Cerence Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended September 30,2024

OR

Commission File Number:001-39030

(Exact name of Registrant as specified in its Charter)

Registrant’s telephone number, including area code: (857)362-7300

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of these error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of March 31, 2024, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $651 million based on the closing price of the common stock on the Nasdaq Global Select Market for such date.

The number of shares of Registrant’s common stock outstanding as of November 13, 2024 was 42,827,789.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the Registrant’s 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K. Such Proxy Statement will be filed within 120 days of the Registrant’s fiscal year ended September 30, 2024.

Table of Contents

i

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, or Form 10-K, filed by Cerence Inc. together with its consolidated subsidiaries, “Cerence”, the “Company,” “we,” “us” or “our” unless the context indicates otherwise, contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions, plans and projections about our business, operations, industry, financial results, financial condition, strategy, goals, or prospects. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “continues,” “believes,” “may,” “will,” “goals” and words and terms of similar substance in connection with discussions of our business and future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Although we believe that the forward-looking statements contained in this Form 10-K are based on reasonable assumptions, you should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in such forward-looking statements, including but not limited to:

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the highly competitive and rapidly changing market in which we operate;

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adverse conditions in the automotive industry or the global economy more generally, including, without limitation, the continuation of the semiconductor shortage being experienced by the automotive industry, consumer spending and preferences, changes in interest rate levels and credit availability, fuel costs and availability, governmental incentives and regulatory requirements, and the ongoing conflicts in Ukraine and the Middle East;

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automotive production delays, including, without limitation, delays due to the increasing complexity of software included in automotive vehicles;

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the continuing effects of the COVID-19 pandemic and its impact on our business and financial performance, including the impact of new variants, and other public health events;

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our strategy to increase cloud services and inability to successfully introduce new products, applications or services and deploy generative AI and large language models (LLMs);

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escalating pricing pressures from our customers;

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the cancellation or postponement of service contracts after a design win;

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our failure to win, renew or implement service contracts;

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the loss of business from any of our largest customers;

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the impact on our business of the transition to a lower level of fixed contracts, including, but not limited to, the failure to achieve the expected predictability and growth in our reported revenue following a transition year in fiscal 2023;

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fluctuations in our financial and operating results, which may be contributed to by the following factors, among others: the volume, timing and fulfillment of customer contracts; changes in customer forecasts; the timing of receipt and accuracy of royalty reports; fluctuating sales by our customers to their end-users; pricing; and the mix of revenue from customer contracts;

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our inability to control and successfully manage our expense and cash positions;

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our transformation plans and cost efficiency initiatives, including estimated net cost savings;

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our inability to deliver improved financial results from process optimization efforts and cost reduction actions;

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disruptions arising from transitions in management personnel;

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our inability to recruit and retain qualified personnel;

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our employees are represented by workers councils or unions or are subject to local laws that are less favorable to employers than the laws of the U.S.;

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cybersecurity and data privacy incidents that damage client relations;

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interruption or delays in our services or services from data center hosting facilities or public clouds;

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economic, political, regulatory, foreign exchange and other risks of international operations;

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unforeseen U.S. and foreign tax liabilities;

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increases or decreases to valuation allowances recorded against deferred tax assets;

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impairment of our goodwill and other intangible assets;

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the failure to protect our intellectual property or allegations that we have infringed the intellectual property of others;

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defects in our software products that result in lost revenue, expensive corrections or claims against us;

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our inability to quickly respond to changes in technology and to develop our intellectual property into commercially viable products;

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our inability to expand into adjacent markets, including, without limitation, two-wheeled vehicles, trucks and AIoT, in the timeframes or levels expected;

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a significant interruption in the supply or maintenance of our third-party hardware, software, services or data;

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restrictions on our current and future operations under the terms of our debt, the use of cash to service our debt; and our inability to generate sufficient cash from our operations; and

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certain factors discussed elsewhere in this Form 10-K.

These and other factors are more fully discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and elsewhere in this Form 10-K. These risks could cause actual results to differ materially from those implied by forward-looking statements in this Form 10-K. Even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-K, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements made by us in this Form 10-K speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by law.

