GlobeNewswire Inc | Nov 16, 2020 07:00AM EST

November 16, 2020

Fourth Quarter and Fiscal Year Highlights

-- Record bookings in FY20 drives backlog to more than $1.8 billion -- Q4 revenue increased 21% from last quarter and up 10% from the prior year, setting new quarterly and full year records -- Strong financial performance generated $26M of GAAP net cash provided by operating activities (CFFO) during the quarter and $45M of CFFO for the year -- Generated adjusted EBITDA of $40.3M and adjusted EBITDA margin of 44.4% in the quarter -- Financial metrics for the fiscal year met or exceeded pre-Covid-19 full year guidance

BURLINGTON, Mass., Nov. 16, 2020 (GLOBE NEWSWIRE) -- Cerence Inc. (NASDAQ: CRNC), AI for a world in motion, today reported its fourth quarter and fiscal year 2020 results for the year ended September 30, 2020.

ResultsSummary(1)(in millions, except per share data)

Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 GAAP Revenue $ 90.9 $ 83.0 $ 329.6 $ 303.3 GAAP Gross Margin 71.8 % 67.4 % 67.3 % 67.2 %Non-GAAP Gross Margin 75.7 % 70.8 % 71.5 % 70.7 %GAAP Operating Margin 15.5 % 5.6 % 5.9 % 3.6 %Non-GAAP Operating 41.9 % 31.3 % 32.1 % 28.7 %MarginGAAP net income $ 6.8 $ 95.8 $ (20.6 ) $ 100.3 (loss)Non-GAAP net income $ 25.7 $ 19.1 $ 64.3 $ 62.7 GAAP net income(loss) per share - $ 0.17 $ 2.63 $ (0.57 ) $ 2.76 dilutedNon-GAAP net income $ 0.61 $ 0.52 $ 1.68 $ 1.72 per share - dilutedAdjusted EBITDA $ 40.3 $ 27.8 $ 114.9 $ 94.7 Adjusted EBITDA 44.4 % 33.6 % 34.9 % 31.2 %margin

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

Sanjay Dhawan, Chief Executive Officer of Cerence, stated, Our Q4 financial performance exceeded our expectations for every metric and delivered record revenue, record gross margin and record EBITDA. Cerences first year as a stand-alone business established the company as a major player in conversational AI for the car. We had to separate the business from Nuance and deal with the economic impact of Covid-19, but we did so while at the same time continuing a relentless introduction of new products and upgraded technologies. Were more agile and more aggressive in our approach to innovation and more dedicated to the success of our customers than ever. Im especially proud of the recognition that the Cerence team has received from our customers regarding our support in helping them achieve their start of production dates without delay.

Dhawan continued, Further demonstrating the depth of our customer relationships, we recently signed a renewal agreement for our SaaS-based connected services with a major global automaker, marking the successful renewal of an expiring contract since Cerence became a standalone public company. This contract extension is an important endorsement from a long-time, respected partner on the strength and value of Cerence Connected Services and ensures that we will continue providing cloud-based services for this popular app suite for drivers.

As we start the new fiscal year, we are expecting another year of growth supported by a strong backlog and a solid pipeline of new business opportunities. The companys competitive position remains strong as we rely on innovation and speed of execution to continue to drive our business forward, Dhawan concluded.

Cerence Key Performance Indicators

To help investors gain further insight into Cerences business and its performance, management provides a set of key performance indicators that includes:

KeyPerformance Q4FY20 Q3FY20 Q2FY20 Q1FY20 Q4FY19 Indicator^1Percent ofworldwide autoproduction 53 % 54 % 56 % 54 % 54 %with CerenceTechnology(TTM)Averagecontract 6.1 6.2 5.7 4.9 5.1 duration(TTM):Repeatablesoftware 79 % contribution(TTM):Change innumber ofCerenceconnected cars -16 % shipped^2 (TTMover prioryear TTM)Growth inbillings percar FY20 vs.prior year 14 % (excludeslegacycontract)

Please refer to the ?Key Performance Indicators? included elsewhere in this(1) release for more information regarding the definition and our use of key performance indicators.(2) Based on IHS data, global auto production declined 19% over the same time period.

