawan Severance Agreement, upon a termination of Mr. Dhawan’s employment by Cerence without “cause” (as defined in the Dhawan Severance Agreement) and other than due to Mr. Dhawan’s death or “disability” (as defined in the Dhawan Severance Agreement) that occurred outside of the one-year period following a “change of control” (as defined in the Dhawan Severance Agreement), Mr. Dhawan would have been entitled to receive a lump sum cash payment equal to (i) 24 months of his base salary then in effect, (ii) 100% of his target annual bonus for the fiscal year in which such termination of employment occurs, (iii) a prorated target annual bonus for the fiscal year in which such termination occurred, (iv) 18 months of COBRA premiums (at the coverage levels in effect immediately prior to his termination), (v) accelerated vesting of the Initial RSUs (as defined in the Dhawan Severance Agreement), as well as any other Company equity awards that would have otherwise vested solely on the basis of his continued employment and that would have vested within the 12 months immediately following the date of his termination of employment and, (vi) if such termination occurred prior to end of the performance period applicable to the Initial PSUs (as defined in the Dhawan Severance Agreement), the Initial PSUs would have vested as to that number of shares determined by multiplying the target number of Initial PSUs by a fraction, the numerator of which is 12 and the denominator of which is the greater of (1) the number of months in the applicable performance period or (2) 12.

In the case of a termination without cause or a resignation for “good reason” (as defined in the Dhawan Severance Agreement) within 12 months following a change of control of Cerence, Mr. Dhawan would have been entitled to receive a lump sum cash payment equal to (i) 30 months of his base salary then in effect, (ii) 200% of his target annual bonus for the fiscal year in which such termination of employment occurred, (iii) a prorated target annual bonus for the fiscal year in which such termination occurred, (iv) 18 months of COBRA premiums (at the coverage levels in effect immediately prior to his termination) and (v) accelerated vesting of all Company equity awards that had been previously awarded to Mr. Dhawan that vest on the basis of his continued employment.

The receipt of any severance payments or benefits under the Dhawan Severance Agreement was subject to Mr. Dhawan’s execution and non-revocation of a separation agreement and release of claims in favor of the Company as well as continued compliance with the terms of any agreements, concerning inventions, confidentiality or restrictive covenants.

The Dhawan Severance Agreement terminated in connection with Mr. Dhawan’s resignation as Chief Executive Officer as of December 15, 2021 as described below.

2021 Separation and Release Agreement

Mr. Dhawan resigned as Chief Executive Officer and director of the Company on December 14, 2021, effective December 15, 2021. In connection with his departure, Mr. Dhawan entered into a Separation and Release Agreement with the Company (the “Separation Agreement”) under which Mr. Dhawan has agreed to provide transition assistance as requested by the Company for up to twelve months. During the transition period, Mr. Dhawan’s existing time-based restricted stock unit awards and initial performance-based restricted stock unit award (at target level) will be eligible for continued vesting. As a result, if Mr. Dhawan serves for the entire 12 month transition period, he will vest in awards representing a total of 119,484 shares of Cerence Common Stock. Mr. Dhawan will not be eligible for any cash payments, and his other equity awards terminated upon his resignation. The Separation Agreement also contains a reaffirmation of Mr. Dhawan’s confidentiality obligations to the Company and other restrictive covenants, as well as a general release of claims by Mr. Dhawan.

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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

Change of Control and Severance Agreement with Named Executive Officers

In November 2019, the Company entered into a Change of Control and Severance Agreement (the “NEO Severance Agreements”) with each of our Named Executive Officers, other than Mr. Dhawan (whose arrangements are described above). The NEO Severance Agreements provide that in the event that a Named Executive Officer’s employment is involuntarily terminated by us without “cause” (as defined in the applicable NEO Severance Agreement) and not in connection with his or her death or “disability” (as defined in the applicable NEO Severance Agreement) and such termination occurs outside of the one-year period following a “change of control” (as defined in the applicable NEO Severance Agreement), the Named Executive Officer will be eligible to receive (i) a lump sum payment equal to 100% of his or her annual base salary then in effect, (ii) a lump sum payment equal to 100% of his or her target bonus and a pro-rated percentage of his or her target bonus for the fiscal year in which the termination occurs, (iii) vesting of the pro-rated portion of the time-based equity that would have vested in the 12 months following the date on which the termination of employment occurs; provided, however, that if such termination had occurred prior to September 30, 2020, 100% of the Named Executive Officer’s unvested time-based equity awards that were converted from equity awards covering Nuance shares would have become vested in full, and (iv) for Named Executive Officers based in the United States, up to 12 months Company-paid health insurance under COBRA (at the coverage levels in effect immediately prior to the Named Executive Officer’s termination).

