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What changed in Cerence Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Cerence Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+403 added−474 removedSource: 10-K (2025-11-20) vs 10-K (2024-11-25)

Top changes in Cerence Inc.'s 2025 10-K

403 paragraphs added · 474 removed · 316 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

61 edited+23 added−77 removed16 unchanged
Biggest changeGiven the popularity in general of these virtual assistants, we believe that automobile drivers and riders increasingly desire the ability to use them as part of the mobility experience. To meet this demand, some of these companies have invested in technologies, such as Apple CarPlay, to make their virtual assistants more accessible within vehicle cabins.
Biggest changeToday, we face competition from three types of organizations: • Large technology companies . Many large technology companies, including Amazon, Apple, Google, Microsoft, Alibaba, Baidu and Tencent, offer Internet-based virtual assistants. Given the popularity in general of these virtual assistants, we believe that automobile drivers and riders increasingly desire the ability to use them as part of the mobility experience.
History and Corporate Information On October 1, 2019, Nuance, a leading provider of speech and language solutions for businesses and consumers around the world, completed the legal and structural separation and distribution to its stockholders of all of the outstanding shares of our common stock, and its consolidated subsidiaries, in a tax free spin-off ( the“Spin-Off”).
History and Corporate Information On October 1, 2019, Nuance Communications, a leading provider of speech and language solutions for businesses and consumers around the world, completed the legal and structural separation and distribution to its stockholders of all of the outstanding shares of our common stock, and its consolidated subsidiaries, in a tax free spin-off (the“Spin-Off”).
Our customers generally provide estimates of the 8 units to be shipped for a particular program, and we review third-party market studies and work with our customers to refine and understand these projections. While these projections provide us with some reasonable visibility into future revenue, the number of units to be shipped for a particular program is not committed upfront.
Our customers generally provide estimates of the units to be shipped for a particular program, and we review third-party market studies and work with our customers to refine and understand these projections. While these projections provide us with some reasonable visibility into future revenue, the number of units to be shipped for a particular program is not committed upfront.
Through regular seminars and workshops, our people learn diverse skills that include leadership, negotiating, communicating, goal setting, and more. We provide access to world-class continuing education opportunities and resources including on-demand, self-paced learning opportunities via LinkedIn Learning. Our teams are also continuously connecting through local social events, which bring teams together while promoting engagement, inclusion, and community-service.
Through regular seminars and workshops, our people learn diverse skills that include leveraging AI, leadership, negotiating, communicating, goal setting, and more. We provide access to world-class continuing education opportunities and resources including on-demand, self-paced learning opportunities via LinkedIn Learning. Our teams are also continuously connecting through local social events, which bring teams together while promoting engagement, inclusion, and community-service.
This hybrid architecture enables our software platform to combine the performance, reliability, efficiency, security and tight vehicular integration of embedded software with the flexibility that cloud connectivity provides.
This hybrid architecture enables our software platform to combine the performance, reliability, efficiency, security and tight vehicular integration of embedded software with the flexibility and intelligence that cloud connectivity provides.
The SEC maintains a website ( www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We webcast our earnings calls and certain events we participate in or host with members of the investment community on the investor relations page of our website ( www.cerence.com/investors/overview ).
The SEC maintains a website ( www.sec.gov ) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We webcast our earnings calls and certain events we participate in or host with members of the investment community on the investor relations page of our website ( https://investors.cerence.com /).
We believe that increasing complexity of our edge software components, including with respect to multi-modal interaction, and growth in our cloud-connected product areas, including the enabling of third-party services, will enable us to increase the revenue per vehicle that we are able to generate.
We believe that increasing complexity of our edge software components, including with respect to language models and multi-modal interaction, and growth in our cloud-connected product areas, including the enabling of third-party services, will enable us to increase the revenue per vehicle that we are able to generate.
Successful execution of these key objectives could lead to the greater penetration of our offerings and key enabling technologies throughout our target markets, resulting in an increase in the revenue we are able to capture per vehicle and expansion of our market share relative to competitors.
We believe that successful execution of these key objectives could lead to the greater penetration of our offerings and key enabling technologies throughout our target markets, resulting in an increase in the revenue we are able to capture per vehicle and expansion of our market share relative to competitors.
Our professional services team also provides post-design phase services through maintenance engagements, particular with respect to our cloud-connected solutions. The tight integration of our platform into our customers’ design process and their vehicles supports our ability to win future business with those customers.
Our professional services team also provides post-design phase services through maintenance engagements, particularly with respect to our cloud-connected solutions. The tight integration of our platform into our customers’ design process and their vehicles supports our ability to win future business with those customers.
Our professional services organization includes approximately 300 employees. These employees work with our customers in the design phase of the vehicle lifecycle to tailor our platform for specific requirements such as branding and also tune the software for the characteristics of a vehicle model.
Our professional services organization includes approximately 300 employees. These employees work with our customers in the design phase of the vehicle lifecycle to tailor our platform for specific requirements such as branding and also tune the software for the characteristics of a specific vehicle model or models.
As we sell our offerings to all major OEMs or their tier 1 suppliers today, our sales strategy is primarily focused on leveraging our existing customer relationships. Account managers typically have longstanding relationships with specific customers and are distributed worldwide to provide local customer coverage.
As we sell our offerings to nearly all major OEMs or their tier one suppliers today, our sales strategy is primarily focused on leveraging our existing customer relationships. Account managers typically have longstanding relationships with specific customers and are distributed worldwide to provide local customer coverage.
Our software platform’s hybrid architecture combines the performance, reliability and tight integration that only edge software can provide with the flexibility of cloud connectivity. Cloud-reliant solutions with which our software platform competes cannot match edge software’s low latency, its bandwidth efficiency or its availability in the absence of network connectivity.
Our platforms' hybrid architecture combines the performance, reliability and tight integration that only edge software can provide with the flexibility of cloud connectivity. Cloud-reliant solutions with which our software platform competes cannot match edge software’s low latency, bandwidth efficiency, or availability in the absence of network connectivity.
Depending on the applicable domain, our software platform determines whether to respond directly or access an external data source or third-party virtual assistant, in all cases resulting in a response including spoken words or taking action.
Depending on the applicable domain, our software platform determines whether to respond directly or access an external or third-party data source, in all cases resulting in a response including spoken words and/or taking action.
Second, the noisy environment of a vehicle cabin presents significant speech processing challenges for smartphone-based third-party virtual assistants that are not designed for a specific vehicle model. Our software platform integrates with third-party virtual assistants and improves their functionality by improving the quality of speech input. • Small, focused competitors .
Second, the noisy environment of a vehicle cabin presents significant speech processing challenges for smartphone-based third-party virtual assistants that are not designed for a specific vehicle model. Our software platform integrates with third-party virtual assistants and improves their functionality by improving the quality of speech input. • OEMs .
Based on royalty reports provided by our customers and third-party reports of total vehicle production worldwide, we estimate that approximately 52% of all cars shipped during the fiscal year ended September 30, 2024 included Cerence technologies. Cerence hybrid solutions shipped on approximately 13 million vehicles during the fiscal year ended September 30, 2024.
Based on royalty reports provided by our customers and third-party reports of total vehicle production worldwide, we estimate that approximately 52% of all cars shipped during the fiscal year ended September 30, 2025 included Cerence technologies. Cerence hybrid solutions shipped on approximately 15.4 million vehicles during the fiscal year ended September 30, 2025.
Research and Development We maintain technical engineering centers in major regions of the world that help develop our software platform and its underlying components and provide our customers with local engineering capabilities and design development. We employ approximately 800 research and development personnel around the world, including scientists, engineers and technicians.
Research and Development We maintain technical engineering centers in major regions of the world that help develop our software platforms and their underlying components and provide our customers with local engineering capabilities and design development. We employ approximately 700 research and development personnel around the world, including scientists, engineers and technicians.
Our customer contracts are bespoke and vary widely, but generally represent multi-year agreements providing visibility into future revenue and helping to support retention of customer relationships over the long term. Our sales and marketing team includes approximately 100 employees. This team includes sales representatives, account managers, sales engineers, product managers and marketing experts.
Our customer contracts are bespoke and vary widely, but 9 Table of Contents generally represent multi-year agreements providing visibility into future revenue and helping to support retention of customer relationships over the long term. Our sales and marketing team includes sales representatives, account managers, sales engineers, product managers, and marketing experts.
Depending on the complexity of the request and other factors, engagement may consist of multiple rapid voice interactions with the user and may combine assistance in multiple domains.
Depending on the complexity of the request and other factors, engagement may consist of multiple rapid voice interactions with the user and may combine assistance in multiple domains or across multiple AI agents.
Our tier 1 supplier customers, who typically sell automobile components to the OEMs, include Aptiv, Bosch, Continental, DENSO TEN, NIO, Harman and many others and represented approximately 43% of our business in fiscal year 2024. Our revenue base is geographically diverse.
Our tier 1 supplier customers, who typically sell automobile components to the OEMs, include HARMAN, EcarX, Bosch, Continental, Denso Ten, Aptiv, and many others and represented approximately 50% of our revenue in fiscal year 2025. Our revenue base is geographically diverse.
We are proactively nurturing our culture by investing in our people, processes and professional development. We understand our people are critical for our continued success and are focused on helping our employees grow at every stage of their career. To help employees at every level develop professional skills to advance in their careers, we offer employee and manager development training.
We understand our people are critical for our continued success and are focused on helping our employees grow at every stage of their careers. To help employees at every level develop professional skills to advance in their careers, we offer employee and manager development training.
The revenue we actually recognize is uncertain and subject to numerous factors, including the number and timing of vehicles our customers ship, potential terminations or changes in 5 scope of customer contracts, and currency fluctuations, as well as the other risks discussed below in Item IA, “Risk Factors.” As of September 30, 2024, we estimate our five-year backlog to be $952.7 million, including $172.7 million of five-year remaining performance obligations and $780.0 million of five-year variable backlog.
The revenue we actually recognize is uncertain and subject to numerous factors, including the number and timing of vehicles our customers ship, potential terminations or changes in scope of customer contracts, and currency fluctuations, as well as the other risks discussed below in Item IA, “Risk Factors.” As of September 30, 2025, we estimate our five-year backlog to be approximately $1,169.2 million, including $165.2 million of five-year remaining performance obligations and $1,004.0 million of five-year variable backlog.
We oftentimes utilize customer-specific demo days and proof-of-concepts (“POCs”) in which we showcase our technology and capabilities to OEMs and tier 1 suppliers on an individual basis. These events help maintain our market presence and awareness of our platform’s offerings while also providing opportunities to solicit feedback and input from our customers on our roadmap and future technologies.
We often utilize trade shows, customer-specific demo days, and proof-of-concept programs (“POCs”) to showcase our technology and capabilities to OEMs and tier one suppliers on an individual basis. These events help maintain our market presence and awareness of our platform’s offerings while also providing opportunities to solicit feedback and input from our customers on our roadmap and future technologies.
We recorded net loss of $588.1 million for the fiscal year ended September 30, 2024, a change of 945.4% compared to net loss of $56.3 million recorded for the fiscal year ended September 30. 2023. The financial information included herein may not necessarily reflect our results of operations in the future.
We recorded net loss of $18.7 million for the fiscal year ended September 30, 2025, a change of 97% compared to net loss of $588.1 million recorded for the fiscal year ended September 30, 2024. The financial information included herein may not necessarily reflect our results of operations in the future.
In aggregate, over 80 OEMs and Tier 1 suppliers worldwide use our solutions, covering over 70 languages and dialects, including English, German, Spanish, French, Mandarin, Cantonese, Japanese and Hindi. In fiscal year 2024, we generated revenue of $331.5 million, an increase of 12.6% compared to $294.5 million for the fiscal year ended September 30, 2023.
In aggregate, over 80 OEMs and Tier 1 suppliers worldwide use our solutions, covering over 70 languages and dialects, including English, German, Spanish, French, Mandarin, Cantonese, Japanese and Hindi. In fiscal year 2025, we generated revenue of $251.8 million, a decrease of 24% compared to $331.5 million for the fiscal year ended September 30, 2024.
First, given the fragmented and competitive nature of the virtual assistant market, it is important for OEMs and suppliers to enable their passengers to utilize a variety of virtual assistants. Our software platform’s cognitive arbitration functionality can, dependent on appropriate third-party agreements, enable OEMs and suppliers to provide access to multiple third-party virtual assistants through a consistent, branded interface.