First Quarter Fiscal 2021 and Full Year Outlook For the fiscal quarter ending December 31, 2020, revenue is expected to be in the range of $85M to $90M representing a 13% increase at the midpoint compared to the same period in the prior year. Adjusted EBITDA is expected to be in the range of $31M to $35M. The adjusted EBITDA guidance excludes acquisition-related costs, amortization of acquired intangible assets, stock-based compensation, and restructuring and other costs. Cerence full-year revenue guidance is for revenue to be in the range of $360M to $380M representing a 12% increase at the midpoint compared to the prior year. Adjusted EBITDA for the full year is expected to be in the range of $122M to $135M. Additional details regarding guidance will be provided on the earnings call.

FourthQuarter Conference CallThe company will host a live conference call and webcast with slides to discuss the results at 10:00 a.m. Eastern Time/7:00 a.m. Pacific Time today. Interested investors and analysts are invited to dial into the conference call by using 1.844.467.7116 (domestic) or +1.409.983.9838 (international) and entering the pass code 5673428. Webcast access will be available on the Investor Information section of the companys website at https://investors.cerence.com/news-and-events/events-and-presentations.

The teleconference replay will be available through December 24, 2020. The replay dial-in number is 1.855.859.2056 (domestic) or +1.404.537.3406 (international) using pass code 5673428. A replay of the webcast can be accessed by visiting our web site 90 minutes following the conference call at https://investors.cerence.com/news-and-events/events-and-presentations.

Forward Looking StatementsStatements in this presentation regarding Cerences future performance, results and financial condition, expected growth and innovation and our managements future expectations, beliefs, goals, plans or prospects constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical fact (including statements containing the words believes, plans, anticipates, expects, intends or estimates or similar expressions) should also be considered to be forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risk, uncertainties and other factors, which may cause actual results or performance of the company to be materially different from any future results or performance expressed or implied by such forward-looking statements including but not limited to: impacts of the Covid-19 pandemic on our and our customers businesses; the highly competitive and rapidly changing market in which we operate; adverse conditions in the automotive industry or the global economy more generally; our ability to control and successfully manage our expenses and cash position; our strategy to increase cloud; escalating pricing pressures from our customers; our failure to win, renew or implement service contracts; the loss of business from any of our largest customers; effects of customer defaults; the inability to recruit and retain qualified personnel; cybersecurity and data privacy incidents; fluctuating currency rates; and the other factors in our Annual Report on our most recent Form 10-K, quarterly reports on Form 10-Q, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update any forward-looking statements as a result of developments occurring after the date of this document.

Discussion of Non-GAAP Financial MeasuresWe believe that providing the non-GAAP information in addition to the GAAP presentation, allows investors to view the financial results in the way management views the operating results. We further believe that providing this information allows investors to not only better understand our financial performance, but more importantly, to evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. The non-GAAP information should not be considered superior to, or a substitute for, financial statements prepared in accordance with GAAP.

We utilize a number of different financial measures, both GAAP and non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions and for forecasting and planning for future periods. While our management uses these non-GAAP financial measures as a tool to enhance their understanding of certain aspects of our financial performance, our management does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial statements.

Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial statements, allows for greater transparency in the review of our financial and operational performance. In assessing the overall health of the business during the three and twelve months ended September 30, 2020 and 2019, our management has either included or excluded the following items in general categories, each of which is described below.

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

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

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

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

Transition and integration costs. Transition and integration costs include retention payments, transitional employee costs, and earn-out(i) payments treated as compensation expense, as well as the costs of integration-related activities, including services provided by third-parties. Professional service fees and expenses. Professional service fees and(ii) expenses include financial advisory, legal, accounting and other outside services incurred in connection with acquisition activities, and disputes and regulatory matters related to acquired entities. Acquisition-related adjustments. Acquisition-related adjustments include adjustments to acquisition-related items that are required to be marked(iii) to fair value each reporting period, such as contingent consideration, and other items related to acquisitions for which the measurement period has ended, such as gains or losses on settlements of pre-acquisition contingencies.