If the Named Executive Officer’s employment is terminated by us without cause or the Named Executive Officer resigns for “good reason” (as defined in the applicable NEO Severance Agreement) within 12 months following a change of control of Cerence, he or she will instead be eligible to receive, (i) 150% of his or her annual base salary then in effect, payable in a lump sum, (ii) a lump sum payment equal to 150% of the greater of (1) Named Executive Officer’s target bonus for the year in which the Named Executive Officer’s termination occurs, or (2) Named Executive Officer’s target bonus in effect immediately prior to the change of control plus (B) a pro-rated percentage of the greater of (1) the Named Executive Officer’s target bonus for the year in which the Named Executive Officer’s termination of employment occurs, or (2) the Named Executive Officer’s target bonus in effect immediately prior to the change of control, (iii) 100% vesting acceleration of the Named Executive Officer’s unvested and time-based equity awards, and (iv) for Named Executive Officers based in the United States, up to 12 months Company-paid health insurance under COBRA (at the coverage levels in effect immediately prior to the Named Executive Officer’s termination). Upon a change of control, PSUs that are subject to performance goals for the year in which the change of control occurs will become eligible to vest based on the number of shares that would vest based on actual performance through the change of control, subject to continued service through the end of the performance period, or upon earlier termination without cause or for good reason. Upon a change of control, PSUs that are subject to performance goals for years after the year in which the change of control occurs will continue to remain subject to the terms of the applicable award agreement except that if, during the 12-month period following a change of control, the Named Executive Officer’s employment is terminated by the successor other than for cause or by the Named Executive Officer for good reason, 50% of the PSUs that would have vested at 100% of target performance will vest.

In the event that a Named Executive Officer’s employment is terminated due to death or disability, he or she will be eligible to receive (i) 100% vesting acceleration of the Named Executive Officer’s unvested and time-based equity awards, and (ii) for Named Executive Officers based in the United States, up to 12 months Company-paid health insurance under COBRA (at the coverage levels in effect immediately prior to the Named Executive Officer’s termination).

To receive the foregoing severance payments and benefits, except in the case of a termination due to death, the Named Executive Officer is required to enter into a separation and release agreement in favor of the Company and must continue to comply with his or her existing confidentiality and restrictive covenant agreements.

The NEO Severance Agreements provide for an initial term through September 30, 2022 and for automatic renewal of additional one-year terms unless the Company or the Named Executive Officer provides timely notice of non-renewal.

Estimated Payment and Benefits Upon Termination or Change of Control

The amount of compensation and benefits payable to each of our Named Executive Officers (other than Mr. Dhawan) in various termination and change of control situations has been estimated in the tables below. The value of the equity vesting acceleration was calculated for each of the tables below based on the assumption that the change of control and

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the Named Executive Officer’s employment termination occurred on September 30, 2021. The per share closing price of the Common Stock on Nasdaq as of September 30, 2021 was $96.11, which was used as the value of a share of the Common Stock for the calculations below. The value of RSU and PSU vesting acceleration was calculated by multiplying the number of RSUs or PSUs subject to vesting acceleration as of September 30, 2021, by the per share closing price of Common Stock as of September 30, 2021.

Sanjay Dhawan

As noted earlier, in connection with Mr. Dhawan’s resignation as President and Chief Executive Officer as of December 15, 2021, the Dhawan Severance Agreement terminated and he was not eligible for severance thereunder. However, in accordance with the SEC rules, the following table describes the potential payments and benefits upon employment termination for Mr. Dhawan, as if his employment terminated as of September 30, 2021.