First, given the fragmented and competitive nature of the virtual assistant market, it is important for OEMs and suppliers to enable end users to utilize a variety of virtual assistants. The flexibility of our platforms can, dependent on appropriate third-party agreements, enable OEMs and suppliers to provide access to multiple third-party virtual assistants through a consistent, branded interface.
Professional Services We have a large professional services team that works with our customers in the design, development and deployment phases of a vehicle head unit program and vehicle model lifecycle, as well as in maintenance and enhancement engagements.
Professional Services We have a large professional services team that works with our customers in the design, development and deployment phases of a vehicle head unit program and vehicle model lifecycle, as well as in maintenance and enhancement engagements. Our professional services team is globally distributed to serve our customers in their primary design and production jurisdictions.
Our total research and development expenses were approximately $121.6 million, $123.3 million and $107.1 million for fiscal years 2024, 2023 and 2022, respectively. We believe that continued investment in research and development will be critical for us to continue to deliver market-leading solutions for automotive cognitive assistance.
Our total research and development expenses were approximately $97.8 million, $121.6 million and $123.3 million for fiscal years 2025, 2024 and 2023, respectively. We believe that continued investment in research and development will be critical for us to continue to deliver market-leading, AI-powered solutions.
Our social committees organize numerous events including luncheons, karaoke, archery, yoga, hiking, fun runs, and community cleanup days. We also encourage employees to serve the community by offering compensated volunteer days to employees. In fiscal year 2024, we contributed over 600 community service hours globally.
Our social committees organize numerous events including luncheons, karaoke, archery, yoga, hiking, fun runs, and community cleanup days. We also encourage employees to serve the community by offering compensated volunteer days to employees.
The information contained in our website is not included as part of, or incorporated by reference into, this Form 10-K or in any other document we file with the SEC, and any references to our website are intended to be inactive textual references only. 6 Our Capabilities Our mission is to empower the transportation ecosystem with digital platform solutions for connected and autonomous vehicles.
The information contained in our website is not included as part of, or incorporated by reference into, this Form 10-K or in any other document we file with the SEC, and any references to our website are intended to be inactive textual references only.
In addition, we generate professional services revenue from our work with OEMs and suppliers during the design, development, and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. Through our over 20 years in the automotive industry, we have developed longstanding industry relationships and benefit from incumbency.
We generate revenue primarily by selling software licenses and cloud-connected services. In addition, we generate professional services revenue from our work with OEMs and suppliers during the design, development, and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. Over our more than 25 years in the automotive industry, we have developed longstanding industry relationships.
As of September 30, 2024, we had five-year remaining performance obligations of $172.7 million. As of September 30, 2024, we had variable five-year backlog of $780.0 million, which includes estimated future revenue from variable forecasted royalties related to our embedded, connected, and professional service businesses.
As of September 30, 2025, we had estimated five-year remaining performance obligations of approximately $165.2 million. As of September 30, 2025, we had variable five-year backlog of approximately $1,004.0 million, which includes estimated future revenue from variable forecasted royalties related to our embedded, connected, and professional services businesses.
Culture and Work Environment We are a group of highly motivated collaborators who share a common passion for creating meaningful change in our industry and shaping the future of mobility. We are committed to attracting and retaining the best and brightest talent and building a culture of transparency, trust, and respect.
Culture and Work Environment We are a group of highly motivated collaborators who share a common passion for creating meaningful change in our industry and shaping the future of mobility.
User engagement with virtual assistants built with our software platform typically begins with a voice request. Upon receiving such an input, our software platform determines what the user has said, infers user intent, and maps the request to the most applicable category and domain.
Upon receiving such an input, our software platform determines what the user has said, infers user intent, and maps the request to the most applicable category and domain or agent.
Our software platform is comprised of edge computing and cloud-connected software components and a software framework linking these components together under a common programming interface. We implement our software platform for our customers through our professional services organization, which works with OEMs and suppliers to optimize our software for the requirements, configurations and acoustic characteristics of specific vehicle models.
Our solutions are comprised of both edge computing and cloud-connected software components and a software framework linking these components together under a common programming interface. We deploy these solutions in deep partnership with OEMs and suppliers to optimize our software for the requirements, configurations and acoustic characteristics of specific vehicle models.
We deliver our solutions on a white-label basis, enabling our customers to deliver customized virtual assistants with unique, branded personalities and ultimately strengthening the bond between their brands and end users. Our vision is to enable a more enjoyable, safer journey for everyone.
We deliver our solutions on a white-label basis, enabling our customers to deliver highly customized virtual assistants with unique, branded personalities that strengthen the bond between their brands and end users.
Our primary strategies for pursuing our growth include the following: • Maintain and extend product leadership .
Our primary growth strategies include, but are not limited to, the following: • Maintain and extend product leadership .
We believe we will continue to be able to compete successfully against these competitors as we continue to invest in our offerings. Our industry has attracted, and may continue to attract, new entrants.
We also believe that our technology, particularly our speech signal enhancement and acoustic tuning, is superior based on benchmarking results against our competitors. We believe we will continue to be able to compete successfully against these competitors as we continue to invest in our offerings. Our industry has attracted, and may continue to attract, new entrants.
As of September 30, 2024, we had approximately 1,400 full-time employees, including approximately 100 in sales and marketing, approximately 200 in administrative functions, approximately 300 in professional services, and approximately 800 in research and development. Approximately 90% of our employees are based outside of the United States.
As of September 30, 2025, we had approximately 1,300 full-time employees, with approximately 300 in professional services, and approximately 700 in research and development. Approximately 93% of our employees are based outside of the United States.
As a neutral, independent, white-label software platform vendor, we empower our customers to build branded and differentiated experiences and retain ownership of, or rights to, their system design and data.
Branded, differentiated automotive cognitive assistants are thus increasingly important to OEMs’ brand value. As a neutral, independent, white-label software platform vendor, we empower our customers to build branded and differentiated experiences and retain ownership of, or rights to, their system design and data. • Deep expertise working with OEMs and tier 1 suppliers .
While these third-party virtual assistants directly compete with some of the functionality we provide as part of our software platform, they also increase the need for our software platform in two ways.
To meet this demand, some of these companies have invested in technologies, such as Apple CarPlay, to make their virtual assistants more accessible within vehicle cabins. While these third-party virtual assistants directly compete with some of the functionality we provide as part of our software platform, they also increase the need for our software platform in two ways.
Additionally, we believe that these investments will help maintain our position with existing customers through new vehicle models and enable us to grow with the overall market for automotive cognitive assistance. • Continue to invest in interoperability with third-party virtual assistants .
Additionally, we believe that these investments will help maintain our position with existing customers through new vehicle models and enable us to grow with the overall market for automotive cognitive assistance. • Deliver new functionality to existing installed base . Our solutions have shipped in more than 525 million vehicles to date.
Cloud-connected components also support the replication of personalized settings such as voice profiles and preferences across multiple vehicles. We offer cloud-connected components in the form of a connected service to the vehicle end user. Initial subscriptions typically have multi-year terms from the time of a vehicle’s sale and are paid in advance by the OEM or supplier.
We offer cloud-connected components in the form of a connected service to the vehicle end user. Initial subscriptions typically have multi-year terms from the time of a vehicle’s sale and are paid in advance by the OEM or supplier. Renewal options vary and are managed by our customers on behalf of vehicle end users.
None of our employees in the United States are represented by a labor union; however many of our employees in Europe are represented by workers councils or labor unions. To date, we have experienced no work stoppages and believe that we have a good relationship with our employees.
None of our employees in the United States are represented by a labor union; however many of our employees in Europe are represented by workers councils or labor unions. Due to the planned closing of one of our facilities as part of the 2025 Plan, we have experienced minimal work stoppages of 12 hours.
We sell directly to our customers, which include OEMs and suppliers and as described above under “Customers”, and for each of our customers we assign a team comprising sales and marketing 13 as well as professional services personnel.
Sales and Marketing and Professional Services We market our offerings using a high-touch model in which we sell directly to our customers, which include OEMs and suppliers and as described above under “Customers.” For each of our customers, we assign a cross-functional team to support development and deployment.
Our professional services team is globally distributed to serve our customers in their primary design and production jurisdictions. We typically charge manufacturers for our design and consulting work, which are primarily project-based, in line with customary non-recurring engineering industry practices. 9 Our Competitive Strengths Our key competitive strengths include: • Industry-leading speech-related technology .
We typically charge manufacturers for our design and consulting work, which are primarily project-based, in line with customary non-recurring engineering industry practices. 6 Table of Contents Our Competitive Strengths Our key competitive strengths include: • Industry-leading technology and expansive language portfolio .
Additionally, we intend to continue to invest in customizing and supporting our solutions for specific individual automobile vehicle models, resulting in tight integration of our solutions.
Our existing relationship with, and our proximity in the design process to, OEMs provides us with insight into the needs of end-users and roadmaps for innovation. Additionally, we intend to continue to invest in customizing and supporting our solutions for specific individual automobile vehicle models, resulting in tight integration of our solutions.
However, we believe that we have multiple meaningful competitive advantages, including our scale, our globally distributed team, our best-in-class portfolio of compatible languages, and our deep experience and focus on the automotive market. We also believe that our technology, particularly our speech signal enhancement and acoustic tuning, is superior based on benchmarking results against our competitors.
These companies have had some success selling into our customer base. However, we believe that we have multiple meaningful competitive advantages, including our scale, our globally distributed team, our best-in-class portfolio of compatible languages, and our deep experience and focus on the automotive market.
Our software platform includes a common programming framework including toolkits and applications for its edge and cloud-connected components, and our customers can choose the software components that are necessary to power the experiences that they want to build and offer. 7 Cerence Platform Framework - Hybrid Architecture We deliver our software platform through our professional services organization, which works with OEMs and suppliers to tailor it to the desired requirements, configurations and acoustic characteristics of specific vehicle models.
Our software platform includes a common programming framework including toolkits and applications for its edge and cloud-connected components, and our customers can choose the software components that are necessary to power the experiences that they want to build and offer.
We intend to continue investing in developing our core product functionality and expanding the breadth of categories and domains our software platform is able to address, particularly with a view toward maintaining our market share in edge software components and growing our share in cloud-connected software functionalities.
We intend to continue investing in developing our solutions portfolio, especially continuing to expand the capabilities of Cerence xUI, our next-gen platform, with a particular view toward maintaining our market share in edge software components and growing our share in cloud-connected software functionalities.
We deliver automotive cognitive assistance solutions that are conversational and intuitive and that enable OEMs to strengthen the emotional connection with their end users through a distinct, consistent, branded experience. We continue to extend these solutions to two-wheel vehicles and trucks and other transportation means.
Our Technology & Capabilities Our mission is to create the world’s most compelling, immersive experience across transportation and beyond, for today and tomorrow. We deliver automotive cognitive assistance solutions that are conversational and intuitive and that enable OEMs to strengthen their connection with their end users through a distinct, consistent, branded experience.
As of September 30, 2023, the estimated five-year backlog was $1.2 billion. Our solutions have been installed in more than 500 million automobiles to date, including over 46 million new vehicles in fiscal year 2024 alone.
As of September 30, 2024, the estimated five-year backlog was approximately 4 Table of Contents $952.7 million, including $172.7 million of five-year remaining performance obligations and $780.0 million of five-year variable backlog. Our solutions have shipped in more than 525 million automobiles to date, including over 25 million new vehicles in fiscal year 2025 alone.
Our large installed base represents an opportunity to deliver new features and software. Depending on system capabilities, we are able to deliver updated functionality to our users in the form of embedded software upgrades performed by dealers and over-the-air updates delivered from the cloud. • Develop products that leverage our expertise in new applications.
Depending on system capabilities, we have an opportunity to deliver updated functionality to end users in the form of embedded software upgrades performed by dealers and over-the-air updates delivered from the cloud. • Expand into non-automotive markets . Today, we primarily target the automobile and broader transportation market.
Like our sales representatives, our professional services employees often have longstanding relationships with specific customers and are distributed worldwide to provide local customer coverage. Human Capital Summary In August 2024, we announced a restructuring plan intended to reduce operating expenses and position us for profitable growth, which included a reduction in force.
Like our sales representatives, our professional services employees often have longstanding relationships with specific customers and are distributed worldwide to provide local customer coverage.
