Cerence Inc
For the period ended Mar 31, 2024. Filed May 10, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 10, 2024
CRNC$8.15+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0000950170-24-012642
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-10.
0000950170-24-057667
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 166 current paragraphs.
61 unchanged; 49 reworded; 46 added; 12 removed; 0 previous and 10 current paragraphs rearranged.
Tables are not compared: 14 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (46)
Current report
Key Financial Metrics
Current report
Total revenue decreased by $0.6 million, or 0.8%, to $67.8 million from $68.4 million.
Current report
Operating margin decreased 359.7 percentage points to negative 389.8% from negative 30.1%.
Current report
Cash provided by operating activities was $1.0 million, a net change of $5.6 million from cash provided by operating activities of $6.6 million.
Current report
For the six months ended March 31, 2024 as compared to the six months ended March 31, 2023:
Current report
Total revenue increased by $54.1 million, or 35.6%, to $206.2 million from $152.1 million.
Current report
Operating margin decreased 84.9 percentage points to negative 99.8% from negative 14.9%.
Current report
Cash used in operating activities was $1.8 million, a net change of $6.2 million from cash provided by operating activities of $4.4 million.
Current report
We expect our revenue to continue to be impacted by the changing dynamics in the global automotive industry which have resulted in production delays and slowdowns. Macroeconomic conditions such as high interest rates and lack of credit availability have contributed to these production delays and slowdowns. In addition, the software and technology systems in automobiles have become increasingly complex, leading to substantial challenges and delays in production for some of our customers. Our business in adjacent markets, such as two-wheeled vehicles, trucks and AIoT, is also developing slower than anticipated due to the challenges of introducing different technology into a new market. In light of these challenges, we intend to focus on our cost structure and expect to take future cost reduction actions, which may result in additional restructuring costs and impairment charges.
Current report
Total revenues for the three months ended March 31, 2024 were $67.8 million, a decrease of $0.6 million, or 0.8%, from $68.4 million for the three months ended March 31, 2023. The decrease in revenues was driven by a decrease in connected services revenue. The decrease was partly offset by increases in license revenue, which includes a one-time $5.0 million deal as full resolution of the one-time adjustment related to a change in a customer's historically reported royalties made in the first quarter of fiscal 2024.
Current report
License revenue for the three months ended March 31, 2024 was $35.5 million, an increase of $4.7 million, or 15.3%, from $30.8 million for the three months ended March 31, 2023. The increase in license revenue was driven by a $5.8 million increase in fixed contracts. The increase was partially offset by a $1.1 million decrease in variable license revenue due to lower volume of licensing royalties. Included in fixed contracts for the period was a $5.0 million deal as full resolution of a one-time adjustment related to a change in a customer's historically reported royalties made in the first quarter of fiscal 2024. As a percentage of total revenues, license revenue increased 7.4 percentage points from 45.0% for the three months ended March 31, 2023 to 52.4% for the three months ended March 31, 2024.
Current report
Connected services revenue for the three months ended March 31, 2024 was $13.6 million, a decrease of $5.3 million, or 28.2%, from $18.9 million for the three months ended March 31, 2023. This decrease was driven by a $8.4 million decrease related to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition. The decrease was partially offset by a $3.0 million increase in demand for our connected services solutions from new connected business. As a percentage of total revenues, connected services revenue decreased by 7.7 percentage points from 27.7% for the three months ended March 31, 2023 to 20.0% for the three months ended March 31, 2024.
Current report
Total Revenues
Current report
License Revenue
Current report
License revenue for the six months ended March 31, 2024 was $56.4 million, a decrease of $19.8 million, or 26.1%, from $76.2 million for the six months ended March 31, 2023. The decrease in license revenue was driven by a $13.2 million decrease in fixed contracts and $6.6 million decrease in variable license revenue due to lower volume of licensing royalties. Included in fixed contracts for the period was a $5.0 million deal as full resolution of a one-time adjustment related to a change in a customer's historically reported royalties made in the first quarter of fiscal 2024. As a percentage of total revenues, license revenue decreased 22.8 percentage points from 50.1% for the six months ended March 31, 2023 to 27.3% for the six months ended March 31, 2024.
Current report
Connected Services Revenue
Current report
Professional Services Revenue
Current report
Total cost of revenues for the three months ended March 31, 2024 were $20.9 million, a decrease of $4.1 million, or 16.5%, from $25.0 million for the three months ended March 31, 2023.
Current report
We experienced an increase in total gross profit of $3.5 million, or 8.2%, from $43.4 million for the three months ended March 31, 2023 to $46.9 million for the three months ended March 31, 2024. The increase was primarily driven by the increase in license revenues due to higher volume of licensing royalties.
Current report
Cost of connected services revenue for the three months ended March 31, 2024 was $5.4 million, a decrease of $0.7 million, or 12.3%, from $6.1 million for the three months ended March 31, 2023. Cost of connected services revenue decreased primarily due to a $0.4 million decrease in salary-related expenditures and a $0.4 million decrease in amortization of costs previously deferred. As a percentage of total cost of revenues, cost of connected services revenue increased by 1.3 percentage points from 24.4% for the three months ended March 31, 2023 to 25.7% for the three months ended March 31, 2024.
Current report
Connected services gross profit decreased $4.6 million, or 35.7%, from $12.8 million for the three months ended March 31, 2023 to $8.2 million for the three months ended March 31, 2024, primarily due to declines in connected services revenues.
Current report
Cost of professional services revenue for the three months ended March 31, 2024 was $14.1 million, a decrease of $2.5 million, or 14.9%, from $16.6 million for the three months ended March 31, 2023. Cost of professional services revenue decreased primarily due a $1.8 million decrease in salary-related expenditures, a $0.6 million decrease in amortization of costs previously deferred, and a $0.4 million decrease in stock-based compensation. The decrease was partially offset by a $0.5 million increase in internal allocated labor. As a percentage of total cost of revenues, cost of professional services revenue increased by 1.3 percentage points from 66.3% for the three months ended March 31, 2023 to 67.6% for the three months ended March 31, 2024.
Current report
Total cost of revenues for the six months ended March 31, 2024 were $47.2 million, a decrease of $4.0 million, or 7.8%, from $51.2 million for the six months ended March 31, 2023.