Amortization of acquired intangible assets.We exclude the amortization of acquired intangible assets from non-GAAP expense and income measures. These amounts are inconsistent in amount and frequency and are significantly impacted by the timing and size of acquisitions. Providing a supplemental measure which excludes these charges allows management and investors to evaluate results as-if the acquired intangible assets had been developed internally rather than acquired and, therefore, provides a supplemental measure of performance in which our acquired intellectual property is treated in a comparable manner to our internally developed intellectual property. Although we exclude amortization of acquired intangible assets from our non-GAAP expenses, we believe that it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Future acquisitions may result in the amortization of additional intangible assets.

Non-cash expenses.We provide non-GAAP information relative to the following non-cash expenses: (i) stock-based compensation; and (ii) non-cash interest. These items are further discussed as follows:

Stock-based compensation. Because of varying valuation methodologies, subjective assumptions and the variety of award types, we exclude stock-based compensation from our operating results. We evaluate performance both with and without these measures because compensation expense related to stock-based compensation is typically non-cash and(i) awards granted are influenced by the Company?s stock price and other factors such as volatility that are beyond our control. The expense related to stock-based awards is generally not controllable in the short-term and can vary significantly based on the timing, size and nature of awards granted. As such, we do not include such charges in operating plans. Stock-based compensation will continue in future periods. Non-cash interest. We exclude non-cash interest because we believe that excluding this expense provides management, as well as other users of the(ii) financial statements, with a valuable perspective on the cash-based performance and health of the business, including the current near-term projected liquidity. Non-cash interest expense will continue in future periods.

Other expenses.We exclude certain other expenses that result from unplanned events outside the ordinary course of continuing operations, in order to measure operating performance and current and future liquidity both with and without these expenses. By providing this information, we believe management and the users of the financial statements are better able to understand the financial results of what we consider to be our organic, continuing operations. Included in these expenses are items such as other charges (credits), net, losses from extinguishment of debt, and changes in indemnification assets corresponding with the release of pre-spin liabilities for uncertain tax positions.

Backlog. Revenue backlog consists of the following categories: (i) fixed backlog, (ii) variable backlog, and (iii) total backlog. These categories are further discussed as follows:

(i) Fixed backlog. Future revenue related to remaining performance obligations and contractual commitments which have not been invoiced. Variable backlog. Estimated future revenue from variable forecasted royalties related to our embedded and connected businesses. Our estimation of forecasted royalties is based on our royalty rates for embedded and connected technologies from expected car shipments under our(ii) existing contracts over the term of the programs. Anticipated shipments are based on historical shipping experience and current customer projections that management believes are reasonable. Both our embedded and connected technologies are priced and sold on a per-vehicle or device basis, where we receive a single fee for either or both the embedded license and the connected service term.(iii) Total backlog. The total of fixed backlog and variable backlog.

Our fixed and variable backlog may not be indicative of our actual future revenue. The revenue we actually recognize is subject to several factors, including the number and timing of vehicles our customers ship, potential terminations or changes in scope of customer contracts and currency fluctuations.

Key performance indicatorsWe believe that providing key performance indicators (KPIs), allows investors to gain insight into the way management views the performance of the business. We further believe that providing KPIs allows investors to better understand information used by management to evaluate and measure such performance. KPIs should not be considered superior to, or a substitute for, operating results prepared in accordance with GAAP. In assessing the performance of the business during the three and twelve months ended September 30, 2020 and 2019, our management has reviewed the following KPIs, each of which is described below:

-- Percent of worldwide auto production with Cerence Technology: The number of Cerence enabled cars shipped as compared to IHS Markit car production data. -- Average contract duration: The weighted average annual period over which we expect to recognize the estimated revenues from new license and connected contracts signed during the quarter, calculated on a trailing twelve months (TTM) basis and presented in years. -- Repeatable software contribution: The percentage of repeatable revenues as compared to total GAAP revenue in the quarter. Repeatable revenues are defined as the sum of License and Connected Services revenues. -- Change in number of Cerence connected cars shipped: The year over year change in the number of cars shipped with Cerence connected solutions. Amounts calculated on a TTM basis. -- Growth in billings percar FY20 vs. prior year: The rate of growth calculated from the average billings per car in FY20 compared to the prior fiscal year excluding legacy contract and adjusted for prepay usage.