We compete for business directly with certain companies focused on voice-based virtual assistance, including SoundHound in the U.S., iFlyTek in China, and other regional and technology-focused competitors. These companies have had some success selling into our customer base.
As such, even if OEMs attempt to develop the technology on their own, they may still opt for us at the end of the day. • Small, focused competitors . We compete for business directly with certain companies focused on voice-based virtual assistance, including SoundHound in the U.S., iFlyTek in China, and other regional and technology-focused competitors.
Our customers include nearly all major automobile original equipment manufacturers, or OEMs, or their tier 1 suppliers worldwide, including BMW, Daimler, FCA Group, Ford, Geely, GM, Renault-Nissan, SAIC, Toyota, Volkswagen Group, Aptiv, Bosch, Continental, DENSO TEN, NIO, XPeng and Harman.
Our automotive customers include nearly all major automobile original equipment manufacturers (OEMs) worldwide, including BMW, Mercedes-Benz, the Volkswagen Group (Volkswagen, Audi, Porsche, and other brands), Stellantis, Renault, Toyota, Ford, General Motors, BYD, Great Wall Motor, and NIO. We also partner with leading tier-one suppliers including HARMAN, EcarX, Bosch, Continental, Denso Ten, Aptiv, and others.
Our automobile manufacturer customers, commonly referred to as OEMs, include BMW, XPeng, Stallantis, Ford, Daimler, Geely, Renault-Nissan, SAIC, Toyota, Harley Davidson, Volkswagen Group and many others and represented approximately 57% of our sales in fiscal year 2024.
Our automobile manufacturer customers, commonly referred to as OEMs, include BMW, Mercedes-Benz, the Volkswagen Group (Volkswagen, Audi, Porsche, and other brands), Stellantis, Renault, Toyota, Ford, General Motors, BYD, Great Wall Motor, NIO, and many others and represented approximately 50% of our revenue in fiscal year 2025.
In fiscal year 2024, approximately 42%, 34% and 24% of our revenue came from the Americas, Europe and Asia, respectively. Sales and Marketing and Professional Services We market our offerings using a high-touch OEM solutions model.
In fiscal year 2025, approximately 16%, 42% and 42% of our revenue came from the Americas, Europe and Asia, respectively.
We expect the implementation of the restructuring plan will be substantially complete by the end of the first quarter of fiscal year 2025. Potential position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the first quarter of fiscal year 2025 in certain cases.
The implementation of the 2025 Plan is expected to be substantially complete by the end of the first quarter of fiscal year 2026. The charges that we incur are subject to a number of assumptions, including legal requirements in impacted jurisdictions.
Compensation, Rewards and Benefits In addition to competitive base salaries, we provide incentive-based compensation programs to reward performance relative to key metrics. We offer comprehensive benefit options, including retirement savings plans, medical insurance, dental insurance, vision insurance, life and disability insurance, health savings accounts, flexible spending accounts, and paid time off, among others.
We offer comprehensive benefit options, including retirement savings plans, medical insurance, dental insurance, vision insurance, life and disability insurance, health savings accounts, flexible spending accounts, and paid time off, among others. Intellectual Property As of September 30, 2025, we own 832 patents and patent applications and other intellectual property.
We believe that our portfolio of languages and multi-lingual capabilities represent an important competitive advantage, as the development of capabilities to support a new language is expensive and time-consuming. 10 • Broad, global network of deep relationships with OEMs and tier 1 suppliers.
In addition to our core platform innovation, we believe that our portfolio of over 70 languages represent an important competitive advantage, as the development of capabilities to support a new language is expensive and time-consuming. Importantly, our offerings are backed by our portfolio of patents and associated rights. • Hybrid edge-cloud system architecture .
To meet the increasing demand for automotive cognitive assistance and to offer differentiated mobility experiences, OEMs and suppliers are building proprietary virtual assistants into a higher proportion of their vehicles.
Fast-moving technological advancements and increasing user engagement and comfort with large language models are driving automakers to examine how they can quickly and cost-effectively bring expanded AI features into their cars. To meet the increasing demand for automotive cognitive assistance and to offer differentiated in-car experiences, OEMs and suppliers are building proprietary virtual assistants into their vehicles.
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Item 1. B usiness. Overview Cerence builds AI powered virtual assistants for the mobility/transportation market. Our primary target is the automobile market, but our solutions can apply to all forms of transportation including but not limited to two-wheel vehicles, planes, tractors, cruise ships and elevators.
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Item 1. Business. Overview Cerence builds conversational and agentic AI solutions that make interaction with technology feel effortless. With decades of expertise in voice, AI, and edge-to-cloud engineering, we’re trusted by many of the world’s leading automakers, transportation OEMs, consumer brands, and technology companies to build voice powered-interfaces that shape the user experiences of today and tomorrow.
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Our solutions power natural conversational and intuitive interactions between vehicles, drivers and passengers, and the broader digital world. We are a premier provider of AI-powered assistants and innovations for connected and autonomous vehicles, including one of the world’s most popular software platforms for building automotive virtual assistants, such as “ Hey BMW ” and “ Ni hao Banma ”.
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While the majority of our business is in the automotive market, our solutions can be leveraged across other areas of transportation - two-wheeled vehicles, trucks, and more - as well as outside of automotive - televisions, smart watches, voice-powered kiosks, and more.
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Our platform utilizes industry-leading speech recognition, natural language understanding, speech signal enhancement, text-to-speech, and acoustic modeling technology to provide a conversational AI-based solution.
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We believe that this trend will continue and that consumer adoption of in-car AI will continue to grow. Cerence is a market leader for building integrated, branded and differentiated virtual assistants for automobiles, offering an extensive solutions portfolio that includes conversational & generative AI as well as audio & communications AI.
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Virtual assistants built with our platform can enable a wide variety of modes of human-vehicle interaction, including speech, touch, handwriting, gaze tracking and gesture recognition, and can support the integration of third-party virtual assistants into the in-vehicle experience. Our software platform is a market leader for building integrated, branded and differentiated virtual assistants for automobiles.
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Our conversational and generative AI solutions include a full-stack generative AI-based voice assistant, including voice activation, natural voice input and output, and hybrid conversational services for automotive and general-purpose tasks. Our audio and communications AI solutions include best-in-class audio applications, enhancing in-car experiences by reducing environmental noise and enabling seamless interaction with vehicles, inside and out.
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As a unified platform and common interface for automotive cognitive assistance, our software platform provides OEMs and suppliers with an important control point with respect to the mobility experience and their brand value.
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Our solutions portfolio, developed in deep partnership with the automotive industry and designed to improve the in-car experience for drivers and passengers worldwide, includes, but is not limited to, the following: • Conversational and Generative AI: O ur AI-powered UX platforms include Cerence xUI, our customizable, hybrid generative AI platform built on our CaLLM family of large and small language models, and Cerence Assistant, our ready-to-deploy, next-gen voice assistant.
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Our platform is fully customizable and designed to support our customers in creating their own ecosystem in the automobile and transforming the vehicle into a hub for numerous connected devices and services. Virtual assistants built with our software platform can address user requests across a wide variety of categories, such as navigation, control, media, communication and tools.
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These offerings are supported by our core technologies, including assistant activation, precise speech recognition and lifelike text-to-speech that create natural, intuitive voice experiences. • Audio AI: a set of advanced, flexible and scalable speech enhancement and signal processing solutions tailored for modern voice assistants, voice communication applications and acoustic event detection. 5 Table of Contents How it Works User engagement with Cerence-powered virtual assistants typically begins with a voice request.
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The market for automotive cognitive assistance is rapidly expanding. The proliferation of smartphones and smart speakers has encouraged consumers to rely on a growing number of virtual assistants and special-purpose bots for various tasks such as controlling entertainment systems and checking the news.
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Fast-moving technological advancements and increasing user engagement with large language model (LLM)-powered assistant platforms are driving automakers to examine how they can quickly and cost-effectively bring expanded AI features into their cars.
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Automobile drivers and passengers increasingly expect hands-free access to virtual assistants as part of the mobility experience, with common use cases in a variety of categories including mobility domains such as navigation, voice-activated texts, and telephone communication, automobile domains, such as automobile user guides, and ignition on-off, and generic domains, such as entertainment.
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Cerence xUI™ delivers on this need, offering an agentic, automotive-specific voice assistant platform that leverages our CaLLM™ family of cloud and embedded large and small language models; third-party LLMs and agents; real-time data sources; and contextual data from the car to create an engaging, conversational interface that can complete tasks, answer questions, and entertain users.
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We believe that this trend will continue and that consumer appetite for automotive cognitive assistance will grow further as vehicles become more autonomous and drivers pursue new forms of human-vehicle engagement previously not feasible during vehicle operation. We generate revenue primarily by selling software licenses and cloud-connected services.
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Underscoring our deep expertise at the intersection of AI innovation and the unique requirements of the automotive user experience, we have already signed several strategic, long-term partnership agreements as well as proof-of-concept programs with global automakers to deploy Cerence xUI as the basis for their future in-cabin experiences.
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Our principal offering is our software platform, which our customers use to build virtual assistants that can communicate, find information and take action across an expanding variety of categories, including navigation, control, media, communication, information and tools. Our software, developed in deep partnership with the automotive industry, improves the mobility experience for drivers and passengers all over the world.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+25 added−21 removed153 unchanged
Biggest changeThese include, among others, provisions that: • do not permit our stockholders to act by written consent and require that stockholder action must take place at an annual or special meeting of our stockholders, in each case except as such rights may otherwise be provided to holders of preferred stock; • establish advance notice requirements for stockholder nominations and proposals; • provide that a special meeting of our stockholders may only be called by our Board, the Chairman of our Board or our Chief Executive Officer, or at the request of holders of not less than 20% of the outstanding shares of our common stock; and • limit our ability to enter into certain business combination transactions. 29 These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of Cerence, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.
Biggest changeThese include, among others, provisions that: • do not permit our stockholders to act by written consent and require that stockholder action must take place at an annual or special meeting of our stockholders, in each case except as such rights may otherwise be provided to holders of preferred stock; • establish advance notice requirements for stockholder nominations and proposals; • provide that a special meeting of our stockholders may only be called by our Board, the Chairman of our Board or our Chief Executive Officer, or at the request of holders of not less than 20% of the outstanding shares of our common stock; and • limit our ability to enter into certain business combination transactions.
Any of these could seriously harm our business, financial condition or operations. Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations. Our success and competitive position depend in large part on our ability to obtain and maintain intellectual property rights protecting our products and services.
Any of these could seriously harm our business, financial condition or results of operations. Unauthorized use of our proprietary technology and intellectual property could adversely affect our business and results of operations. Our success and competitive position depend in large part on our ability to obtain and maintain intellectual property rights protecting our products and services.
Your percentage ownership in Cerence may be diluted in the future. Your percentage ownership in Cerence may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we grant to our directors, officers, employees and other service providers.
Your percentage ownership in Cerence may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that we grant to our directors, officers, employees and other service providers.
Our indebtedness could have significant negative consequences for our stockholders and our business, results of operations and financial condition by, among other things: (a) increasing our vulnerability to adverse economic and industry conditions; (b) limiting our ability to obtain additional financing; (c) requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; (d) limiting our flexibility to plan for, or react to, changes in our business; (e) diluting the interests of our existing stockholders as a result of issuing our common stock upon conversion of the Notes; and (f) placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our stockholders and our business, results of operations and financial condition by, among other things: (a) increasing our vulnerability to adverse economic and industry conditions; (b) limiting our ability to obtain additional financing; (c) requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; (d) limiting our flexibility to plan for, or react to, changes in our business; (e) diluting the interests of our existing stockholders as a result of issuing our common stock upon conversion of the 2028 Notes; and (f) placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
If one or more holders elect to convert their Notes, 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 share), 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.
If one or more holders elect to convert their 2028 Notes, 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 share), 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.
Under FASB ASC Subtopic 470-20, Debt with Conversion and Other Options, or ASC 470-20, an issuer was required to separately account for the liability and equity components of convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.
Under FASB ASC Subtopic 470-20, Debt with Conversion and Other Options , or ASC 470-20, an issuer was required to separately account for the liability and equity components of convertible debt instruments (such as the 2028 Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost.