Current report
Cost of license revenue for the six months ended March 31, 2024 was $3.0 million, a decrease of $0.8 million, or 21.3%, from $3.8 million for the six months ended March 31, 2023. Cost of license revenues decreased primarily due to costs associated with our Cerence Link product. As a percentage of total cost of revenues, cost of license revenue decreased by 1.1 percentage points from 7.5% for the six months ended March 31, 2023 to 6.4% for the six months ended March 31, 2024.
Current report
Cost of Connected Services Revenue
Current report
Cost of connected services revenue for the six months ended March 31, 2024 and 2023 remained flat at $12.7 million. As a percentage of total cost of revenues, cost of connected service revenue increased by 2.1 percentage points from 24.7% for the six months ended March 31, 2023 to 26.8% for the six months ended March 31, 2024.
Current report
Cost of Professional Services Revenue
Current report
Cost of professional services revenue for the six months ended March 31, 2024 was $31.4 million, a decrease of $3.1 million, or 8.9%, from $34.5 million for the six months ended March 31, 2023. Cost of professional services revenue decreased primarily due to a $3.4 million decrease in salary-related expenditures, a $1.0 million decrease in stock-based compensation costs, and a $0.9 million decrease in amortization of costs previously deferred. The decrease was partially offset by a $1.9 million increase in internal allocated labor and a $1.2 million increase in third-party contractor costs. As a percentage of total cost of revenues, cost of professional services revenue decreased by 0.8 percentage points from 67.4% for the six months ended March 31, 2023 to 66.6% for the six months ended March 31, 2024.
Current report
Professional services gross profit increased $3.9 million, or 98.6%, from $4.0 million for the six months ended March 31, 2023 to $7.9 million for the six months ended March 31, 2024, which was primarily due to the composition of our professional service arrangements.
Current report
Historically, R&D expenses are our largest operating expense as we continue to build on our existing software platforms and develop new technologies. R&D expenses for the six months ended March 31, 2024 were $65.2 million, an increase of $7.2 million, or 12.4%, from $58.0 million for the six months ended March 31, 2023. The increase was primarily attributable to a $6.2 million increase in salary-related expenditures, $4.1 million increase in third-party contractor costs, and a $0.7 million decrease in capitalized costs associated with internally developed software. The increase was partially offset by a $2.5 million decrease in internally allocated labor and $2.2 million decrease in stock-based compensation expense. As a percentage of total operating expenses, R&D expenses decreased by 29.1 percentage points from 47.0% for the six months ended March 31, 2023 to 17.9% for the six months ended March 31, 2024.
Current report
Sales and marketing expenses for the six months ended March 31, 2024 were $11.7 million, a decrease of $5.7 million, or 32.7%, from $17.4 million for the six months ended March 31, 2023. The decrease in sales and marketing expenses was primarily attributable to a $3.1 million decrease in salary-related expenditures, a $2.1 million decrease in stock-based compensation costs, and a $0.5 million decrease in professional services. The decrease was partially offset by a $0.3 million increase in commissions expenditures and a $0.3 million increase in travel-related expenditures. As a percentage of total operating expenses, sales and marketing expenses decreased by 10.9 percentage points from 14.1% for the six months ended March 31, 2023 to 3.2% for the six months ended March 31, 2024.
Current report
General and administrative expenses for the six months ended March 31, 2024 were $29.5 million, a decrease of $3.9 million, or 11.9%, from $33.4 million for the six months ended March 31, 2023. The decrease in general and administrative expenses was primarily attributable to a $6.2 million decrease in stock-based compensation costs. The decrease was partially offset by a $2.4 million increase in credit loss provision, including a $6.1 million provision relating to the bankruptcy of one fitness equipment manufacturer. During the three months ended March 31, 2023, we recorded a $3.8 million provision relating to one international electric vehicle maker. As a percentage of total operating expenses, general and administrative expenses decreased by 19.0 percentage points from 27.1% for the six months ended March 31, 2023 to 8.1% for the six months ended March 31, 2024.
Current report
As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 0.2 percentage points from 0.4% for the six months ended March 31, 2023 to 0.2% for the six months ended March 31, 2024. As a percentage of total operating expenses, intangible asset amortization expenses within operating expenses decreased by 3.5 percentage points from 3.8% for the six months ended March 31, 2023 as compared to 0.3% for the six months ended March 31, 2024.
Current report
Other Components of Operating Expense
Current report
For the three months ended March 31, 2024, we recorded restructuring and other costs, net of $4.6 million which included a $4.4 million severance charge related to the elimination of personnel and a $0.1 million charge resulting from the closure of facilities that will no longer be utilized. During the remainder of fiscal year 2024, we expect additional personnel-related restructuring costs as we better align our cost structure with current levels of revenue.
Current report
Goodwill impairment for the three months ended March 31, 2024 was $252.1 million. At March 31, 2024, we concluded indicators of impairment were present due to the current macroeconomic conditions, including declines in our stock price. The fair value of our reporting unit was determined using a combination of the income approach and the market approach. We weighted the methodologies appropriately to estimate a fair value of approximately $463.4 million as of March 31, 2024. The carrying value of our reporting unit exceeded the estimated fair value. Based upon the results of the impairment test, we recorded a goodwill impairment charge of $252.1 million.
Current report
Whenever events or changes in circumstances indicate that the carrying value may not be recoverable, we will be required to assess the potential impairment of goodwill and other intangible assets. Examples of factors that could trigger an impairment of such assets include, but are not limited to, our market capitalization declining to below net book value, declines in our stock price for sustained periods of time and negative industry or economic trends. Future adverse changes in these or other unforeseeable factors could result in additional impairment charges that would impact our results of operations and financial position in the reporting period identified.
Current report
Goodwill impairment for the six months ended March 31, 2024 was $252.1 million. At March 31, 2024, we concluded indicators of impairment were present due to the current macroeconomic conditions, including declines in our stock price. The fair value of our reporting unit was determined using a combination of the income approach and the market approach. We weighted the methodologies appropriately to estimate a fair value of approximately $463.4 million as of March 31, 2024. The carrying value of our reporting unit exceeded the estimated fair value. Based upon the results of the impairment test, we recorded a goodwill impairment charge of $252.1 million.