See the tables at the end of this press release for non-GAAP reconciliations to the most directly comparable GAAP measures.

About Cerence Inc.Cerence (NASDAQ: CRNC) is the global industry leader in creating unique, moving experiences for the automotive world. As an innovation partner to the worlds leading automakers, it is helping transform how a car feels, responds and learns. Its track record is built on more than 20 years of knowledge and more than 325 million cars on the road today. Whether its connected cars, autonomous driving or e-vehicles, Cerence is mapping the road ahead. For more information, visit www.cerence.com.

Contact InformationRich YerganianCerence Inc.Tel: 617-987-4799Email: richard.yerganian@cerence.com

CERENCE INC.Consolidated and Combined Statements of Operations(unaudited - in thousands, except per share data)

Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues: License $ 46,425 $ 45,092 $ 164,268 $ 172,379 Connected service 25,000 22,860 96,148 78,690 Professional service 19,457 15,006 69,230 52,246 Total revenues 90,882 82,958 329,646 303,315 Cost of revenues: License 439 641 2,783 2,069 Connected service 7,026 8,971 31,768 37,562 Professional service 16,190 15,082 64,963 51,214 Amortization of 1,929 2,323 8,337 8,498 intangible assetsTotal cost of revenues 25,584 27,017 107,851 99,343 Gross profit 65,298 55,941 221,795 203,972 Operating expenses: Research and development 22,001 23,717 88,899 93,061 Sales and marketing 8,569 8,786 33,398 36,261 General and 12,930 8,280 49,386 25,926 administrativeAmortization of 3,168 3,127 12,544 12,524 intangible assetsRestructuring and other 4,512 7,257 18,237 24,404 costs, netAcquisition-related - 161 - 944 costsTotal operating expenses 51,180 51,328 202,464 193,120 Income from operations 14,118 4,613 19,331 10,852 Interest income 22 ? 585 ? Interest expense (3,694 ) ? (22,737 ) ? Other income (expense), (2,953 ) 231 (23,319 ) 332 netIncome (loss) before 7,493 4,844 (26,140 ) 11,184 income taxesProvision for (benefit 676 (90,945 ) (5,509 ) (89,084 )from) income taxesNet income (loss) $ 6,817 $ 95,789 $ (20,631 ) $ 100,268 Net income (loss) per share:Basic 0.19 2.63 (0.57 ) 2.76 Diluted 0.17 2.63 (0.57 ) 2.76 Weighted-average common share outstanding:Basic 36,765 36,391 36,428 36,391 Diluted 39,041 36,391 36,428 36,391

CERENCE INC.Consolidated and Combined Balance Sheets(unaudited - in thousands, except per share data)

September September 30, 30, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 136,067 $ - Marketable securities 11,662 - Accounts receivable, net of allowances of$1,394 and $865 at September 30, 2020 and 49,943 65,787 September 30, 2019, respectivelyDeferred costs 7,256 9,195 Prepaid expenses and other current assets 44,220 17,343 Total current assets 249,148 92,325 Property and equipment, net 29,529 20,113 Deferred costs 38,161 32,428 Operating lease right-of-use assets 20,096 - Goodwill 1,128,198 1,119,329 Intangible assets, net 45,616 65,561 Deferred tax assets 161,759 150,629 Other assets 14,938 3,444 Total assets $ 1,687,445 $ 1,483,829 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,447 $ 16,687 Deferred revenue 112,520 88,233 Short-term operating lease liabilities 5,700 - Short-term debt 6,250 - Accrued expenses and other current 67,857 24,194 liabilitiesTotal current liabilities 200,774 129,114 Long-term debt, net of discounts and 266,872 - issuance costsDeferred revenue, net of current portion 212,573 265,051 Long-term operating lease liabilities 17,821 - Other liabilities 31,649 21,536 Total liabilities 729,689 415,701 Stockholders' Equity: Common stock, $0.01 par value, 560,000shares authorized as of September 30, 369 - 2020; 36,842 shares issued andoutstanding as of September 30, 2020Net parent investment - 1,097,127 Accumulated other comprehensive income 3,711 (28,999 )(loss)Additional paid-in capital 974,307 - Accumulated deficit (20,631 ) - Total stockholders' equity 957,756 1,068,128 Total liabilities and stockholders' $ 1,687,445 $ 1,483,829 equity