The Framework could be challenged like its predecessor frameworks. This complexity and the additional contractual 21 burden increase our overall risk exposure. There may be further divergence in the future, including with regard to administrative burdens. In addition, we are subject to Swiss data protection laws, including the Federal Act on Data Protection, or the FADP.
The Framework could be challenged like its predecessor frameworks. This complexity and the additional contractual burden increase our overall risk exposure. There may be further divergence in the future, including with regard to administrative burdens. In addition, we are subject to Swiss data protection laws, including the Federal Act on Data Protection, or the FADP.
In addition, even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders do not elect to convert their 2028 Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
We currently apply the “if-converted” method for calculating any potential dilutive effect of the conversion options embedded in the Notes on diluted net income per share, which assumes that all of the Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive.
We currently apply the “if-converted” method for calculating any potential dilutive effect of the conversion options embedded in the 2028 Notes on diluted net income per share, which assumes that all of the 2028 Notes were converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive.
Interruptions in our service may reduce our revenue, cause us to issue credits or pay service level agreement penalties, cause customers to terminate their on-demand services, and adversely affect our renewal rates and our ability to attract new customers. 24 If our goodwill or other intangible assets become impaired, our operating results could be negatively impacted.
Interruptions in our service may reduce our revenue, cause us to issue credits or pay service level agreement penalties, cause customers to terminate their on-demand services, and adversely affect our renewal rates and our ability to attract new customers. If our goodwill or other intangible assets become impaired, our operating results could be negatively impacted.
Among the changes, ASU 2020-06 removed the requirement to bifurcate the liability and equity components of convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion. The removal of the bifurcation of liability and equity components eliminated non-cash interest expense corresponding to the amounts recorded within equity.
Among the changes, ASU 2020-06 removed the requirement to bifurcate the liability and equity components of convertible debt instruments (such as the 2028 Notes) that may be settled entirely or partially in cash upon conversion. The removal of the bifurcation of liability and equity components eliminated non-cash interest expense corresponding to the amounts recorded within equity.
Our success depends substantially upon our ability to enhance our products and technologies, to develop and introduce, on a timely and cost-effective basis, 15 new products and features that meet changing customer requirements and incorporate technological enhancements, and to maintain our alignment with the OEMs, their technology and market strategies.
Our success depends substantially upon our ability to enhance our products and technologies, to develop and introduce, on a timely and cost-effective basis, new products and features that meet changing customer requirements and incorporate technological enhancements, and to maintain our alignment with the OEMs, their technology and market strategies.
The carrying value of the Notes, net of the applicable discount recorded, were accreted up to the principal amount of the Notes, as the case may be, from the issuance date until maturity, which resulted in non-cash charges to interest expense in our consolidated statement of operations.
The carrying value of the 2028 Notes, net of the applicable discount recorded, were accreted up to the principal amount of the 2028 Notes, as the case may be, from the issuance date until maturity, which resulted in non-cash charges to interest expense in our consolidated statement of operations.
Upon conversion, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.
Upon conversion, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2028 Notes being converted.
ASC 470-20 requires the value of the conversion options of the Notes, representing the equity component, to be recorded as additional paid-in capital within stockholders’ equity in our consolidated balance sheet and as a discount to the Notes, which reduced their initial carrying value.
ASC 470-20 requires the value of the conversion options of the 2028 Notes, representing the equity component, to be recorded as additional paid-in capital within stockholders’ equity in our consolidated balance sheet and as a discount to the 2028 Notes, which reduced their initial carrying value.
This, in turn, could have an adverse impact on trading prices for shares of our common stock, and could adversely affect our ability to access the capital markets. 32 Item 1B. Unresolved Staff Comments. None.
This, in turn, could have an adverse impact on trading prices for shares of our common stock, and could adversely affect our ability to access the capital markets. Item 1B. Unresolved Staff Comments. None.
If we fail to win a significant number of customer design competitions in the future or to renew a significant number of existing service contracts, our business, 17 results of operations and financial condition would be adversely affected.
If we fail to win a significant number of customer design competitions in the future or to renew a significant number of existing service contracts, our business, results of operations and financial condition would be adversely affected.
Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our ability to make scheduled payments of the principal of, to pay interest on, or to refinance our indebtedness, including the 2028 Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our failure to repurchase the Notes at a time when the repurchase is required by the indenture governing the Notes or to pay any cash payable on future conversions as required by such indenture would constitute a default under such indenture.
Our failure to repurchase the 2028 Notes at a time when the repurchase is required by the indenture governing the 2028 Notes or to pay any cash payable on future conversions as required by such indenture would constitute a default under such indenture.
If holders of our Notes elect to convert their Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.
If holders of our 2028 Notes elect to convert their 2028 Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our common stock, which would cause dilution to our existing stockholders.
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.
The accounting method for convertible debt securities that may be settled in cash, such as the 2028 Notes, could have a material effect on our reported financial results.
Any cybersecurity or data privacy incident or breach may result in: 20 • loss of revenue resulting from the operational disruption; • loss of revenue or increased credit loss expense due to the inability to invoice properly or to customer dissatisfaction resulting in collection issues; • loss of revenue due to loss of customers; • material remediation costs to recreate or restore systems; • material investments in new or enhanced systems in order to enhance our information security posture; • cost of incentives offered to customers to restore confidence and maintain business relationships; • reputational damage resulting in the failure to retain or attract customers; • costs associated with potential litigation or governmental investigations, enforcement actions or regulatory fines; • claims by third parties asserting that we have breached our privacy, confidentiality, data security or similar obligations; • costs associated with any required notices of a data breach; • costs associated with the potential loss of critical business data; • difficulties enhancing or creating new products due to loss of data or data integrity issues; and • other consequences of which we are not currently aware of but will discover through the remediation process.
Any cybersecurity or data privacy incident or breach may result in: • loss of revenue resulting from the operational disruption; • loss of revenue or increased credit loss expense due to the inability to invoice properly or to customer dissatisfaction resulting in collection issues; • loss of revenue due to loss of customers; • material remediation costs to recreate or restore systems; • material investments in new or enhanced systems in order to enhance our information security posture; • cost of incentives offered to customers to restore confidence and maintain business relationships; • reputational damage resulting in the failure to retain or attract customers; • costs associated with potential litigation or governmental investigations, enforcement actions or regulatory fines; • claims by third parties asserting that we have breached our privacy, confidentiality, data security or similar obligations; • costs associated with any required notices of a data breach; • costs associated with the potential loss of critical business data; • difficulties enhancing or creating new products due to loss of data or data integrity issues; and 16 Table of Contents • other consequences of which we are not currently aware of but will discover through the remediation process.
Factors that could trigger an impairment of such assets include the following: • changes in our organization or management reporting structure that could result in additional reporting units, which may require alternative methods of estimating fair values or greater disaggregation or aggregation in our analysis by reporting unit; • significant under performance relative to historical or projected future operating results; • significant changes in the strategy for our overall business; • significant negative industry or economic trends; • significant decline in our stock price for a sustained period; and • our market capitalization declining to below net book value.
Factors that could trigger an impairment of such assets include the following: 20 Table of Contents • changes in our organization or management reporting structure that could result in additional reporting units, which may require alternative methods of estimating fair values or greater disaggregation or aggregation in our analysis by reporting unit; • significant under performance relative to historical or projected future operating results; • significant changes in the strategy for our overall business; • significant negative industry or economic trends; • significant decline in our stock price for a sustained period; and • our market capitalization declining to below net book value.
The development and use of artificial intelligence or 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.
The development and use of artificial intelligence (“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.
Our organizational documents designate the courts within the State of Delaware or the U.S. district courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our organizational documents designate the courts within the State of Delaware or the U.S. district courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could 25 Table of Contents limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
AI-related issues, deficiencies and/or failures could (i) give rise to legal and/or regulatory actions, including with respect to legislation regulating AI in jurisdictions such as the EEA, and as a result of new applications of existing data protection, privacy, intellectual property, and other laws; (ii) damage our reputation; or (iii) otherwise materially harm our business.
AI-related issues, deficiencies and/or failures could: • give rise to legal and/or regulatory actions, including with respect to legislation regulating AI in jurisdictions such as the EEA, and as a result of new applications of existing data protection, privacy, intellectual property, and other laws; • damage our reputation; or • otherwise materially harm our business.
If we are unable to develop new products and enhance functionalities or technologies to adapt to these changes and maintain our alignment with OEMs, our business will suffer. Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.
If we are unable to develop new products and enhance functionalities or technologies to adapt to these changes and maintain our alignment with OEMs, our business will suffer. 11 Table of Contents Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.
Accordingly, our future results could be harmed by a variety of factors associated with international sales and operations, including: • adverse political and economic conditions, or changes to such conditions, in a specific region or country; • trade protection measures, including tariffs and import/export controls, imposed by the United States and/or by other countries or regional authorities such as China, Canada or the European Union; • the impact on local and global economies of the United Kingdom leaving the European Union; • changes in foreign currency exchange rates or the lack of ability to hedge certain foreign currencies; • compliance with laws and regulations in many countries, including with respect to data protection, anticorruption, labor relations, tax, foreign currency, anti-competition, import, export and trade regulations, and any subsequent changes in such laws and regulations; 23 • geopolitical turmoil, including terrorism and war, such as the ongoing conflicts in Ukraine and the Middle East; • changing data privacy regulations and customer requirements to locate data centers in certain jurisdictions; • evolving restrictions on cross-border investment, including recent enhancements to the oversight by the Committee on Foreign Investment in the United States pursuant to the Foreign Investment Risk Preview Modernization Act and substantial restrictions on investment from China; • changes in applicable tax laws; • difficulties in staffing and managing operations in multiple locations in many countries; • longer payment cycles of foreign customers and timing of collections in foreign jurisdictions; and • less effective protection of intellectual property than in the United States.
Accordingly, our future results could be harmed by a variety of factors associated with international sales and operations, including: • adverse political and economic conditions, or changes to such conditions, in a specific region or country; • trade protection measures, including tariffs and import/export controls, imposed by the United States and/or by other countries or regional authorities such as China, Canada or the European Union; • changes in foreign currency exchange rates or the lack of ability to hedge certain foreign currencies; 19 Table of Contents • compliance with laws and regulations in many countries, including with respect to data protection, anticorruption, labor relations, tax, foreign currency, anti-competition, import, export and trade regulations, and any subsequent changes in such laws and regulations; • geopolitical turmoil, including terrorism and war, such as the ongoing conflicts in Ukraine and the Middle East; • changing data privacy regulations and customer requirements to locate data centers in certain jurisdictions; • evolving restrictions on cross-border investment, including recent enhancements to the oversight by the Committee on Foreign Investment in the United States pursuant to the Foreign Investment Risk Preview Modernization Act and substantial restrictions on investment from China; • changes in applicable tax laws; • difficulties in staffing and managing operations in multiple locations in many countries; • longer payment cycles of foreign customers and timing of collections in foreign jurisdictions; and • less effective protection of intellectual property than in the United States.
In addition, the company with the winning design may have an advantage with the customer going forward because of the established relationship between the winning company and such customer, which could make it more difficult for such company’s competitors to win the designs for other service contracts.
In addition, the company with the winning design may have an advantage with the customer going forward because of the established relationship between the winning company and such customer, which could make it more difficult for such company’s competitors to win the designs for other service 13 Table of Contents contracts.
The interest rate is fixed at 1.50% per annum and is payable semi-annually in arrears on January 1 and July 1 of each year, beginning on January 1, 2024. We repurchased $87.5 million of the 2025 Notes with a portion of the proceeds from the sale of the 2028 Notes.
The interest rate for the 2028 Notes is fixed at 1.50% per annum and is payable semi-annually in arrears on January 1 and July 1 of each year. We repurchased $87.5 million of the 2025 Notes with a portion of the proceeds from the sale of the 2028 Notes.
Further, new regulations or volatility in the stock market could diminish our use, and the value, of our equity awards. These issues could place us at a competitive disadvantage in attracting qualified personnel or force us to offer more cash compensation.
Further, new regulations or volatility in the stock market could diminish our use, 15 Table of Contents and the value, of our equity awards. These issues could place us at a competitive disadvantage in attracting qualified personnel or force us to offer more cash compensation.
Any delay in or inability to replace any such functionality could have a material adverse effect on our business, results of operations and financial condition. Furthermore, delays in the release of new and upgraded versions of third-party software applications could have a material adverse effect on our business, results of operations and financial condition.