Current report
Whenever events or changes in circumstances indicate that the carrying value may not be recoverable, we will be required to assess the potential impairment of goodwill and other intangible assets. Examples of factors that could trigger an impairment of such assets include, but are not limited to, our market capitalization declining to below net book value, declines in our stock price for sustained periods of time and negative industry or economic trends. Future adverse changes in these or other unforeseeable factors could result in additional impairment charges that would impact our results of operations and financial position in the reporting period identified.
Current report
For the six months ended March 31, 2023, we recorded restructuring and other charges, net of $9.9 million, which included a $6.4 million severance charge related to the elimination of personnel, a $0.3 million charge resulting from the closure of facilities that will no longer be utilized, and $3.1 million related to other one-time charges.
Showing the first 40 of 46 passages. Open the source sections for the rest.
Removed paragraphs (12)
Previous report
Key Metrics
Previous report
Total revenue increased by $54.6 million, or 65.4%, to $138.3 million from $83.7 million.
Previous report
Operating margin increased 44.7 percentage points to 42.3% from negative 2.4%.
Previous report
Cash used in operating activities was $2.8 million, a net change of $0.7 million from cash used in operating activities of $2.1 million.
Previous report
License revenue for the three months ended December 31, 2023 was $20.8 million, a decrease of $24.6 million, or 54.2%, from $45.4 million for the three months ended December 31, 2022. The decrease in license revenue was driven by a $19.1 million decrease in minimum purchase commitments and prepaid deals and the remaining $5.5 million decrease in variable license revenue mainly due to a one-time adjustment relating to a change in a customer’s historically reported royalties based on new information provided by the customer in the first quarter of fiscal year 2024. As a percentage of total revenues, license revenue decreased 39.2 percentage points from 54.3% for the three months ended December 31, 2022 to 15.1% for the three months ended December 31, 2023.
Previous report
Total cost of revenues for the three months ended December 31, 2023 were $26.3 million, an increase of $0.1 million, or 0.6%, from $26.2 million for the three months ended December 31, 2022.
Previous report
Cost of connected services revenue for the three months ended December 31, 2023 was $7.3 million, an increase of $0.8 million, or 11.6%, from $6.5 million for the three months ended December 31, 2022. Cost of connected services revenue increased primarily due to a $0.9 million increase in amortization of costs previously deferred and a $0.2 million increase in our cloud infrastructure costs. The increase was partially offset by a $0.3 million decrease in salary-related expenditures. During the first quarter of fiscal year 2024, we had an acceleration of $2.0 million of expenses associated with the termination of the legacy contract acquired by Nuance through a 2013 acquisition. As a percentage of total cost of revenues, cost of connected service revenue increased by 2.7 percentage points from 25.0% for the three months ended December 31, 2022 to 27.7% for the three months ended December 31, 2023.
Previous report
Cost of professional services revenue for the three months ended December 31, 2023 was $17.3 million, a decrease of $0.6 million, or 3.3%, from $17.9 million for the three months ended December 31, 2022. Cost of professional services revenue decreased primarily due to a $1.6 million decrease in salary-related expenditures and a $0.6 million decrease in stock-based compensation. The decrease was partially offset by a $1.2 million increase in third-party contractor costs. As a percentage of total cost of revenues, cost of professional services revenue decreased by 2.7 percentage points from 68.5% for the three months ended December 31, 2022 to 65.8% for the three months ended December 31, 2023.
Previous report
Restructuring and Other Costs, Net
Previous report
Fiscal Year 2024
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Fiscal Year 2023
Previous report
Total Other (Expense) Income, Net
Reworded paragraphs (49)
Previous wording
You should read the following discussion and analysis of our financial condition and results of operations together with our Unaudited Condensed Consolidated Financial Statements, and the related notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on November 29, 2023. Some of the information contained in this discussion and analysis or elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, our performance and future success, our liquidity and capital resources, the impact of the COVID-19 pandemic on our business, results of operations and financial condition, macroeconomic conditions, the semiconductor shortage, trends in the global auto industry, including shipping and production issues and expected production improvements, and tax estimates and other tax matters, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements.” You should review the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Note that the results of operations for the three months ended December 31, 2023 are not necessarily indicative of what our operating results for the full fiscal year will be. In this Item, “we,” “us,” “our,” “Cerence” and the “Company” refer to Cerence Inc. and its consolidated subsidiaries, collectively.
Current wording
You should read the following discussion and analysis of our financial condition and results of operations together with our Unaudited Condensed Consolidated Financial Statements, and the related notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, filed with the Securities and Exchange Commission (“SEC”) on November 29, 2023. Some of the information contained in this discussion and analysis or elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, our performance and future success, our liquidity and capital resources, results of operations and financial condition, macroeconomic conditions, the semiconductor shortage, trends in the global auto industry and adjacent markets, including shipping and production issues, new products, cost management, and tax estimates and other tax matters, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements.” You should review the “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Note that the results of operations for the three and six months ended March 31, 2024 are not necessarily indicative of what our operating results for the full fiscal year will be. In this Item, “we,” “us,” “our,” “Cerence” and the “Company” refer to Cerence Inc. and its consolidated subsidiaries, collectively.
Previous wording
We generate revenue primarily by selling software licenses and cloud-connected services. Our edge software components are typically sold under a traditional per unit perpetual software license model, in which a per unit fee is charged on a variable basis for each software instance installed on an automotive head unit. We typically license cloud-connected software components in the form of a service to the vehicle end user, which is paid for in advance. In addition, we generate professional services revenue from our work with our customers during the design, development, and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. We have existing relationships with all major OEMs or their tier 1 suppliers, and while our customer contracts vary, they generally represent multi-year engagements, giving us some level of visibility into future revenue.
Current wording
We generate revenue primarily by selling software licenses and cloud-connected services. Our edge software components are typically sold under a traditional per unit perpetual software license model, in which a per unit fee is charged on a variable basis for each software instance installed on an automotive head unit. We typically license cloud-connected software components in the form of a service to the vehicle end user, which is paid for in advance. In addition, we generate professional services revenue from our work with our customers during the design, development, and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. We have existing relationships with all major OEMs or their tier 1 suppliers, and while our customer contracts vary, they generally represent multi-year engagements, giving us some level of visibility into future revenue; however, such revenue may not materialize as expected due to delays in automobile production, changing customer forecasts, macroeconomic conditions or other factors discussed elsewhere in this Quarterly Report.