Risk Factor Summary

The following is a summary of the principal risks described below in Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K. We believe that the risks described in the “Risk Factors” section are material to investors, but other factors not presently known to us or that we currently believe are immaterial may also adversely affect us. The following summary should not be considered an exhaustive summary of the material risks facing us, and it should be read in conjunction with the “Risk Factors” section and the other information contained in this Annual Report on Form 10-K.

Risks Relating to Our Business

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The market in which we operate is highly competitive and rapidly changing and we may be unable to compete successfully.

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Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.

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Our process optimization and cost-reduction efforts may not be successful.

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Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance.

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Our strategy to increase cloud connected services may adversely affect our near-term revenue growth and results of operations.

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Pricing pressures from our customers may adversely affect our business.

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We invest effort and money seeking validation of our technology by original equipment manufacturers ("OEMs"), and there can be no assurance that we will win or be able to renew service contracts.

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Our business could be materially and adversely affected if we lost any of our largest customers.

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Our operating results may fluctuate significantly from period to period, and this may cause our stock price to decline.

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We may not be successful with the adoption of new products.

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The transition in our Chief Executive Officer and other senior management positions will be critical to our success, and our business could be negatively impacted if we do not successfully manage these transitions.

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We may be unable to attract and retain key personnel.

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We depend on skilled employees and could be impacted by a shortage of critical skills.

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Some of our employees are represented by workers councils or unions or are subject to local laws that are less favorable to employers than the laws of the U.S.

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Cybersecurity and data privacy incidents or breaches may damage client relations and inhibit our growth.

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Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

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The development and use of artificial intelligence AI (AI) presents risks and challenges that can impact our business including by posing security risks to our confidential information, proprietary information, and personal data and could give rise to legal and/or regulatory actions, damage our reputation or otherwise materially harm our business.

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A significant portion of our revenues and research and development activities originate outside the United States. Our results could be harmed by economic, political and regulatory risks associated with these international regions and foreign currency fluctuations.

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Our business in China is subject to aggressive competition and is sensitive to economic, market and political conditions.

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Interruptions or delays in our services or services from data center hosting facilities or public clouds could impair the delivery of our services and harm our business.

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If our goodwill or other intangible assets become impaired, our operating results could be negatively impacted.

Risks Relating to our Intellectual Property and Technology

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Third parties have claimed and may claim in the future that we are infringing their intellectual property, and we could be exposed to significant litigation or licensing expenses or be prevented from selling our products if such claims are successful.

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Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations.

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Our software products may have bugs, which could result in delayed or lost revenue, expensive correction, liability to our customers and claims against us.

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We may be unable to respond quickly enough to changes in technology and technological risks and to develop our intellectual property into commercially viable products.

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We utilize certain key technologies, content and services from, and integrate certain of our solutions with, third parties and may be unable to replace those technologies, content and services if they become obsolete, unavailable or incompatible with our solutions.

Risks Relating to the Spin-Off

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The allocation of intellectual property rights and data between Nuance and Cerence as part of the Spin-Off, could adversely impact our reputation, our ability to enforce certain intellectual property rights, and our competitive position.

Risks Relating to Our Securities and Indebtedness

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The terms of the Senior Credit Facilities restrict our current and future operations, particularly our ability to incur debt that we may need to fund initiatives in response to changes in our business, the industry in which we operate, the economy and governmental regulations.

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We may evaluate whether to pay cash dividends on our common stock in the future, and the terms of our Senior Credit Facilities limit our ability to pay dividends on our common stock.

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Servicing our debt may require a significant amount of cash. We may not have sufficient cash flow from our business to pay our indebtedness.

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The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations and the value of our common stock.

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The accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.

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Certain provisions in our organizational documents, including amendments thereto, and Delaware law may discourage takeovers.

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Our organizational documents, including amendments thereto, designate the courts of the State of Delaware or the U.S. district courts as the sole and exclusive forum for certain types of proceedings, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes.

General Risk Factors

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Tax matters may cause significant variability in our financial results and may impact our overall financial condition.

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The commercial and credit environment may adversely affect our access to, and the cost of, capital.

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Our stock price may fluctuate significantly.

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Your percentage ownership in Cerence may be diluted in the future.

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If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us could be harmed.