Any delay in or inability to replace any such functionality could have a material adverse effect on our business, results of operations and financial condition. Furthermore, delays in the release of new and upgraded versions 22 Table of Contents of third-party software applications could have a material adverse effect on our business, results of operations and financial condition.
Holders of the Notes have the right to require us to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indentures governing the Notes) at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.
Holders of the 2028 Notes have the right to require us to repurchase their 2028 Notes upon the occurrence of a fundamental change (as defined in the indenture governing the 2028 Notes) at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest, if any.
A decline in future operating results could provide substantial evidence that a full or partial valuation allowance for deferred tax assets is necessary, which could have a material adverse effect on our results of operations and financial condition. 30 The commercial and credit environment, may adversely affect our access to, and the cost of, capital.
A decline in future operating results could provide substantial evidence that a full or partial valuation allowance for deferred tax assets is necessary, which could have a material adverse effect on our results of operations and financial condition. 26 Table of Contents The commercial and credit environment may adversely affect our access to, and the cost of, capital.
Policing unauthorized use of our products is difficult and we may not be able to protect our technology from unauthorized use. Additionally, our competitors may independently develop technologies that are substantially the same or superior to our technologies and that do not infringe our rights.
Policing unauthorized use of our products is difficult and we may not be able to protect our technology from unauthorized use. Additionally, our competitors may independently 21 Table of Contents develop technologies that are substantially the same or superior to our technologies and that do not infringe our rights.
The loss of business from any of our major customers, including as a result of lower overall demand for vehicles, cancellation of existing contracts or the failure to award us new business, has in the past and could in the future have a material adverse effect on our business, results of operations and financial condition.
The loss of business from any of our major customers, including as a result of lower overall demand for vehicles, automotive production curtailment or delays, cancellation of existing contracts or the failure to award us new business, has in the past and could in the future have a material adverse effect on our business, results of operations and financial condition.
Factors that may contribute to fluctuations in operating results include: • given our limited customer base, the volume, timing and fulfillment of large customer contracts; • renewals of existing customer contracts and wins of new customer programs; • our mix of variable, fixed prepaid or fixed minimum purchase commitment license contracts; • increased expenditures incurred pursuing new product or market opportunities; • the timing of the receipt and accuracy of royalty reports; • fluctuating sales by our customers to their end-users; • contractual counterparties failing to meet their contractual commitments to us; • introduction of new products by us or our competitors; • cybersecurity or data breaches; • reduction in the prices of our products in response to competition, market conditions or contractual obligations; • impairment of goodwill or intangible assets; • accounts receivable that are not collectible; • higher than anticipated costs related to fixed-price contracts with our customers; • change in costs due to regulatory or trade restrictions; • expenses incurred in litigation matters, whether initiated by us or brought by third-parties against us, and settlements or judgments we are required to pay in connection with disputes; • changes in our stock compensation practices, as it relates to employee short-term incentive payments; and 18 • general economic trends as they affect the customer bases into which we sell.
Factors that may contribute to fluctuations in operating results include: • given our limited customer base, the volume, timing and fulfillment of large customer contracts; • renewals of existing customer contracts and wins of new customer programs; • changes in customer forecasts; • our mix of variable, fixed prepaid or fixed minimum purchase commitment license contracts; • increased expenditures incurred pursuing new product or market opportunities; • the timing of the receipt and accuracy of royalty reports; • fluctuating sales by our customers to their end-users; • level of professional services projects; • contractual counterparties failing to meet their contractual commitments to us; • introduction of new products by us or our competitors; • cybersecurity or data breaches; 14 Table of Contents • reduction in the prices of our products in response to competition, market conditions or contractual obligations; • impairment of goodwill or intangible assets; • accounts receivable that are not collectible; • higher than anticipated costs related to fixed-price contracts with our customers; • change in costs and demand for our products due to tariffs, or regulatory or trade restrictions; • expenses incurred in litigation matters, whether initiated by us or brought by third-parties against us, and settlements or judgments we are required to pay in connection with disputes; • changes in our stock compensation practices, as it relates to employee incentive payments; and • general economic trends as they affect the customer bases into which we sell.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategies; • competition and industry capacity; • changes in interest rates and other factors that affect earnings and cash flow; • our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed; • our ability to retain and recruit qualified personnel; • our quarterly or annual earnings, or those of other companies in our industry; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • the failure of securities analysts to cover, or positively cover, our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investor perception of our company and our industry; • overall market fluctuations unrelated to our operating performance; • results from any material litigation or government investigation; • changes in laws and regulations (including tax laws and regulations) affecting our business; • changes in capital gains taxes and taxes on dividends affecting stockholders; and • general economic conditions, war, conflict or other political instability, and other external factors. 31 Low trading volume for our stock would amplify the effect of the above factors on our stock price volatility.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • actual or anticipated fluctuations in our results of operations due to factors related to our business; • success or failure of our business strategies; • competition and industry capacity; • changes in interest rates and other factors that affect earnings and cash flow; • our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as needed; • our ability to retain and recruit qualified personnel; • our quarterly or annual earnings, or those of other companies in our industry; • announcements by us or our competitors of significant acquisitions or dispositions; • changes in accounting standards, policies, guidance, interpretations or principles; • the failure of securities analysts to cover, or positively cover, our common stock; • changes in earnings estimates by securities analysts or our ability to meet those estimates; • the operating and stock price performance of other comparable companies; • investor perception of our company and our industry; • overall market fluctuations unrelated to our operating performance; • results from any material litigation or government investigation; • changes in laws and regulations (including tariffs, trade regulations, and tax laws and regulations) affecting our business; • changes in capital gains taxes and taxes on dividends affecting stockholders; and • general economic and political conditions, government shutdowns, war, conflict or other political instability, and other external factors.
If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive.
If we are unable to generate such cash flows, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining 23 Table of Contents additional debt financing or equity capital on terms that may be onerous or highly dilutive.
The implementation of the Plan may be disruptive to our operations, result in higher than anticipated restructuring charges, including severance payments, payments in lieu of notice, employee benefits and related costs, and otherwise adversely affect our results of operations and financial condition.
The implementation of these types of plans may be disruptive to our operations, result in higher than anticipated restructuring charges, including severance payments, payments in lieu of notice, employee benefits and related costs, and otherwise adversely affect our results of operations and financial condition.
A change in senior management, such as we experienced over the past years, also could result in our future strategy and plans differing from those of the past. In August 2024, we announced a restructuring plan, including a reduction in force, intended to reduce operating expenses and position us for profitable growth.
A change in senior management, such as we experienced over the past few years, also could result in our future strategy and plans differing from those of the past. In August 2024 and September 2025, we announced restructuring plans, including reductions in force, intended to reduce operating expenses and position us for profitable growth.
AI algorithms and training methodologies may be flawed. Additionally, AI technologies are complex and rapidly evolving, and we face significant competition in the market and from other companies regarding such technologies.
AI algorithms and training methodologies may be flawed. Additionally, AI technologies are complex and rapidly evolving, and we face 18 Table of Contents significant competition in the market and from other companies regarding such technologies.
Our business depends on, and is directly affected by, the global automobile industry.
Our business depends on, and is directly affected by, the global automotive industry.
In the event the conditional conversion feature of either series of the Notes is triggered, holders of such series of Notes will be entitled to convert the Notes of such series at any time during specified periods at their option.
In the event the conditional conversion feature of the 2028 Notes is triggered, holders of the 2028 Notes will be entitled to convert the 2028 Notes at any time during specified periods at their option.
As our customers react to global economic conditions and the potential for a global recession, we may see them reduce spending on our products and take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.
As our customers react to global political, trade and economic conditions and the potential for a global recession, we may see them increase pricing pressure on us, reduce spending on our products and take additional precautionary measures to limit or delay expenditures and preserve capital and liquidity.
We also may not have sufficient rights to grant sublicenses of intellectual property or data used in our business, and we may be subject to third party rights pertaining to the underlying intellectual property or data.
We also may not have sufficient rights to grant sublicenses of intellectual property or data used in our business, and may be subject to third party rights pertaining to the underlying intellectual property or data, and may be unsuccessful in remedying any breaches of these agreements.
In connection with the Spin-Off, we entered into agreements with Nuance governing the allocation of intellectual property rights and data related to our business. These agreements include restrictions on our use of Nuance’s intellectual property rights and data licensed to us, including limitations on the field of use in which we can exercise our license rights.
In connection with the Spin-Off, we entered into agreements with Nuance governing the allocation of intellectual property rights and data related to our business. These agreements include restrictions on our use of Nuance’s intellectual property rights and data licensed to us.
Any significant adverse change in any of these factors, including, but not limited to, general economic conditions and the resulting bankruptcy of a customer, the closure of a customer manufacturing facility or the ability of a customer manufacturing facility to obtain supplies to manufacture automobiles and to ship or receive shipments of parts, supplies or finished product, may result in a reduction in automotive sales and production by our customers, and could have a material adverse effect on our business, results of operations and financial condition.
Any significant adverse change in any of these factors, including, but not limited to, general economic conditions and the resulting bankruptcy of a customer, the closure of a customer manufacturing facility or the ability of a customer manufacturing facility to obtain supplies to manufacture automobiles and to ship or receive shipments of parts, supplies or finished product on prices that are acceptable to them, or imposition of tariffs that affect the prices at which end consumers purchase automobiles, may result in a reduction in automotive sales and production by our customers, and could have a material adverse effect on our business, results of operations and financial condition.
If any of our management or other key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience.
If we are unable to attract and retain management and other key personnel, our business could be harmed. If any of our management or other key employees were to leave, we could face substantial difficulty in hiring qualified successors and could experience a loss in productivity while any successor obtains the necessary training and experience.
Additionally, the terms of the Senior Credit Facilities limit our ability to pay cash dividends. There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends. 27 Servicing our debt may require a significant amount of cash.
There can be no assurance that we will pay a dividend in the future or continue to pay any dividend if we do commence paying dividends. Servicing our debt may require a significant amount of cash.
In addition, our Senior Credit Facilities contain and any of our future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
In addition, any future debt agreements may contain restrictive covenants that may prohibit us from adopting any of these alternatives.
Reductions in spending on our solutions, delays in automobile production or purchasing decisions, lack of renewals or the inability to attract new customers, as well as pressure for extended billing terms or pricing discounts, would limit our ability to grow our business and negatively affect our operating results and financial condition.
Reductions in spending on our solutions, delays in automobile production or purchasing decisions, lack of renewals or the inability to attract new customers, as well as pressure for extended billing terms or pricing discounts, would limit our ability to grow our business and negatively affect our operating results and financial condition. 12 Table of Contents Our process optimization and cost-reduction efforts may not be successful.
During the fiscal years ended September 30, 2024 and 2022, we recorded goodwill impairment charges of $609.2 million and $213.7 million, respectively, within the Consolidated Statement of Operations. For the fiscal year September 30, 2023, we did not have goodwill impairment.
During the fiscal years ended September 30, 2025 and 2023, we did not have goodwill impairment. For the fiscal year ended September 30, 2024, we recorded a goodwill impairment charge of $609.2 million within the Consolidated Statement of Operations.
These developments, along with continued uncertainty about economic stability related to the global outbreak of COVID-19, and the ongoing conflicts in Ukraine and the Middle East, have resulted in supply chain disruption, inflation, higher interest rates, fluctuations in currency exchange rates, and uncertainty about business continuity, which may adversely affect our business and our results of operations.
These developments, along with continued uncertainty about tariffs and trade policies, and the ongoing conflicts in Ukraine and the Middle East, have resulted in supply chain disruption, inflation, higher interest rates, fluctuations in currency exchange rates, and uncertainty about business continuity, which may adversely affect our business and our results of operations.
Defects in the solutions or products that we develop and sell to our customers could require expensive corrections and result in delayed or lost revenue, adverse customer reaction and negative publicity about us or our products and services.
Complex software products such as ours may contain errors, defects or bugs. Defects in the solutions or products that we develop and sell to our customers could require expensive corrections and result in delayed or lost revenue, adverse customer reaction and negative publicity about us or our products and services.
In June 2023, we issued an aggregate principal amount of $210 million 1.50% convertible senior notes due July 1, 2028, the “2028 Notes”, and together with the 2025 Notes and the 2025 Modified Notes (as defined below), the “Notes”.