Previous wording
The condensed consolidated balance sheet data as of September 30, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three months ended December 31, 2023 are not necessarily indicative of the results expected for the full fiscal year ending September 30, 2024.
Current wording
The condensed consolidated balance sheet data as of September 30, 2023 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and six months ended March 31, 2024 are not necessarily indicative of the results expected for the full fiscal year ending September 30, 2024.
Previous wording
The following table shows the Condensed Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022 (dollars in thousands):
Current wording
The following table shows the Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2024 and 2023 (dollars in thousands):
Previous wording
Connected services revenue primarily represents the subscription fee that provides access to our connected services components, including the customization and construction of our connected services solutions. We also derive revenue within our connected services business from usage contracts and there can be instances where a customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party. Subscription and usage contracts typically have a term of one to five years. Subscription revenue is recognized over the subscription period and cash is expected to be collected at the start of the subscription period. Usage based revenue is recognized and cash is collected as the service is used. If the customer takes possession of the software to have it hosted by the customer or a third-party, revenue is recognized, and cash is collected at the time the license is delivered. On October 31, 2023, we entered into an early termination agreement relating to a legacy contract acquired by Nuance through a 2013 acquisition. Previously the term of the contract ended on December 31, 2025, whereas the agreement signed on October 31, 2023, updated the termination date to December 31, 2023. The effect of this change was to accelerate $67.8 million of deferred revenue into the first quarter of fiscal year 2024. There is no cash flow associated with this legacy contract. We provided services to a separate customer, who in turn provided services to our legacy customer. Our customer terminated services on October 31, 2023. There is no cash flow associated with this contract. The effect of this termination is to accelerate $9.9 million of deferred revenue into the first quarter of fiscal year 2024. See Note 3 to the accompanying unaudited condensed consolidated financial statements for further discussion of our revenue, deferred revenue performance obligations and the timing of revenue recognition. Cost of connected service revenue primarily consists of labor costs of software delivery services, infrastructure, and communications fees that support our connected services solutions.
Current wording
Connected services revenue primarily represents the subscription fee that provides access to our connected services components, including the customization and construction of our connected services solutions. We also derive revenue within our connected services business from usage contracts and there can be instances where a customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party. Subscription and usage contracts typically have a term of one to five years. Subscription revenue is recognized over the subscription period and cash is expected to be collected at the start of the subscription period. Usage based revenue is recognized and cash is collected as the service is used. If the customer takes possession of the software to have it hosted by the customer or a third-party, revenue is recognized, and cash is collected at the time the license is delivered. On October 31, 2023, we entered into an early termination agreement relating to a legacy contract acquired by Nuance through a 2013 acquisition. Previously, the term of the contract ended on December 31, 2025, whereas the agreement signed on October 31, 2023 updated the termination date to December 31, 2023. The effect of this change was to accelerate $67.8 million of deferred revenue into the first quarter of fiscal year 2024. There is no cash flow associated with this legacy contract. We provided services to a separate customer, who in turn provided services to our legacy customer. This separate customer terminated services on October 31, 2023. There is no cash flow associated with this contract. The effect of this termination was to accelerate $9.9 million of deferred revenue into the first quarter of fiscal year 2024. See Note 3 to the accompanying unaudited condensed consolidated financial statements for further discussion of our revenue, deferred revenue performance obligations and the timing of revenue recognition. Cost of connected service revenue primarily consists of labor costs of software delivery services, infrastructure, and communications fees that support our connected services solutions.
Previous wording
Total other (expense) income, net consists primarily of foreign exchange gains (losses), interest income and interest expense related to the Notes and Senior Credit Facilities.
Current wording
Total other expense, net consists primarily of foreign exchange gains (losses), interest income and interest expense related to the Notes and Senior Credit Facilities.
Previous wording
Total revenues for the three months ended December 31, 2023 were $138.3 million, an increase of $54.6 million, or 65.4%, from $83.7 million for the three months ended December 31, 2022. The increase in revenues was driven by connected services revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer. The increase was partially offset by decreases in license revenue primarily related to minimum purchase commitments and prepaid deals and a one-time adjustment relating to a change in a customer’s historically reported royalties based on new information provided by the customer in the first quarter of fiscal year 2024.
Current wording
Total revenues for the six months ended March 31, 2024 were $206.2 million, an increase of $54.1 million, or 35.6%, from $152.1 million for the six months ended March 31, 2023. The increase in revenues was driven by connected services revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer. The increase was partially offset by decreases in license revenue primarily related to fixed contracts.
Previous wording
Connected services revenue for the three months ended December 31, 2023 was $96.8 million, an increase of $78.4 million, or 426.4%, from $18.4 million for the three months ended December 31, 2022. This increase was primarily driven by the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer. The effect of these changes was an acceleration of $67.8 million and $9.9 million of deferred revenue into the first quarter of fiscal year 2024. As a percentage of total revenues, connected services revenue increased by 48.0 percentage points from 22.0% for the three months ended December 31, 2022 to 70.0% for the three months ended December 31, 2023.
Current wording
Connected services revenue for the six months ended March 31, 2024 was $110.4 million, an increase of $73.1 million, or 195.9%, from $37.3 million for the six months ended March 31, 2023. This increase was primarily driven by the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer. The effect of these changes was an acceleration of $67.8 million and $9.9 million of deferred revenue into the first quarter of fiscal year 2024. As a percentage of total revenues, connected services revenue increased by 29.1 percentage points from 24.5% for the six months ended March 31, 2023 to 53.6% for the six months ended March 31, 2024.
Previous wording
Professional service revenue for the three months ended December 31, 2023 was $20.7 million, an increase of $0.9 million, or 4.3%, from $19.8 million for the three months ended December 31, 2022. This increase was primarily driven by our arrangements and the related timing of fulfilling performance obligations under the contracts. As a percentage of total revenues, professional services revenue decreased by 8.8 percentage points from 23.7% for the three months ended December 31, 2022 to 14.9% for the three months ended December 31, 2023.