CERENCE INC.Consolidated and Combined Statements of Cash Flows(unaudited - in thousands)

Twelve Months Ended September 30, 2020 2019 Cash flows from operating activities: Net (loss) income $ (20,631 ) $ 100,268 Adjustments to reconcile net (loss) incometo net cash provided by operating activities:Depreciation and amortization 30,041 28,844 Provision for doubtful accounts 704 - Stock-based compensation expense 47,285 29,682 Non-cash interest expense 5,286 - Loss on debt extinguishment 19,279 - Deferred tax benefit (11,354 ) (101,223 )Changes in operating assets and liabilities:Accounts receivable 16,112 904 Prepaid expenses and other assets (30,311 ) (8,836 )Deferred costs (1,381 ) 4,339 Accounts payable (2,430 ) 10,130 Accrued expenses and other liabilities 27,819 6,289 Deferred revenue (35,630 ) 17,674 Net cash provided by operating activities 44,789 88,071 Cash flows from investing activities: Capital expenditures (19,012 ) (4,517 )Purchases of marketable securities (11,663 ) - Net cash used in investing activities (30,675 ) (4,517 )Cash flows from financing activities: Net transactions with Parent 12,964 (83,554 )Distributions to Parent (152,978 ) - Proceeds from long-term debt, net of 547,719 - discountPayments for long-term debt issuance costs (6,402 ) - Principal payments of long-term debt (271,563 ) - Common stock repurchases for taxwithholdings for net settlement of equity (9,369 ) - awardsPrincipal payments of lease liabilities (136 ) - arising from a finance leaseProceeds from issuance of common stock from 1,318 - employee stock plansNet cash provided by (used in) financing 121,553 (83,554 )activitiesEffects of exchange rate changes on cash 400 - and cash equivalentsNet change in cash and cash equivalents 136,067 - Cash and cash equivalents at the beginning - - of the periodCash and cash equivalents at the end of the $ 136,067 $ - period

CERENCE INC.Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures(unaudited - in thousands)

Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 GAAP revenue $ 90,882 $ 82,958 $ 329,646 $ 303,315 GAAP gross profit $ 65,298 $ 55,941 $ 221,795 $ 203,972 Stock-based 1,588 436 5,573 1,896 compensationAmortization of 1,929 2,323 8,337 8,498 intangible assetsNon-GAAP gross $ 68,815 $ 58,700 $ 235,705 $ 214,366 profitGAAP gross margin 71.8 % 67.4 % 67.3 % 67.2 %Non-GAAP gross 75.7 % 70.8 % 71.5 % 70.7 %margin GAAP operating $ 14,118 $ 4,613 $ 19,331 $ 10,852 incomeStock-based 14,331 8,487 47,285 29,682 compensationAmortization of 5,097 5,450 20,881 21,022 intangible assetsRestructuring and 4,512 7,257 18,237 24,404 other costs, netAcquisition-related - 161 - 944 costsNon-GAAP operating $ 38,058 $ 25,968 $ 105,734 $ 86,904 incomeGAAP operating 15.5 % 5.6 % 5.9 % 3.6 %marginNon-GAAP operating 41.9 % 31.3 % 32.1 % 28.7 %margin GAAP net income $ 6,817 $ 95,789 $ (20,631 ) $ 100,268 (loss)Stock-based 14,331 8,487 47,285 29,682 compensationAmortization of 5,097 5,450 20,881 21,022 intangible assetsRestructuring and 4,512 7,257 18,237 24,404 other costs, netAcquisition-related - 161 - 944 costsDepreciation 2,255 1,872 9,160 7,822 Total other income (6,625 ) 231 (45,471 ) 332 (expense), netProvision for(benefit from) 676 (90,945 ) (5,509 ) (89,084 )income taxesAdjusted EBITDA $ 40,313 $ 27,840 $ 114,894 $ 94,726 GAAP net income 7.5 % 115.5 % -6.3 % 33.1 %(loss) marginAdjusted EBITDA 44.4 % 33.6 % 34.9 % 31.2 %margin