In June 2020, we issued an aggregate principal amount of $175 million 3.00% convertible senior notes due June 1, 2025, the “2025 Notes.” In June 2023, we issued an aggregate principal amount of $210 million of the 2028 Notes (together with the 2025 Notes and the 2025 Modified Notes (as defined below), the “Notes”).
Further, we intend to continue to hire additional highly qualified personnel, including research and development and operational personnel, but may not be able to attract, assimilate or retain qualified personnel in the future.
Further, we intend to continue to hire additional highly qualified personnel, including research and development and operational personnel, but may not be able to attract, assimilate or retain qualified personnel in the future. Any failure to attract, integrate, motivate and retain these employees could harm our business.
We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of our outstanding notes (the "Notes") or to repurchase the Notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle for cash conversions of our outstanding 1.50% convertible senior notes due July 1, 2028 ($210 million of which were outstanding as of September 30, 2025, the "2028 Notes") or to repurchase the 2028 Notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
United Kingdom-based organizations doing business in the European Union will need to continue to comply with the GDPR. Although the UK is regarded as a third country under the EU’s GDPR, the European Commission recognizes the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted.
Although the UK is regarded as a third country under the EU’s GDPR, the European Commission recognizes the UK as providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EU to the UK remain unrestricted.
In addition, our Amended and Restated Certificate of Incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock with respect to dividends and distributions, as our Board may generally determine.
Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. 27 Table of Contents In addition, our Amended and Restated Certificate of Incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock with respect to dividends and distributions, as our Board may generally determine.
Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets.
Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rate levels and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, trade restrictions, customs regulations, tariffs and price or exchange controls, preferences by nations for domestically manufactured products and political volatility, especially in energy-producing countries and large or high growth markets.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof. In addition, our indebtedness, combined with our other financial obligations and contractual commitments, could have other important consequences.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2028 Notes or make cash payments upon conversions thereof.
In the past couple of years, we have observed increased economic uncertainty in the United States and abroad. Impacts of such economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
Impacts of such economic weakness include: • falling overall demand for goods and services, leading to reduced profitability; • reduced credit availability; • higher borrowing costs; • reduced liquidity; • recession risks; • volatility in credit, equity and foreign exchange markets; and • bankruptcies.
The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such Notes. Our Notes may become in the future convertible at the option of their holders under certain circumstances.
The conversion of some or all of the 2028 Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock upon any conversion of such 2028 Notes.
If we do not realize the expected benefits of the Plan on a timely basis, or at all, our business, results of operations and financial condition could be adversely affected. Furthermore, following completion of the Plan, our business may not be more efficient or effective than prior to the implementation of the Plan.
If we do not realize the expected benefits of the 2025 Plan or any plan we may announce in the future on a timely basis, or at all, our business, results of operations and financial condition could be adversely affected.
Item 1A. Ris k Factors. You should carefully consider all of the information in this Form 10-K and each of the risks described below, which we believe are the material risks that we face.
Item 1A. Risk Factors. You should carefully consider all of the information in this Form 10-K and each of the risks described below, which we believe are the material risks that we face. Some of the risks relate to our business, others to our intellectual property and technology, the securities markets, our indebtedness and ownership of our securities.
Skilled and experienced personnel in the areas where we compete are in high demand, and competition for their talents is intense. We expect that many of our key employees will receive a total compensation package that includes equity awards. We are limited in the amount of equity awards that we may issue under the terms of our equity incentive plans.
We expect that many of our key employees will receive a total compensation package that includes equity awards. We are limited in the amount of equity awards that we may issue under the terms of our equity incentive plans.
Although the source code for our proprietary software is protected both as a trade secret and as a copyrighted work, litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.
Litigation may be necessary to enforce our intellectual property rights, including our patents, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity.
Negotiations for the ePrivacy Regulation are still ongoing as of the date of this report, and there is no final text or date for entry into force. Once agreed, the ePrivacy Regulation will come into force in two years from the twentieth day following its publication.
Negotiations for the ePrivacy Regulation are still ongoing as of the date of this report, and there is no final text or date for entry into force.
We also continue to see jurisdictions, such as Russia, imposing data localization laws, which under Russian laws require personal information of Russian citizens to be, among other data processing operations, initially collected, stored, and modified in Russia. 22 Preparing for and complying with the evolving application of these laws has required and will continue to require us to incur substantial operational costs and may interfere with our intended business activities, inhibit our ability to expand into certain markets or prohibit us from continuing to offer services in those markets without significant additional costs.
Preparing for and complying with the evolving application of these laws has required and will continue to require us to incur substantial operational costs and may interfere with our intended business activities, inhibit our ability to expand into certain markets or prohibit us from continuing to offer services in those markets without significant additional costs.
Our leadership position has historically been derived from our products and services based on edge software technology. We have been and are continuing to develop new products and services that incorporate cloud-connected components. The design and development of new cloud-connected components will involve significant expense.
Our strategy to increase cloud connected services may adversely affect our near-term revenue growth and results of operations. Our leadership position has historically been derived from our products and services based on edge software technology. We have been and are continuing to develop new products and services that incorporate cloud-connected components.
Additional risks associated with the continuing impact of the Plan include employee attrition, the ability to hire new employees in the future, diversion of management attention, and adverse effects on employee morale. 16 In addition, our ability to complete the Plan and achieve the anticipated benefits from the Plan within the expected time frame, or at all, is subject to management’s estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.
In addition, our ability to complete the 2025 Plan or any plan we may announce in the future and achieve the anticipated benefits from such plan within the expected time frame, or at all, is subject to management’s estimates and assumptions and may vary materially from our expectations, including as a result of factors that are beyond our control.
Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, our business, which could adversely affect our financial performance. Our business depends on, and is directly affected by, the output and sales of the global automotive industry and the use of automobiles by consumers.
Our business depends on, and is directly affected by, the output and sales of the global automotive industry and the use of automobiles by consumers. Health events, such as pandemics and disease outbreaks, have disrupted, and may in the future again disrupt, global automotive industry sales and production volumes.
Future adverse changes in the above 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.
Future adverse changes in the above 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. Health Events, such as pandemics and disease outbreaks, have disrupted, and may continue to disrupt, our business and that of our customers, which could adversely affect our financial performance.
In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase. 28 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.
Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase.
Our Board has adopted the Cerence 2019 Equity Incentive Plan, as well as the 2024 Inducement Plan, for the benefit of certain of our current and future employees, service providers and non-employee directors. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
Our Board has adopted the Cerence 2019 Equity Incentive Plan, as well as the 2024 Inducement Plan, for the benefit of certain of our current and future employees, service providers and non-employee directors.
Our research and development costs have increased in recent years and, together with certain expenses associated with delivering our connected services, could continue to escalate in the near future. We may encounter difficulties with designing, developing and releasing new cloud-connected components, as well as integrating these components with our existing hybrid technologies.
The design and development of new cloud-connected components will involve significant expense. Our research and development costs have increased in recent years and, together with certain expenses associated with delivering our connected services, could continue to escalate in the near future.
As another prominent example, we are also subject to data protection regulation in the UK. Following the UK’s withdrawal from the EU on January 31, 2020 and the end of the transitional arrangements agreed between the UK and EU as of January 1, 2021, the GDPR has been incorporated into UK domestic law.
Following the UK’s withdrawal from the EU on January 31, 2020 and the end of the transitional arrangements agreed between the UK and EU as of January 1, 2021, the GDPR has been incorporated into UK domestic law. United Kingdom-based organizations doing business in the European Union will need to continue to comply with the GDPR.
Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property.
Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. On the regulatory front, recent state legislative developments in the United States have introduced emerging compliance risks for companies that develop or deploy AI technologies.
Any failure to attract, integrate, motivate and retain these employees could harm our business. 19 We depend on skilled employees and could be impacted by a shortage of critical skills. Much of our future success depends on the continued service and availability of skilled employees, particularly with respect to technical areas.
We depend on skilled employees and could be impacted by a shortage of critical skills. Much of our future success depends on the continued service and availability of skilled employees, particularly with respect to technical areas. Skilled and experienced personnel in the areas where we compete are in high demand, and competition for their talents is intense.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe individual who is currently in this role has over 20 years of experience in information security. Our audit committee has oversight over cybersecurity risks. The audit committee reviews the enterprise risk management program quarterly, which includes the cybersecurity risk management program and any identified cybersecurity risks.
Biggest changeOur CISO is responsible for the day-to-day oversight of the assessment and management of cybersecurity risks. The individual who is currently in this role has over 20 years of experience in information security. Our audit committee has oversight over cybersecurity risks.
We have an enterprise risk management program and we maintain written information security policies, including an incident response plan, which is designed to establish our processes for identifying, responding to, and recovering from cybersecurity incidents. We test this incident response plan on an annual basis.
We have an enterprise risk management program and we maintain written information security policies, including an incident response plan, which is designed to establish our processes for identifying, responding to, and recovering from cybersecurity incidents. The incident response plan is exercised on an annual basis.
Led by our Chief Information Security Officer (“CISO”), the Information Security Management Committee is made up of cross-functional members of company management and works closely with our third-party information technology and security providers to develop and implement our cybersecurity strategy. Our CISO is responsible for the day-to-day oversight of the assessment and management of cybersecurity risks.
Governance Related to Cybersecurity Risks Our cybersecurity risk management program is managed by our Information Security Management Committee. Led by our Chief Information Security Officer (“CISO”), the Information Security Management Committee is made up of cross-functional members of company management and works closely with our third-party information technology and security providers to develop and implement our cybersecurity strategy.
However, like other companies in our industry, we and our third-party vendors may, from time to time, experience threats and security incidents that could affect our information or systems. For more information, please see Item 1A - Risk Factors. Governance Related to Cybersecurity Risks Our cybersecurity risk management program is managed by our Information Security Management Committee.
However, like other companies in our industry, we and 28 Table of Contents our third-party vendors may, from time to time, experience threats and security incidents that could affect our information or systems. For more information, please see Item 1A - Risk Factors.
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The audit committee reviews the enterprise risk management program quarterly, which includes the cybersecurity risk management program and any identified cybersecurity risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Pr operties. Our corporate headquarters is located in Burlington, Massachusetts. Other large, leased sites include properties located in: Aachen and Ulm, Germany; Heerlen, Netherlands; Montreal, Canada; Shanghai and Chengdu, China; Merelbeke, Belgium; Turin, Italy; and Pune, India. We believe our existing facilities and equipment are in good operating condition and are suitable for the conduct of our business.
Biggest changeItem 2. Properties. Our corporate headquarters is located in Burlington, Massachusetts. Other large, leased sites include properties located in: Aachen and Ulm, Germany; Heerlen, Netherlands; Montreal, Canada; Shanghai and Chengdu, China; Merelbeke, Belgium; Turin, Italy; and Pune, India. We believe our planned facilities and equipment are in good operating condition and are suitable for the conduct of our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeGiven the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from this action. 34 Other Legal Proceedings From time to time, we may become a party to other legal proceedings, including, without limitation, product liability claims, employment matters, commercial disputes, governmental inquiries and investigations (which may in some cases involve our entering into settlement arrangements or consent decrees), and other matters arising out of the ordinary course of our business.
Biggest changeOther Legal Proceedings From time to time, we may become a party to other legal proceedings, including, without limitation, product liability claims, employment matters, commercial disputes, governmental inquiries and investigations (which may in some cases involve our entering into settlement arrangements or consent decrees), and other matters arising out of the ordinary course of our business.
Cerence has filed motions to dismiss both cases. On February 27, 2024, the Circuit Court issued an order denying Cerence's motion to dismiss. On April 16, 2024, Cerence filed its answer and affirmative defenses, a motion to certify the Court’s order on Cerence’s motion to dismiss, and a motion to stay.
Cerence filed motions to dismiss both cases. On February 27, 2024, the Circuit Court issued an order denying Cerence's motion to dismiss. On April 16, 2024, Cerence filed its answer and affirmative defenses, a motion to certify the Court’s order on Cerence’s motion to dismiss, and a motion to stay.