Current wording
Professional service revenue for the six months ended March 31, 2024 was $39.4 million, an increase of $0.9 million, or 2.3%, from $38.5 million for the six months ended March 31, 2023. This increase was primarily driven by our arrangements and the related timing of fulfilling performance obligations under the contracts. As a percentage of total revenues, professional services revenue decreased by 6.3 percentage points from 25.4% for the six months ended March 31, 2023 to 19.1% for the six months ended March 31, 2024.
Previous wording
Cost of license revenue for the three months ended December 31, 2023 and 2022 remained flat at $1.6 million. Cost of license revenues are primarily due to costs associated with our Cerence Link product. As a percentage of total cost of revenues, cost of license revenue decreased by 0.1 percentage points from 6.2% for the three months ended December 31, 2022 to 6.1% for the three months ended December 31, 2023.
Current wording
Cost of license revenue for the three months ended March 31, 2024 was $1.4 million, a decrease of $0.8 million, or 36.4%, from $2.2 million for the three months ended March 31, 2023. Cost of license revenues decreased primarily due to costs associated with our Cerence Link product. As a percentage of total cost of revenues, cost of license revenue decreased by 2.1 percentage points from 8.8% for the three months ended March 31, 2023 to 6.7% for the three months ended March 31, 2024.
Previous wording
License gross profit decreased by $24.6 million, or 56.1%, for the three months ended December 31, 2023 when compared to the three months ended December 31, 2022, primarily due to declines in license revenue.
Current wording
License gross profit increased by $5.5 million, or 19.3%, for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023, primarily due to increases in license revenues.
Previous wording
Professional services gross profit increased $1.5 million, or 75.1%, from $1.9 million for the three months ended December 31, 2022 to $3.4 million for the three months ended December 31, 2023, which was primarily due to the composition of our professional service arrangements.
Current wording
Professional services gross profit increased $2.5 million, or 120.3%, from $2.1 million for the three months ended March 31, 2023 to $4.6 million for the three months ended March 31, 2024, which was primarily due to the composition of our professional service arrangements.
Previous wording
We experienced an increase in total gross profit of $54.5 million, or 94.9%, from $57.5 million for the three months ended December 31, 2022 to $112.0 million for the three months ended December 31, 2023. The increase was primarily driven by the increase in connected service revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer.
Current wording
We experienced an increase in total gross profit of $58.0 million, or 57.6%, from $100.9 million for the six months ended March 31, 2023 to $158.9 million for the six months ended March 31, 2024. The increase was primarily driven by the increase in connected service revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer.
Previous wording
Connected services gross profit increased $77.6 million, or 655.3%, from $11.9 million for the three months ended December 31, 2022 to $89.5 million for the three months ended December 31, 2023, primarily due to the increase in connected service revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer.
Current wording
Connected services gross profit increased $73.1 million, or 296.3%, from $24.7 million for the six months ended March 31, 2023 to $97.8 million for the six months ended March 31, 2024, primarily due to the increase in connected service revenue due to the early termination of a legacy contract acquired by Nuance through a 2013 acquisition and the termination of services provided to a separate customer, who in turn provided services to our legacy customer.
Previous wording
The tables below show each component of operating expense. Total other (expense) income, net and provision for income taxes are non-operating expenses and presented in a similar format (dollars in thousands).
Current wording
The tables below show each component of operating expense. Total other expense, net and provision for income taxes are non-operating expenses and presented in a similar format (dollars in thousands).
Previous wording
Historically, R&D expenses are our largest operating expense as we continue to build on our existing software platforms and develop new technologies. R&D expenses for the three months ended December 31, 2023 were $33.3 million, an increase of $3.8 million, or 12.9%, from $29.5 million for the three months ended December 31, 2022. The increase was primarily attributable to a $4.4 million increase in salary-related expenditures and a $1.6 million increase in third-party contractor costs. The increase was partially offset by a $1.7 million decrease in internally allocated labor and a $0.6 million decrease in stock-based compensation costs. As a percentage of total operating expenses, R&D expenses increased by 12.7 percentage points from 49.6% for the three months ended December 31, 2022 to 62.3% for the three months ended December 31, 2023.
Current wording
Historically, R&D expenses are our largest operating expense as we continue to build on our existing software platforms and develop new technologies. R&D expenses for the three months ended March 31, 2024 were $31.8 million, an increase of $3.3 million, or 11.8%, from $28.5 million for the three months ended March 31, 2023. The increase was primarily attributable to a $2.5 million increase in third-party contractor costs, a $1.8 million increase in salary-related expenditures, and a $0.6 million decrease in capitalized costs associated with internally developed software. The increase was partially offset by a $1.5 million decrease in stock-based compensation expense and a $0.8 million decrease in internally allocated labor. As a percentage of total operating expenses, R&D expenses decreased by 34.3 percentage points from 44.5% for the three months ended March 31, 2023 to 10.2% for the three months ended March 31, 2024.
Previous wording
Sales and marketing expenses for the three months ended December 31, 2023 were $6.1 million, a decrease of $3.1 million, or 33.7%, from $9.2 million for the three months ended December 31, 2022. The decrease in sales and marketing expenses was primarily attributable to a $1.4 million decrease in salary-related expenditures, a $0.9 million decrease in stock-based compensation costs, a $0.3 million decrease in professional services, and a $0.2 million decrease in travel expenditures. As a percentage of total operating expenses, sales and marketing expenses decreased by 4.0 percentage points from 15.4% for the three months ended December 31, 2022 to 11.4% for the three months ended December 31, 2023.
Current wording
Sales and marketing expenses for the three months ended March 31, 2024 were $5.6 million, a decrease of $2.6 million, or 31.6%, from $8.2 million for the three months ended March 31, 2023. The decrease in sales and marketing expenses was primarily attributable to a $1.7 million decrease in salary-related expenditures, a $1.2 million decrease in stock-based compensation costs, and a $0.2 million decrease in professional services. The decrease was partially offset by a $0.2 million increase in commissions expenditures. As a percentage of total operating expenses, sales and marketing expenses decreased by 11.0 percentage points from 12.8% for the three months ended March 31, 2023 to 1.8% for the three months ended March 31, 2024.