CERENCE INC.Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)(unaudited - in thousands, except per share data)

Three Months Ended Twelve Months Ended September 30, September 30, 2020 2019 2020 2019 GAAP net income $ 6,817 $ 95,789 $ (20,631 ) $ 100,268 (loss)Stock-based 14,331 8,487 47,285 29,682 compensationAmortization of 5,097 5,450 20,881 21,022 intangible assetsRestructuring and 4,512 7,257 18,237 24,404 other costs, netAcquisition-related - 161 - 944 costsLoss on debt - - 19,279 - extinguishmentNon-cash interest 1,261 - 5,286 - expenseIndemnification 1,215 - 1,215 - asset releaseAdjustments to (7,501 ) (98,085 ) (27,203 ) (113,584 )income tax expenseNon-GAAP net income $ 25,732 $ 19,059 $ 64,349 $ 62,736 Adjusted EPS: GAAP Numerator: Net income (loss)attributed to $ 6,817 $ 95,789 $ (20,631 ) $ 100,268 common shareholdersInterest onConvertible Senior - - - - Notes, net of taxNet income (loss)attributed to $ 6,817 $ 95,789 $ (20,631 ) $ 100,268 common shareholders- diluted Non-GAAP Numerator: Net incomeattributed to $ 25,732 $ 19,059 $ 64,349 $ 62,736 common shareholdersInterest onConvertible Senior 998 - 1,323 - Notes, net of taxNet incomeattributed to $ 26,730 $ 19,059 $ 65,672 $ 62,736 common shareholders- diluted GAAP Denominator: Weighted-averagecommon shares 36,765 36,391 36,428 36,391 outstanding - basicAdjustment for 2,276 - - - diluted sharesWeighted-averagecommon shares 39,041 36,391 36,428 36,391 outstanding -diluted Non-GAAP Denominator:Weighted-averagecommon shares 36,765 36,391 36,428 36,391 outstanding- basicAdjustment for 6,952 - 2,747 - diluted sharesWeighted-averagecommon shares 43,717 36,391 39,175 36,391 outstanding -diluted GAAP net income(loss) per share - $ 0.17 $ 2.63 $ (0.57 ) $ 2.76 dilutedNon-GAAP net income $ 0.61 $ 0.52 $ 1.68 $ 1.72 per share - diluted GAAP net cashprovided by $ 26,212 $ 19,412 $ 44,789 $ 88,071 operatingactivitiesCapital (2,937 ) (1,649 ) (19,012 ) (4,517 )expendituresFree Cash Flow $ 23,275 $ 17,763 $ 25,777 $ 83,554

CERENCE INC.Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)(unaudited - in thousands)

Q4FY20 Q3FY20 Q2FY20 Q1FY20 Q4FY19 Q3FY19 Q2FY19 Q1FY19 GAAP $ 90,882 $ 74,810 $ 86,495 $ 77,459 $ 82,958 $ 77,569 $ 70,304 $ 72,484 revenuesLess:Professional 19,457 17,360 18,742 13,671 15,006 13,891 12,122 11,227 servicesrevenueNon-GAAPRepeatable $ 71,425 $ 57,450 $ 67,753 $ 63,788 $ 67,952 $ 63,678 $ 58,182 $ 61,257 revenues GAAP $ 329,646 $ 321,722 $ 324,481 $ 308,290 $ 303,315 $ 295,713 revenues TTMLess:Professional 69,230 64,779 61,310 54,690 52,246 48,643 servicesrevenue TTMNon-GAAPRepeatable $ 260,416 $ 256,943 $ 263,171 $ 253,600 $ 251,069 $ 247,070 revenues TTMRepeatablesoftware 79% 80% 81% 82% 83% 84% contribution

CERENCE INC.Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)(unaudited - in thousands, except per share data)

