Cerence(CRNC) - 2024 Q3 - Quarterly Report

Revenue Performance - Total revenue for the three months ended June 30, 2024, increased by $8.8 million, or 14.4$70.5 million from $61.7 million in the same period of 2023[82]. - Total revenue for the nine months ended June 30, 2024, increased by$63.0 million, or 29.5%, to $276.7 million from$213.7 million in the same period of 2023[82]. - License revenue for the three months ended June 30, 2024, was $43.1 million, compared to$25.8 million in the same period of 2023[84]. - Connected services revenue for the three months ended June 30, 2024, was $10.9 million, down from$18.6 million in the same period of 2023[84]. - Professional services revenue for the three months ended June 30, 2024, was $16.5 million, compared to$17.2 million in the same period of 2023[84]. - Total revenues for the three months ended June 30, 2024 were $70.5 million, an increase of$8.8 million, or 14.4%, from $61.7 million for the same period in 2023[88]. - License revenue for the three months ended June 30, 2024 was$43.1 million, an increase of $17.3 million, or 66.6$25.8 million for the same period in 2023[89]. - Connected services revenue for the three months ended June 30, 2024 was $10.9 million, a decrease of$7.7 million, or 41.1%, from $18.6 million for the same period in 2023[90]. - Total revenues for the nine months ended June 30, 2024 were$276.7 million, an increase of $63.0 million, or 29.5$213.7 million for the same period in 2023[92]. - License revenue for the nine months ended June 30, 2024 was $99.4 million, a decrease of$2.7 million, or 2.6%, from $102.1 million for the same period in 2023[93]. - Connected services revenue for the nine months ended June 30, 2024 was$121.4 million, an increase of $65.5 million, or 117.1$55.9 million for the same period in 2023[94]. Operating Performance - Operating margin for the three months ended June 30, 2024, decreased by 489.3 percentage points to negative 503.1% from negative 13.8% in the same period of 2023[82]. - Total operating expenses for the three months ended June 30, 2024, were $405.3 million, compared to$49.2 million in the same period of 2023[84]. - Net loss for the three months ended June 30, 2024, was $313.5 million, compared to a net loss of$16.5 million in the same period of 2023[84]. - Total gross profit for the three months ended June 30, 2024 was $50.4 million, an increase of$9.7 million, or 23.8%, from $40.7 million for the same period in 2023[97]. - Total gross profit increased by$67.8 million, or 47.9%, from $141.6 million for the nine months ended June 30, 2023, to$209.4 million for the nine months ended June 30, 2024[102]. - Connected services gross profit increased by $65.3 million, or 173.3$37.7 million for the nine months ended June 30, 2023, to $103.0 million for the nine months ended June 30, 2024[104]. - Professional services gross profit increased by$3.6 million, or 43.2%, from $8.3 million for the nine months ended June 30, 2023, to$11.9 million for the nine months ended June 30, 2024[106]. Cash Flow and Liquidity - Cash provided by operating activities for the three months ended June 30, 2024, was $12.9 million, a net change of$21.0 million from cash used in operating activities of $8.2 million in the same period of 2023[82]. - Net cash provided by operating activities for the nine months ended June 30, 2024 was$11.1 million, a 394.7% increase from a net cash used of $3.8 million in the same period of 2023[140]. - Net cash provided by investing activities for the nine months ended June 30, 2024 was$4.3 million, a 276.8% increase from cash used of $2.4 million in the same period of 2023[141]. - Cash, cash equivalents, and marketable securities as of June 30, 2024 totaled$126.3 million, indicating strong liquidity[126]. - The company maintained a minimum liquidity of at least $50 million as per the amended Credit Agreement[138]. - The company’s ability to secure additional liquidity may be adversely affected by economic conditions, including inflation and rising interest rates[129]. - The company held approximately$115.5 million in cash and cash equivalents as of June 30, 2024[148]. Restructuring and Costs - The company expects to incur cash restructuring charges of approximately $18 to$22 million in connection with the announced restructuring plan[87]. - The implementation of the restructuring plan is expected to be substantially complete by the end of the first quarter of fiscal year 2025[87]. - The company expects additional personnel-related restructuring costs in fiscal year 2024 to align its cost structure with current revenue levels[115]. - Restructuring and other costs for the nine months ended June 30, 2024 totaled $6.7 million, a decrease of 39.1$11.1 million in the same period of 2023[119]. Debt and Interest - The company issued $190.0 million in aggregate principal amount of 1.50$193.2 million after transaction costs[130]. - The company repurchased $87.5 million in aggregate principal amount of 3.00$2.926 million, compared to $1.672 million for the same period in 2023[135]. - Total interest expense related to the Senior Credit Facilities for the three months ended June 30, 2024 was$0.1 million, down from $2.4 million in the same period of 2023[139]. - The company recorded a loss of$1.3 million on the extinguishment of debt after borrowing $24.7 million under the Revolving Facility and paying$106.3 million towards the Term Loan Facility[136]. - The carrying amount of the 2025 Modified Notes was $159.8 million as of June 30, 2024, net of unamortized costs of$15.2 million[131]. - The carrying amount of the 2028 Notes was $120.6 million, with unamortized issuance costs of$1.9 million[133]. - The conversion rate for the 2028 Notes is 24.5586 shares per $1,000 principal amount, equivalent to an initial conversion price of approximately$40.72 per share[130]. - The company incurred transaction costs of $2.4 million related to the issuance of the 2028 Notes, which are being amortized as interest expense[131]. Other Financial Metrics - Goodwill impairment for the three months ended June 30, 2024 was$357.1 million, reflecting a 100% increase due to macroeconomic conditions[115]. - Effective income tax rate for the three months ended June 30, 2024 was 11.9%, compared to negative 22.4% for the same period in 2023[124]. - Total other expense, net for the three months ended June 30, 2024 was $1.2 million, a decrease of 75.9$4.9 million in the same period of 2023[122]. - Interest income for the nine months ended June 30, 2024 was $3.9 million, an increase of 20.6$3.2 million in the prior year[123]. - The fair value of the reporting unit was estimated at approximately $154.2 million as of June 30, 2024, leading to significant goodwill impairment charges[120]. - Total material cash requirements amount to$326.914 million, with $3.261 million due in 2024 and$103.187 million in 2025-2026[128]. - The net secured leverage ratio requirement was adjusted to not greater than 3.00 to 1.00 under the latest amendment to the Credit Agreement[138]. - The aggregate notional amount of outstanding foreign currency forward contracts was $72.1 million at June 30, 2024[147]. - A 10$6.1 million[147]. - Assuming a 1% increase in interest rates, interest income on highly liquid investments would increase by $0.8 million per annum[148].