Previous wording
General and administrative expenses for the three months ended December 31, 2023 were $12.8 million, a decrease of $1.5 million, or 10.3%, from $14.3 million for the three months ended December 31, 2022. The decrease in general and administrative expenses was primarily attributable to a $1.8 million decrease in stock-based compensation costs. The decrease was partially offset by a $0.6 million increase in salary-related expenditures. As a percentage of total operating expenses, general and administrative expenses decreased by 0.1 percentage points from 24.0% for the three months ended December 31, 2022 to 23.9% for the three months ended December 31, 2023.
Current wording
General and administrative expenses for the three months ended March 31, 2024 were $16.7 million, a decrease of $2.5 million, or 13.1%, from $19.2 million for the three months ended March 31, 2023. The decrease in general and administrative expenses was primarily attributable to a $4.4 million decrease in stock-based compensation costs and a $0.7 million decrease in salary-related expenditures. The decrease was partially offset by a $2.4 million increase in credit loss provision, including a $6.1 million provision relating to the bankruptcy of one fitness equipment manufacturer. During the three months ended March 31, 2023, we recorded a $3.8 million provision relating to one international electric vehicle maker. As a percentage of total operating expenses, general and administrative expenses decreased by 24.6 percentage points from 30.0% for the three months ended March 31, 2023 to 5.4% for the three months ended March 31, 2024.
Previous wording
Intangible asset amortization for the three months ended December 31, 2023 was $0.6 million, a decrease of $1.9 million, or 73.6%, from $2.5 million for the three months ended December 31, 2022. The decrease in amortization relates to certain intangible assets having been fully amortized during fiscal year 2023. Amortization expense for acquired technology and patents is included in the cost of revenues in the accompanying Condensed Consolidated Statements of Operations. Amortization expense for customer relationships is included in operating expenses in the accompanying Condensed Consolidated Statements of Operations.
Current wording
Intangible asset amortization for the three months ended March 31, 2024 was $0.6 million, a decrease of $1.9 million, or 77.8%, from $2.5 million for the three months ended March 31, 2023. The decrease in amortization relates to certain intangible assets having been fully amortized during fiscal year 2024 and 2023. Amortization expense for acquired technology and patents is included in the cost of revenues in the accompanying Condensed Consolidated Statements of Operations. Amortization expense for customer relationships is included in operating expenses in the accompanying Condensed Consolidated Statements of Operations.
Previous wording
As a percentage of total cost of revenues, intangible asset amortization within cost of revenues remained flat at 0.4% for the three months ended December 31, 2023 and 2022. As a percentage of total operating expenses, intangible asset amortization expenses within operating expenses decreased by 3.0 percentage points from 4.0% for the three months ended December 31, 2022 as compared to 1.0% for the three months ended December 31, 2023.
Current wording
As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 0.4 percentage points from 0.4% for the three months ended March 31, 2023 to 0.0% for the three months ended March 31, 2024. As a percentage of total operating expenses, intangible asset amortization expenses within operating expenses decreased by 3.5 percentage points from 3.7% for the three months ended March 31, 2023 as compared to 0.2% for the three months ended March 31, 2024.
Previous wording
For the three months ended December 31, 2022, we recorded restructuring and other costs, net of $4.2 million, which included a $3.0 million severance charge related to the elimination of personnel, a $0.2 million charge resulting from the closure of facilities that will no longer be utilized, and $0.9 million related to other one-time charges.
Current wording
For the three months ended March 31, 2023, we recorded restructuring and other charges, net of $5.7 million, which included a $3.4 million severance charge related to the elimination of personnel, a $0.2 million charge resulting from the closure of facilities that will no longer be utilized, and $2.2 million related to other one-time charges.
Previous wording
As a percentage of total operating expenses, restructuring and other costs, net decreased by 5.7 percentage points from 7.0% for the three months ended December 31, 2022 to 1.3% for the three months ended December 31, 2023.
Current wording
As a percentage of total operating expenses, restructuring and other costs, net decreased by 7.4 percentage points from 8.9% for the three months ended March 31, 2023 to 1.5% for the three months ended March 31, 2024.
Previous wording
For the three months ended December 31, 2023, we recorded restructuring and other costs, net of $0.7 million which included a $0.1 million severance charge related to the elimination of personnel, a $0.1 million charge resulting from the closure of facilities that will no longer be utilized, and $0.4 million related to other one-time charges. For the remainder of fiscal year 2024, we expect approximately $6.5 million of personnel-related restructuring costs.
Current wording
For the six months ended March 31, 2024, we recorded restructuring and other costs, net of $5.3 million, which included a $4.5 million severance charge related to the elimination of personnel, $0.4 million related to other one-time charges and a $0.3 million charge resulting from the closure of facilities that will no longer be utilized. During the remainder of fiscal year 2024, we expect additional personnel-related restructuring costs as we better align our cost structure with current levels of revenue.
Previous wording
Total other (expense) income, net for the three months ended December 31, 2023 was expense of $0.4 million, a change of $1.5 million from $1.1 million of income for the three months ended December 31, 2022. The increase in interest income was primarily attributable to returns on investments. The decrease in interest expense was primarily attributable to lower applicable interest rate on our Notes. The change in other income, net was primarily driven by foreign exchange gains. For further information, see “Liquidity and Capital Resources” below.
Current wording
Total other expense, net for the six months ended March 31, 2024 was expense of $2.3 million, a change of $1.6 million from $0.7 million of expense for the six months ended March 31, 2023. The increase in interest income was primarily attributable to returns on investments. The decrease in interest expense was primarily attributable to a lower applicable interest rate on our Notes. The change in Other income, net was primarily driven by foreign exchange gains, see “Liquidity and Capital Resources” below.
Previous wording
Our effective income tax rate for the three months ended December 31, 2023 was 59.0%, compared to negative 137.7% for the three months ended December 31, 2022. Our provision for income taxes for the three months ended December 31, 2023 was $34.3 million, a net change of $33.0 million from a provision for income taxes of $1.3 million for the three months ended December 31, 2022. This difference was attributable to the change in income tax expense related to foreign valuation allowance.