Q1 2021 FY2021 Low High Low High GAAP revenue $ 85,000 $ 90,000 $ 360,000 $ 380,000 GAAP gross $ 57,500 $ 62,100 $ 248,100 $ 270,100 profitStock-based 1,000 1,000 3,400 3,400 compensationAmortizationof intangible 1,900 1,900 7,500 7,500 assetsNon-GAAP $ 60,400 $ 65,000 $ 259,000 $ 281,000 gross profitGAAP gross 68 % 69 % 69 % 71 %marginNon-GAAP 71 % 72 % 72 % 74 %gross margin GAAPoperating $ 11,300 $ 14,900 $ 48,000 $ 61,900 incomeStock-based 9,700 9,700 40,000 40,000 compensationAmortizationof intangible 5,000 5,000 20,100 20,100 assetsRestructuringand other 2,500 2,500 3,600 3,600 costs, netNon-GAAPoperating $ 28,500 $ 32,100 $ 111,700 $ 125,600 incomeGAAPoperating 13 % 17 % 13 % 16 %marginNon-GAAPoperating 34 % 36 % 31 % 33 %margin GAAP net $ 5,600 $ 9,300 $ 17,900 $ 30,900 incomeStock-based 9,700 9,700 40,000 40,000 compensationAmortizationof intangible 5,000 5,000 20,100 20,100 assetsRestructuringand other 2,500 2,500 3,600 3,600 costs, netDepreciation 2,500 2,500 9,400 9,400 Total otherincome (3,700 ) (3,700 ) (14,500 ) (14,500 )(expense),netProvision for 1,900 1,900 16,500 16,500 income taxesAdjusted $ 30,900 $ 34,600 $ 122,000 $ 135,000 EBITDAGAAP net 7 % 10 % 5 % 8 %income marginAdjusted 36 % 38 % 34 % 36 %EBITDA margin

CERENCE INC.Reconciliations of GAAP Financial Measures to Non-GAAP Financial Measures (cont.)(unaudited - in thousands, except per share data)

Q1 2021 FY2021 Low High Low High GAAP net income $ 5,600 $ 9,300 $ 17,900 $ 30,900 Stock-based 9,700 9,700 40,000 40,000 compensationAmortization ofintangible 5,000 5,000 20,100 20,100 assetsRestructuringand other costs, 2,500 2,500 3,600 3,600 netNon-cash 1,200 1,200 5,000 5,000 interest expenseIncome taximpact of (4,300 ) (5,200 ) (10,500 ) (13,100 )Non-GAAPadjustmentsNon-GAAP net $ 19,700 $ 22,500 $ 76,100 $ 86,500 income Adjusted EPS: GAAP Numerator: Net incomeattributed to $ 5,600 $ 9,300 $ 17,900 $ 30,900 commonshareholdersInterest onConvertible 1,005 1,005 3,987 3,987 Senior Notes,net of taxNet incomeattributed tocommon $ 6,605 $ 10,305 $ 21,887 $ 34,887 shareholders -diluted Non-GAAP Numerator:Net incomeattributed to $ 19,700 $ 22,500 $ 76,100 $ 86,500 commonshareholdersInterest onConvertible 1,005 1,005 3,987 3,987 Senior Notes,net of taxNet incomeattributed tocommon $ 20,705 $ 23,505 $ 80,087 $ 90,487 shareholders -diluted GAAP Denominator:Weighted-averagecommon shares 37,221 37,221 38,302 38,302 outstanding -basicAdjustment for 5,818 5,818 5,888 5,888 diluted sharesWeighted-averagecommon shares 43,039 43,039 44,190 44,190 outstanding -diluted Non-GAAP Denominator:Weighted-averagecommon shares 37,221 37,221 38,302 38,302 outstanding-basicAdjustment for 5,818 5,818 5,888 5,888 diluted sharesWeighted-averagecommon shares 43,039 43,039 44,190 44,190 outstanding -diluted GAAP net incomeper share - $ 0.15 $ 0.24 $ 0.50 $ 0.79 dilutedNon-GAAP netincome per share $ 0.48 $ 0.55 $ 1.81 $ 2.05 - diluted