Three shareholder derivative complaints making factual and legal contentions substantially similar to those raised in the consolidated federal derivative action have been also filed in the Delaware Court of Chancery: the first filed on October 19, 2022 by plaintiff Melinda Hipp against the defendants named in the consolidated federal derivative action and board member Douglas Davis, the second filed on August 17, 2023 by plaintiff Catherine Fleming against the defendants named in the consolidated federal derivative action, and the third filed on July 10, 2024 by plaintiff Alberto Goncalves against the defendants named in the consolidated federal derivative action.
Three shareholder derivative complaints making factual and legal contentions substantially similar to those raised in the consolidated federal derivative action were also filed in the Delaware Court of Chancery: the first filed on October 19, 2022 by plaintiff Melinda Hipp against the defendants named in the consolidated federal derivative action and board member Douglas Davis, the second filed on August 17, 2023 by plaintiff Catherine Fleming against the defendants named in the consolidated federal derivative action, and the third filed on July 10, 2024 by plaintiff Alberto Goncalves against the defendants named in the consolidated federal derivative action.
Across both cases, plaintiffs allege that Cerence violated: (1) BIPA Section 15(a) by possessing biometrics without any public written policy for their retention or destruction; (2) BIPA Section 15(b) by collecting, capturing, or obtaining biometrics without written notice or consent; (3) BIPA Section 15(c) by profiting from biometrics obtained from Plaintiffs and putative class members; and (4) BIPA Section 15(d) by disclosing biometrics to third party companies without consent.
Across both cases, plaintiffs allege that Cerence violated: (1) BIPA Section 15(a) by possessing biometrics without any public written policy for their 29 Table of Contents retention or destruction; (2) BIPA Section 15(b) by collecting, capturing, or obtaining biometrics without written notice or consent; (3) BIPA Section 15(c) by profiting from biometrics obtained from Plaintiffs and putative class members; and (4) BIPA Section 15(d) by disclosing biometrics to third party companies without consent.
Gallenberger as well as board members Arun Sarin, Thomas Beaudoin, Marianne Budnik, Sanjay Jha, Kristi Ann Matus, Alfred Nietzel and former CEO and board member Stefan Ortmanns. These actions are premised on factual contentions substantially similar to those made in the Securities Action and contain substantially similar legal contentions.
Gallenberger as well as board members Arun Sarin, Thomas Beaudoin, Marianne Budnik, Sanjay Jha, Kristi Ann Matus, Alfred Nietzel and then-current CEO and board member Stefan Ortmanns. These actions are premised on factual contentions substantially similar to those made in the Securities Action (as defined below) and contain substantially similar legal contentions.
Derivative Actions On May 10 and 12, 2022, respectively, plaintiffs William Shafer and Peter Morse filed shareholder derivative complaints in the United States District Court for the District of Massachusetts on behalf of Cerence Inc. against defendants (and former officers) Sanjay Dwahan and Mark J.
Item 3. Legal Proceedings. Derivative Actions On May 10 and 12, 2022, respectively, plaintiffs William Shafer and Peter Morse filed shareholder derivative complaints in the United States District Court for the District of Massachusetts on behalf of Cerence Inc. against defendants (and former officers) Sanjay Dhawan and Mark J.
While the results of any legal proceeding cannot be predicted with certainty, in our opinion none of these other pending matters are currently anticipated to have a material adverse effect on our consolidated financial position, liquidity or results of operations. Item 4. Mine Safe ty Disclosures. Not applicable. 35 PART II
While the results of any legal proceeding cannot be predicted with certainty, in our opinion none of our pending matters are currently anticipated to have a material adverse effect on our consolidated financial position, liquidity or results of operations. Item 4. Mine Safety Disclosures. Not applicable. 30 Table of Contents PART II
On March 15, 2024, Cerence filed its second patent infringement complaint against Samsung alleging infringement of four Cerence patents. In its responsive pleading on July 10, 2024, Samsung asserted counterclaims, alleging infringement of U.S. Patent Nos. 10,395,657; 10,720,162; 11,823,682; and 9,583,103 against the Cerence Assistant. Samsung seeks damages, including trebled damages, and its costs and fees.
In its responsive pleading to Samsung II, on July 10, 2024, Samsung asserted counterclaims, alleging infringement of U.S. Patent Nos. 10,395,657; 10,720,162; 11,823,682; and 9,583,103 against the Cerence Assistant. Samsung sought damages, including trebled damages, and its costs and fees. On September 4, 2024, Cerence filed its answer denying the allegations and counterclaims of invalidity and noninfringement.
As such, on June 13, 2022, at the parties’ request, the court consolidated these derivative actions into a single action and appointed co-lead counsel for plaintiffs in that consolidated action. On May 24, 2024, defendants filed a motion to dismiss under the forum selection clause in the Company’s charter, and on June 7, 2024, plaintiffs opposed the motion to dismiss.
As such, on June 13, 2022, at the parties’ request, the court consolidated these derivative actions into a single action and appointed co-lead counsel for plaintiffs in that consolidated action. On February 3, 2025, defendants filed a motion to dismiss on the grounds of demand futility and failure to state a claim.
Thereafter, in exchange for Cerence withdrawing its motions to certify and stay, plaintiffs filed amended complaints in both the Circuit Court and Federal Court. Cerence’s answers in the Federal Court and Circuit Court were due on July 15 and July 18, 2024, respectively, which the Company filed on such dates.
Thereafter, in exchange for Cerence withdrawing its motions to certify and stay, plaintiffs filed amended complaints in both the Circuit Court and Federal Court, which 1) dismissed some plaintiffs and 2) amended the class definition to include Illinois individuals who owned, leased, and/or created user profiles for vehicles with Cerence's "voice recognition technology" (rather than anyone in Illinois whose "voiceprint" was collected or stored by Cerence).
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Item 3. Legal Proceedings. City of Miami Fire Fighters’ and Police Officers’ Retirement Trust Action On February 25, 2022, a purported shareholder class action captioned as City Of Miami Fire Fighters’ and Police Officers’ Retirement Trust v. Cerence Inc., et al.
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On June 18, 2025, the Court granted the motion without leave to amend.
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(the “Securities Action”) was filed in the United States District Court for the District of Massachusetts, naming the Company and two of its former officers as defendants. Following the court’s selection of a lead plaintiff and lead counsel, an amended complaint was filed on July 26, 2022.
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On October 20, 2023, Ms. Hipp voluntarily dismissed her action with prejudice. On July 22, 2025, Mr. Goncalves's action was dismissed without prejudice at his request. On July 31, 2025, Ms. Fleming's action was dismissed without prejudice by stipulation of the parties.
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The plaintiff claims to be suing on behalf of anyone who purchased the Company’s common stock between November 16, 2020 and February 4, 2022.
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Cerence filed its answers in both and the parties concluded fact discovery. The parties are now briefing class certification, which briefing is scheduled to be complete on December 15, 2025. On November 3, 2025, plaintiffs moved to stay the Federal Court case pending the Circuit Court's ruling on class certification.
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The lawsuit alleges that material misrepresentations and/or omissions of material fact regarding the Company’s operations, financial performance and prospects were made in the Company’s public disclosures during the period from November 16, 2020 to February 4, 2022, in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder.
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On October 13, 2023, Cerence filed its first patent infringement complaint against Samsung alleging infringement of five Cerence patents (hereinafter referred to as “Samsung I”). On March 15, 2024, Cerence filed its second patent infringement complaint against Samsung alleging infringement of four additional Cerence patents (hereinafter referred to as “Samsung II”).
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The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees. On September 9, 2022, the defendants in the Securities Action moved to dismiss the action in its entirety.
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Trial for Samsung I was scheduled to begin in October 2025 and trial for Samsung II was scheduled to begin in April 2026.
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On March 25, 2024, the court granted in part and denied in part the motion to dismiss, dismissing certain of the alleged misrepresentations and omissions while allowing claims challenging certain other alleged misrepresentations and omissions to proceed. On April 15, 2024, the defendants filed their answer to the amended complaint.
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On October 28, 2025 Samsung and Cerence resolved these disputes by entering into a cross-license agreement, which, among other things, resulted in Samsung agreeing to pay Cerence a one-time lump sum payment in the total amount of $49.5 million, due within 30 days.
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On August 14, 2024, the parties conducted a mediation and thereafter the parties agreed to settle the matter for $30.0 million, subject to court approval. On September 18, 2024, the Court granted preliminary approval of the settlement and scheduled a final settlement approval hearing on December 16, 2024. The entire settlement amount is being funded by insurance proceeds.
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The cross-license agreement requires that each party is responsible for bearing their own costs for any associated legal fees incurred as a result of the alleged complaints and negotiations resulting in the dispute resolution. As a result, our final receipt of the one-time lump-sum payment will result in us incurring approximately $24.6 million in legal fees.
Removed
As of September 30, 33 2024, we have recorded a $30.0 million receivable related to the insurance proceeds within Prepaid and other current assets and a $30.0 million liability related to the settlement within Accrued expenses and other current liabilities within the Consolidated Balance Sheets.
Removed
The parties are awaiting the court’s decision on the motion to dismiss.
Removed
On October 20, 2023, Ms. Hipp voluntarily dismissed her action with prejudice. On June 26, 2024, the court stayed the Fleming action pending the outcome of mediation. On August 12, 2024, the court stayed the Goncalves action pending the outcome of mediation.
Removed
Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, derivative standing and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from these derivative actions.
Removed
Cerence filed its answer denying the allegations and counterclaims of invalidity and noninfringement on September 4, 2024. Trial is scheduled to begin in January 2026.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 35 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6 Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 61 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 30 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 31 Item 6 Reserved 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 33 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−1 removed3 unchanged
Biggest changeThe information presented assumes an initial investment of $100 on October 2, 2019, the date our common stock began regular-way trading on the Nasdaq Global Select Market. The graph shows the value that each of these investments would have had at the end of each fiscal year. The comparisons shown in the graph below are based upon historical data.
Biggest changeThe information presented assumes an initial investment of $100 on October 1, 2020. The graph shows the value that each of these investments would have had at the end of each fiscal year. The comparisons shown in the graph below are based upon historical data.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Our common stock has been listed on the Nasdaq Global Select Market under the symbol “CRNC” since October 2, 2019. Prior to that date, there was no public trading market for our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our common stock has been listed on the Nasdaq Global Select Market under the symbol “CRNC” since October 2, 2019. Prior to that date, there was no public trading market for our common stock.
A “when-issued” trading market for our common stock existed between September 17, 2019 and October 1, 2019 under the symbol “CRNCV”. Holders of Common Stock As of November 13, 2024, there were 442 holders of record of our common stock. This number does not reflect beneficial owners whose shares are held in street name.
A “when-issued” trading market for our common stock existed between September 17, 2019 and October 1, 2019 under the symbol “CRNCV”. Holders of Common Stock As of November 7, 2025, there were 415 holders of record of our common stock. This number does not reflect beneficial owners whose shares are held in street name.
Removed
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. 36 10/2/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 Cerence Inc. $ 100.00 $ 318.37 $ 626.12 $ 102.61 $ 132.70 $ 20.52 Russell 2000 $ 100.00 $ 101.90 $ 148.98 $ 112.51 $ 120.65 $ 150.71 S&P Software & Services Select $ 100.00 $ 131.74 $ 189.66 $ 118.19 $ 140.34 $ 177.50 Recent Sales of Unregistered Securities and Use of Proceeds None.
Added
We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. The total return performance graph does not assume the reinvestment of dividends for the Company’s common stock.