Current wording
Our effective income tax rate for the three months ended March 31, 2024 was negative 4.4%, compared to negative 16.6% for the three months ended March 31, 2023. Our provision for income taxes for the three months ended March 31, 2024 was $11.6 million, a net change of $7.9 million from a provision for income taxes of $3.7 million for the three months ended March 31, 2023. This difference was attributable to impairment of book goodwill and the change in income tax expense related to foreign valuation allowance.
Previous wording
As of December 31, 2023, we had $116.3 million in cash, cash equivalents, and marketable securities. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Marketable securities include commercial paper, corporate bonds, and government securities. As of December 31, 2023, our net working capital, excluding deferred revenue and deferred costs, was $146.2 million. This balance is representative of the short-term net cash inflows based on the working capital at that date.
Current wording
As of March 31, 2024, we had $115.2 million in cash, cash equivalents, and marketable securities. Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. Marketable securities include commercial paper, corporate bonds, and government securities. As of March 31, 2024, our net working capital, excluding deferred revenue and deferred costs, was $166.3 million. This balance is representative of the short-term net cash inflows based on the working capital at that date.
Previous wording
Our ability to fund future operating needs will depend on our ability to generate positive cash flows from operations and finance additional funding in the capital and debt markets as needed. Based on our expectations to generate positive cash flows and the $116.3 million of cash, cash equivalents, and marketable securities as of December 31, 2023, we believe that we will be able to meet our liquidity needs over the next 12 months. We believe that we will meet longer-term expected future cash requirements and obligations, through a combination of cash flows from operating activities, available cash balances, and available credit via our Revolving Facility (as described below).
Current wording
Our ability to fund future operating needs will depend on our ability to generate positive cash flows from operations and finance additional funding in the capital and debt markets as needed. Based on our expectations to generate positive cash flows and the $115.2 million of cash, cash equivalents, and marketable securities as of March 31, 2024, we believe that we will be able to meet our liquidity needs over the next 12 months.
Previous wording
Interest per annum is due and payable semiannually and is determined based on the outstanding principal as of December 31, 2023.
Current wording
Interest per annum is due and payable monthly and is determined based on the outstanding principal as of March 31, 2024.
Previous wording
Contractual lease commitments are shown net of sublease income related to certain facilities. As of December 31, 2023, we anticipate sublease income of $0.4 million through fiscal year 2024.
Current wording
Contractual lease commitments are shown net of sublease income related to certain facilities. As of March 31, 2024, we anticipate sublease income of $0.2 million through fiscal year 2024.
Previous wording
Should we need to secure additional sources of liquidity, we believe that we could finance our needs through the issuance of equity securities or debt offerings. However, we cannot guarantee that we will be able to obtain financing through the issuance of equity securities or debt offerings on acceptable terms. Inflation and rising interest rates, and disruptions and instability in the banking industry have negatively impacted the global economy and created significant volatility and disruption of financial markets. An extended period of economic disruption, market volatility or recent bank failures, could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition.
Current wording
Should we need to secure additional sources of liquidity, we believe that we could finance our needs through the issuance of equity securities or debt offerings. However, we cannot guarantee that we will be able to obtain financing through the issuance of equity securities or debt offerings or that, if such financing is obtained, that it will be on acceptable terms. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. For instance, inflation and rising interest rates, and disruptions and instability in the banking industry have negatively impacted the global economy and and rising interest rates, and disruptions and instability in the banking industry have negatively impacted the global economy and created significant volatility and disruption of financial markets. An extended period of economic disruption, market volatility or recent bank failures, could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition.
Previous wording
As a result, $87.5 million of the 2028 Notes are considered a modification of the 2025 Notes and are included in the balances of the 2025 Notes along with the remaining $87.5 million of the 2025 Notes (together the "2025 Modified Notes") that were not repurchased as part of the transaction. We recorded $14.3 million of fees paid directly to the lenders as deferred debt issuance costs, and $3.8 million of fees paid to third-parties were expensed in the period. As of December 31, 2023, the carrying amount of the 2025 Modified Notes was $157.1 million, net of unamortized costs of $17.9 million.
Current wording
As a result, $87.5 million of the 2028 Notes are considered a modification of the 2025 Notes and are included in the balances of the 2025 Notes along with the remaining $87.5 million of the 2025 Notes (together the "2025 Modified Notes") that were not repurchased as part of the transaction. We recorded $14.3 million of fees paid directly to the lenders as deferred debt issuance costs, and $3.8 million of fees paid to third-parties were expensed in the period. As of March 31, 2024, the carrying amount of the 2025 Modified Notes was $158.4 million, net of unamortized costs of $16.6 million.
Previous wording
We accounted for $122.5 million of the 2028 Notes, that were not negotiated with the investors of the 2025 Notes, as a single liability. We incurred transaction costs of $2.4 million relating to the issuance of the 2028 Notes, which were recorded as a direct deduction from the face amount of the 2028 Notes and are being amortized as interest expense over the term of the 2028 Notes using the interest method. As of December 31, 2023, the carrying amount of the 2028 Notes was $120.3 million and unamortized issuance costs of $2.2 million. As of December 31, 2023, the 2028 Notes were not convertible.
Current wording
We accounted for $122.5 million of the 2028 Notes, that were not negotiated with the investors of the 2025 Notes, as a single liability. We incurred transaction costs of $2.4 million relating to the issuance of the 2028 Notes, which were recorded as a direct deduction from the face amount of the 2028 Notes and are being amortized as interest expense over the term of the 2028 Notes using the interest method. As of March 31, 2024, the carrying amount of the 2028 Notes was $120.5 million and unamortized issuance costs of $2.0 million. As of March 31, 2024, the 2028 Notes were not convertible.
