Cerence(US:CRNC)2025-05-07 21:07Revenue Performance - Total revenue for the three months ended March 31, 2025, increased by $10.2 million, or 15.0%, to $78.0 million from $67.8 million[136]. - Total revenue for the six months ended March 31, 2025, decreased by $77.3 million, or 37.5%, to $128.9 million from $206.2 million[136]. - License revenue for the three months ended March 31, 2025, was $51.5 million, compared to $35.5 million in the same period last year[137]. - Connected services revenue for the three months ended March 31, 2025, was $12.6 million, a slight decrease from $13.6 million in the same period last year[137]. - Professional services revenue for the three months ended March 31, 2025, was $13.9 million, down from $18.7 million in the same period last year[137]. - Total revenues for the three months ended March 31, 2025 were $78.0 million, an increase of $10.2 million, or 15.0%, from $67.8 million for the same period in 2024[145]. - License revenue for the three months ended March 31, 2025 was $51.5 million, an increase of $16.0 million, or 44.8%, from $35.5 million for the same period in 2024[146]. - Connected services revenue for the three months ended March 31, 2025 was $12.6 million, a decrease of $1.0 million, or 7.0%, from $13.6 million for the same period in 2024[147]. - Professional services revenue for the three months ended March 31, 2025 was $13.9 million, a decrease of $4.8 million, or 25.7%, from $18.7 million for the same period in 2024[148]. - Total revenues for the six months ended March 31, 2025 were $128.9 million, a decrease of $77.3 million, or 37.5%, from $206.2 million for the same period in 2024[150]. - License revenue for the six months ended March 31, 2025 was $74.2 million, an increase of $17.8 million, or 31.7%, from $56.4 million for the same period in 2024[151]. - Connected services revenue for the six months ended March 31, 2025 was $26.4 million, a decrease of $84.0 million, or 76.1%, from $110.4 million for the same period in 2024[152]. Operating Performance - Operating margin for the three months ended March 31, 2025, improved by 412.0 percentage points to positive 22.2% from negative 389.8%[136]. - Operating margin for the six months ended March 31, 2025, increased by 100.1 percentage points to positive 0.3% from negative 99.8%[136]. - Total cost of revenues for the three months ended March 31, 2025 was $17.8 million, a decrease of $3.1 million, or 14.6%, from $20.9 million for the same period in 2024[155]. - Total gross profit for the three months ended March 31, 2025 was $60.2 million, an increase of $13.3 million, or 28.2%, from $46.9 million for the same period in 2024[156]. - Total gross profit for the six months ended March 31, 2025 was $93.3 million, a decrease of $65.6 million, or 41.3%, from $158.9 million for the same period in 2024[165]. - License gross profit increased by $16.6 million, or 31.2%, for the six months ended March 31, 2025 compared to the same period in 2024, primarily due to increases in license revenues[167]. - Connected services gross profit decreased by $82.7 million, or 84.6%, from $97.8 million for the six months ended March 31, 2024 to $15.1 million for the same period in 2025[169]. Cash Flow and Financing - Cash provided by operating activities for the three months ended March 31, 2025, was $15.5 million, a net change of $14.4 million from $1.0 million in the same period last year[136]. - Net cash provided by operating activities for the six months ended March 31, 2025 was $24.7 million, a significant increase of 1495.8% from net cash used in operating activities of $1.8 million for the same period in 2024[224]. - Net cash used in financing activities for the six months ended March 31, 2025 was $27.2 million, a change of $27.7 million from cash provided by financing activities of $0.5 million in the same period in 2024[226]. - As of March 31, 2025, the company had $122.8 million in cash, cash equivalents, and marketable securities[203]. - The company issued $190.0 million in aggregate principal amount of 2028 Notes, with initial net proceeds of $193.2 million after transaction costs[207]. - The 2028 Notes accrue interest at a rate of 1.50% per year and will mature on July 1, 2028[208]. - The company repurchased $87.5 million in aggregate principal amount of the 2025 Notes in connection with the offering of the 2028 Notes[210]. - The total interest expense related to the Notes for the three months ended March 31, 2025 was $2.7 million, a decrease from $2.9 million in the same period of 2024[219]. - The interest expense recognized related to the Notes for the six months ended March 31, 2025 was $5.7 million, compared to $5.8 million for the same period in 2024[219]. - The company incurred transaction costs of $2.4 million related to the issuance of the 2028 Notes, which are being amortized as interest expense over the term of the 2028 Notes[213]. - The company recorded a gain on extinguishment of debt of $0.3 million after repurchasing $27.4 million aggregate principal amount of the 2025 Notes for $27.0 million in cash[218]. Expenses and Restructuring - A restructuring plan was announced in August 2024 to reduce operating expenses and position the company for profitable future growth, with implementation substantially complete by the end of Q1 fiscal year 2025[144]. - R&D expenses for the six months ended March 31, 2025 were $44.2 million, a decrease of $21.0 million, or 32.2%, from $65.2 million for the same period in 2024[175]. - Sales and marketing expenses for the six months ended March 31, 2025 were $9.7 million, a decrease of $2.0 million, or 17.1%, from $11.7 million for the same period in 2024[178]. - General and administrative expenses for the six months ended March 31, 2025 were $24.0 million, a decrease of $5.5 million, or 18.7%, from $29.5 million for the same period in 2024[180]. - Restructuring and other costs for the three months ended March 31, 2025 were $2.8 million, including a $1.6 million charge related to personnel elimination[187]. - Restructuring costs as a percentage of total operating expenses increased by 13.6 percentage points from 1.4% for the six months ended March 31, 2024 to 15.0% for the six months ended March 31, 2025[198]. - Restructuring and other costs, net increased by 164.3% from $5.3 million for the six months ended March 31, 2024 to $13.9 million for the six months ended March 31, 2025[193]. Impairments and Taxation - Goodwill impairment was recorded at $252.1 million for the three months ended March 31, 2024, indicating significant financial challenges faced by the company[186]. - For the three months ended March 31, 2024, restructuring and other costs, net amounted to $4.6 million, including a $4.4 million severance charge[189]. - Goodwill impairment for the three months ended March 31, 2024 was $252.1 million, with a fair value estimate of approximately $463.4 million[190]. - The effective income tax rate for the three months ended March 31, 2025 was negative 34.9%, compared to negative 4.4% for the same period in 2024[201]. Market and Economic Conditions - The company expects revenue to be impacted by production delays and slowdowns in the global automotive industry, as well as macroeconomic conditions such as high interest rates[144]. - The aggregate notional amount of outstanding foreign currency forward contracts was $31.0 million at March 31, 2025[234]. - A 10% unfavorable exchange rate movement in the portfolio of foreign currency contracts would have resulted in unrealized losses of $2.6 million at March 31, 2025[234]. - Assuming a 1% increase in interest rates, interest income on highly liquid investments would increase by $0.6 million per annum based on March 31, 2025 reported balances[235].