Previous wording
The interest expense recognized related to the Notes for the three months ended December 31, 2023 and 2022 was as follows (dollars in thousands):
Current wording
The interest expense recognized related to the Notes for the three and six months ended March 31, 2024 and 2023 was as follows (dollars in thousands):
Previous wording
The conditional conversion feature of the Notes was not triggered during the three months ended December 31, 2023. As of December 31, 2023, the Notes were not convertible. As of this Quarterly Report, no Notes have been converted by the holders. Whether any of the Notes will be converted in future quarters will depend on the satisfaction of one or more of the conversion conditions in the future. If one or more holders elect to convert their Notes at a time when any such Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
Current wording
The conditional conversion feature of the Notes was not triggered during the three and six months ended March 31, 2024. As of March 31, 2024, the Notes were not convertible. As of this Quarterly Report, no Notes have been converted by the holders. Whether any of the Notes will be convertible in future quarters will depend on the satisfaction of one or more of the conversion conditions in the future. If one or more holders elect to convert their Notes at a time when any such Notes are convertible, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
Previous wording
On November 22, 2022, we entered into Amendment No. 2 to the Credit Agreement. Amendment No. 2 modified certain financial covenants between the fiscal quarter ended March 31, 2023 to the fiscal quarter ended December 31, 2023. During the covenant adjustment period, each tested quarterly, we are required to maintain (1) a net secured leveraged ratio of not greater than 4.25 to 1.00; (2) minimum liquidity of at least $125 million; and (3) aggregate capital expenditures less than $7.5 million. The net total leverage ratio will be waived during the covenant adjustment period. At the conclusion of the covenant adjustment period, the original financial covenants will resume. As of December 31, 2023, we were in compliance with all Credit Agreement covenants.
Current wording
On November 22, 2022, we entered into Amendment No. 2 to the Credit Agreement. Amendment No. 2 modified certain financial covenants between the fiscal quarter ended March 31, 2023 to the fiscal quarter ended December 31, 2023, which is referred to as the covenant adjustment period. During the covenant adjustment period, each tested quarterly, we were required to maintain (1) a net secured leveraged ratio of not greater than 4.25 to 1.00; (2) minimum liquidity of at least $125 million; and (3) aggregate capital expenditures less than $7.5 million. The net total leverage ratio was waived during the covenant adjustment period. At the conclusion of the covenant adjustment period, the original financial covenants resumed. As of March 31, 2024, there were no loan amounts outstanding under the Credit Agreement, and we were in compliance with all Credit Agreement covenants.
Previous wording
Total interest expense relating to the Senior Credit Facilities for the three months ended December 31, 2023 and 2022 was $0.1 million and $1.9 million, respectively. Amounts reflect the coupon and accretion of the discount.
Current wording
Total interest expense relating to the Senior Credit Facilities for the three months ended March 31, 2024 and 2023 was $0.1 million and $2.3 million, respectively, and $0.1 million and $4.2 million for the six months ended March 31, 2024 and 2023, respectively. Amounts reflect the coupon and accretion of the discount.
Previous wording
Cash flows from operating, investing and financing activities for the three months ended December 31, 2023 and 2022, as reflected in the unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Form 10-Q, are summarized in the following table (dollars in thousands):
Current wording
Cash flows from operating, investing and financing activities for the six months ended March 31, 2024 and 2023, as reflected in the unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Form 10-Q, are summarized in the following table (dollars in thousands):
Previous wording
Net Cash Used in Operating Activities
Current wording
Net Cash (Used in) Provided by Operating Activities
Previous wording
Net cash used in operating activities for the three months ended December 31, 2023 was $2.8 million, a net change of $0.7 million, or 32.9%, from net cash used in operating activities of $2.1 million for the three months ended December 31, 2022. The change in cash flows were primarily due to:
Current wording
Net cash used in operating activities for the six months ended March 31, 2024 was $1.8 million, a net change of $6.2 million, or 139.9%, from net cash provided by operating activities of $4.4 million for the six months ended March 31, 2023. The change in cash flows were primarily due to:
Previous wording
An increase of $55.4 million from income before non-cash charges;
Current wording
An increase of $63.0 million from income before non-cash charges;
Showing the first 40 of 49 pairs. Open the source sections for the rest.
Rearranged current paragraphs (10)
Current report — wording carried from elsewhere
Professional service revenue for the three months ended March 31, 2024 and 2023 remained flat at $18.7 million. Professional service revenues are primarily driven by our arrangements and the related timing of fulfilling performance obligations under the contracts. As a percentage of total revenues, professional services revenue increased by 0.3 percentage points from 27.3% for the three months ended March 31, 2023 to 27.6% for the three months ended March 31, 2024.
Current report — wording carried from elsewhere
The following table shows total revenues by product type, including the corresponding percentage change, for the six months ended March 31, 2024 and 2023 (dollars in thousands):
Current report — wording carried from elsewhere
Total Cost of Revenues and Gross Profits
Current report — wording carried from elsewhere
The following table shows total cost of revenues by product type and the corresponding percentage change (dollars in thousands):
Current report — wording carried from elsewhere
The following table shows total gross profit by product type and the corresponding percentage change (dollars in thousands):
Current report — wording carried from elsewhere
License gross profit decreased by $19.1 million, or 26.3%, for the six months ended March 31, 2024 when compared to the six months ended March 31, 2023, primarily due to declines in license revenues.
Current report — wording carried from elsewhere
Intangible asset amortization for the six months ended March 31, 2024 was $1.2 million, a decrease of $3.8 million, or 75.7%, from $5.0 million for the six months ended March 31, 2023. The decrease in amortization relates to certain intangible assets having been fully amortized during fiscal year 2024 and 2023. Amortization expense for acquired technology and patents is included in the cost of revenues in the accompanying Condensed Consolidated Statements of Operations. Amortization expense for customer relationships is included in operating expenses in the accompanying Condensed Consolidated Statements of Operations.
Current report — wording carried from elsewhere
Total other expense, net for the three months ended March 31, 2024 was expense of $1.9 million, a change of $0.1 million from $1.8 million of expense for the three months ended March 31, 2023. The decrease in interest expense was primarily attributable to a lower applicable interest rate on our Notes. The change in Other (expense) income, net was primarily driven by foreign exchange gains. For further information, see “Liquidity and Capital Resources” below.
Current report — wording carried from elsewhere
Our effective income tax rate for the six months ended March 31, 2024 was negative 22.1%, compared to negative 21.3% for the six months ended March 31, 2023. Our provision for income taxes for the six months ended March 31, 2024 was $46.0 million, a net change of $41.0 million from a provision for income taxes of $5.0 million for the six months ended March 31, 2023. This difference was attributable to impairment of book goodwill and the change in income tax expense related to foreign valuation allowance.
Current report — wording carried from elsewhere
An increase of $0.7 million in capital expenditures.