Added
As mentioned in Dividend Policy above, the Company does not currently pay nor reinvest dividends. 31 Table of Contents October 1, 2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 9/30/2025 Cerence Inc. $ 100.00 $ 193.22 $ 31.66 $ 40.95 $ 6.33 $ 25.05 Russell 2000 $ 100.00 $ 143.96 $ 108.72 $ 116.58 $ 145.64 $ 159.12 S&P Software & Services Select $ 100.00 $ 141.30 $ 88.05 $ 104.55 $ 132.24 $ 162.71 Recent Sales of Unregistered Securities and Use of Proceeds None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

140 edited+29 added−46 removed122 unchanged
Biggest changeFor fiscal year 2023 as compared to fiscal year 2022: • Total revenue decreased by $33.4 million, or 10.2%, from $327.9 million to $294.5 million. • Operating margin increased by 47.0 percentage points from negative 56.2% to negative 9.2%. • Cash from operating activities changed by $9.6 million, or 450.7%, from cash used in operating activities of $2.1 million to cash provided by operating activities of $7.5 million. 39 Operating Results The following table shows the Consolidated Statements of Operations for the fiscal years 2024, 2023 and 2022 (dollars in thousands): 2024 2023 2022 Revenues: License $ 124,746 $ 145,159 $ 158,610 Connected services 133,444 75,071 85,571 Professional services 73,314 74,245 83,710 Total revenues 331,504 294,475 327,891 Cost of revenues: License $ 6,060 $ 8,522 $ 2,698 Connected services 24,787 22,995 22,722 Professional services 56,282 63,232 68,764 Amortization of intangibles 103 414 2,984 Total cost of revenues 87,232 95,163 97,168 Gross profit 244,272 199,312 230,723 Operating expenses: Research and development $ 121,563 $ 123,333 $ 107,116 Sales and marketing 21,725 27,504 31,098 General and administrative 52,468 57,903 42,653 Amortization of intangible assets 2,203 5,854 11,516 Restructuring and other costs, net 17,077 11,917 8,965 Goodwill impairment 609,172 — 213,720 Total operating expenses 824,208 226,511 415,068 Loss from operations (579,936 ) (27,199 ) (184,345 ) Interest income 5,353 4,471 1,007 Interest expense (12,553 ) (14,769 ) (14,394 ) Other income (expense), net 2,526 1,108 (1,019 ) Loss before income taxes (584,610 ) (36,389 ) (198,751 ) Provision for income taxes 3,468 19,865 112,075 Net loss $ (588,078 ) $ (56,254 ) $ (310,826 ) Our revenue consists primarily of license revenue, connected services revenue and revenue from professional services.
Biggest changeOperating Results The following table shows the Consolidated Statements of Operations for the fiscal years 2025, 2024 and 2023 (dollars in thousands): 34 Table of Contents 2025 2024 2023 Revenues: License $ 140,625 $ 124,746 $ 145,159 Connected services 53,358 133,444 75,071 Professional services 57,798 73,314 74,245 Total revenues 251,781 331,504 294,475 Cost of revenues: License $ 6,941 $ 6,060 $ 8,522 Connected services 21,418 24,787 22,995 Professional services 40,286 56,282 63,232 Amortization of intangibles — 103 414 Total cost of revenues 68,645 87,232 95,163 Gross profit 183,136 244,272 199,312 Operating expenses: Research and development $ 97,756 $ 121,563 $ 123,333 Sales and marketing 21,815 21,725 27,504 General and administrative 48,770 52,468 57,903 Amortization of intangible assets 1,668 2,203 5,854 Restructuring and other costs, net 15,418 17,077 11,917 Goodwill impairment — 609,172 — Total operating expenses 185,427 824,208 226,511 Loss from operations (2,291) (579,936) (27,199) Interest income 3,853 5,353 4,471 Interest expense (10,223) (12,553) (14,769) Other (expense) income, net (160) 2,526 1,108 Loss before income taxes (8,821) (584,610) (36,389) Provision for income taxes 9,893 3,468 19,865 Net loss $ (18,714) $ (588,078) $ (56,254) Our revenue consists primarily of license revenue, connected services revenue and revenue from professional services.
We are focused on pursuing actions intended to position the Company to deliver on our generative AI and large language model product roadmap and also deliver improved financial results which include process optimization efforts and cost reductions. Goodwill impairment for the fiscal year ended September 30, 2024 was $609.2 million.
We are focused on pursuing actions intended to position the Company to deliver on our generative AI and large language model product roadmap and also deliver improved financial results which include process optimization efforts and cost reductions. Fiscal Year 2024 Goodwill impairment for the fiscal year ended September 30, 2024 was $609.2 million.
The effective tax rate for the fiscal year 2024 differed from the U.S. federal statutory rate of 21.0%, primarily due to impairment of book goodwill, the tax impacts of stock-based compensation, U.S. inclusions of foreign taxable income, valuation allowance on foreign loss carryforwards, and our composition of jurisdictional earnings.
The effective income tax rate for fiscal year 2024 differed from the U.S. federal statutory rate of 21.0%, primarily due to impairment of book goodwill, the tax impacts of stock-based compensation, U.S. inclusions of foreign taxable income, valuation allowance on foreign loss carryforwards, and our composition of jurisdictional earnings.
We recognize revenue after applying the following five steps for arrangements with customers within the scope of ASC 606: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract, including whether they are distinct within the context of the contract; 55 • determination of the transaction price, including the constraint on variable consideration; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, the performance obligations are satisfied.
We recognize revenue after applying the following five steps for arrangements with customers within the scope of ASC 606: • identification of the contract, or contracts, with a customer; • identification of the performance obligations in the contract, including whether they are distinct within the context of the contract; • determination of the transaction price, including the constraint on variable consideration; • allocation of the transaction price to the performance obligations in the contract; and • recognition of revenue when, or as, the performance obligations are satisfied.
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 40 through a 2013 acquisition.
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.
For the fiscal year 2024 as compared to fiscal year 2023: • Total revenue increased by $37.0 million, or 12.6%, from $294.5 million to $331.5 million. • Operating margin decreased by 165.7 percentage points from negative 9.2% to negative 174.9%. • Cash from operating activities changed by $9.7 million, or 129.4%, from cash provided by operating activities of $7.5 million to cash provided by operating activities of $17.2 million.
For fiscal year 2024 as compared to fiscal year 2023: • Total revenue increased by $37.0 million, or 12.6%, from $294.5 million to $331.5 million. • Operating margin decreased by 165.7 percentage points from negative 9.2% to negative 174.9%. • Cash from operating activities changed by $9.7 million, or 129.4%, from cash provided by operating activities of $7.5 million to cash provided by operating activities of $17.2 million.
We classify these costs as current or noncurrent based on the timing of when we expect to recognize the expense. The current and noncurrent portions of capitalized contract fulfillment costs are presented as Deferred costs. 57 Trade Accounts Receivable and Contract Balances We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset.
We classify these costs as current or noncurrent based on the timing of when we expect to recognize the expense. The current and noncurrent portions of capitalized contract fulfillment costs are presented as Deferred costs. Trade Accounts Receivable and Contract Balances We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset.
Based upon the results of the impairment test, we recorded a goodwill impairment charge of $252.1 million during the three months ended March 31, 2024. 58 At June 30, 2024, we concluded indicators of impairment were present due to the current macroeconomic conditions, including declines in our stock price.
Based upon the results of the impairment test, we recorded a goodwill impairment charge of $252.1 million during the three months ended March 31, 2024. At June 30, 2024, we concluded indicators of impairment were present due to the current macroeconomic conditions, including declines in our stock price.
The net proceeds from the issuance of the 2028 Notes were $193.2 million after deducting transaction costs. The 2028 Notes are senior, unsecured obligations and accrue interest payable semiannually in arrears on January 1 and July 1 of each year at a rate of 1.50% per year.
The initial net proceeds from the issuance of the 2028 Notes were $193.2 million after deducting transaction costs. The 2028 Notes are senior, unsecured obligations and accrue interest payable semiannually in arrears on January 1 and July 1 of each year at a rate of 1.50% per year.
We recognize revenue as each distinct service period is performed (i.e., recognized as incurred). 56 Fixed fee subscription basis revenue represents a single promise to stand-ready to provide access to our connected services. We recognize revenue over time on a ratable basis over the respective hosting subscription term.
We recognize revenue as each distinct service period is performed (i.e., recognized as incurred). Fixed fee subscription basis revenue represents a single promise to stand-ready to provide access to our connected services. We recognize revenue over time on a ratable basis over the respective hosting subscription term.
Income Taxes We account for income taxes using the assets and liabilities method, as prescribed by ASC No. 740, Income Taxes , or ASC 740. Deferred Taxes 59 Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carry amount of assets and liabilities and their respective tax bases.
Income Taxes We account for income taxes using the assets and liabilities method, as prescribed by ASC No. 740, Income Taxes, or ASC 740. Deferred Taxes Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carry amount of assets and liabilities and their respective tax bases.
During fiscal year 2023, we had a reduction in contributions from our fixed license contracts due to our decision to limit the level of such contracts on a go-forward basis which contributed to a decline in reported license revenue for fiscal years 2023 and 2024.
During fiscal year 2023, we had a reduction in contributions from our fixed license contracts due to our decision to limit the level of such contracts on a go-forward basis which contributed to a decline in reported license revenue for fiscal years 2023, 2024 and 2025.
Our operating expenses include R&D, sales and marketing and general and administrative expenses. R&D expenses primarily consist of salaries, benefits, and overhead relating to research and engineering staff. Sales and marketing expenses include salaries, benefits, and commissions related to our sales, product marketing, product management, and business unit management teams.
Our operating expenses include R&D, sales and marketing and general and administrative expenses. R&D expenses primarily consist of salaries, benefits, and overhead relating to research and engineering staff. Sales and marketing expenses includes salaries, benefits, and commissions related to our sales, product marketing, product management, and business unit management teams.
General and administrative expenses primarily consist of personnel costs for administration, finance, human resources, general management, fees for external professional advisers including accountants and attorneys, and provisions for credit losses.
General and administrative expenses primarily consist of personnel costs for administration, legal, finance, human resources, general management, fees for external professional advisers including accountants and attorneys, and provisions for credit losses.
Bank Trust Company, National Association, as trustee (the “Trustee”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. On July 3, 2023, we issued an additional $20.0 million in aggregate principal amount of 2028 Notes.
Bank Trust Company, National Association, as trustee (the “Trustee”), in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). On July 3, 2023, we issued an additional $20.0 million in aggregate principal amount of 2028 Notes.
In addition, following certain corporate events that occur prior to the maturity date or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2025 Notes in connection with such a corporate event or convert its 2025 Notes called for redemption in connection with such notice of redemption, as the case may be.
In addition, following certain corporate events that occur prior to the maturity date or if we deliver a notice of redemption, we will, in certain circumstances, increase the conversion rate for a holder who elects to convert its 2028 Notes in connection with such a corporate event or convert its 2028 Notes called for redemption in connection with such notice of redemption, as the case may be.
Convertible Debt We adopted ASU 2020-06 on October 1, 2022. Since the adoption of ASU 2020-06, we record our convertible debt at face value less unamortized issuance costs. Issuance costs are amortized to Interest expense in our Consolidated Statements of Operations using the effective interest method over the expected term of the convertible debt.
Convertible Debt We adopted ASU 2020-06 on October 1, 2022. Since the adoption of ASU 2020-06, we record our convertible debt at face value less unamortized issuance costs. Issuance costs are amortized to Interest expense in our Consolidated Statements of Operations using the effective interest method over the contractual term of the convertible debt.
The aggregate net liability of our defined benefit plans as of September 30, 2024 was $6.2 million. 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.
The aggregate net liability of our defined benefit plans as of September 30, 2025 was $6.2 million. 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.
Our MD&A generally includes a discussion of results of operations, financial condition, liquidity and capital resources related to year-over-year comparisons between fiscal years ended September 30, 2024 and 2023, as well as fiscal years ended September 30, 2023 and 2022.
Our MD&A generally includes a discussion of results of operations, financial condition, liquidity and capital resources related to year-over-year comparisons between fiscal years ended September 30, 2025 and 2024, as well as fiscal years ended September 30, 2024 and 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 decrease in revenues was driven by a decrease in 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.
These estimates require our most difficult and subjective judgments. Revenue Recognition We primarily derive revenue from the following sources: (1) royalty-based software license arrangements, (2) connected services, and (3) professional services.
These estimates require our most difficult and subjective judgments. Revenue Recognition We primarily derive revenue from the following sources: (1) royalty-based software or IP license arrangements, (2) connected services, and (3) professional services.
An extended period of economic disruption or market volatility could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition. 1.50% Senior Convertible Notes due 2028 On June 26, 2023, we issued $190.0 million in aggregate principal amount of 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”), which are governed by an indenture (the “2028 Indenture”), between us and U.S.
An extended period of economic disruption or market volatility could materially affect our business, results of operations, access to sources of liquidity and financial condition. 1.50% Senior Convertible Notes due 2028 On June 26, 2023, we issued $190.0 million in aggregate principal amount of 1.50% Convertible Senior Notes due 2028 (the “2028 Notes”), which are governed by an indenture (the “2028 Indenture”), between us and U.S.
Potential position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the first quarter of fiscal year 2025 in certain cases.
Potential position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the first quarter of fiscal year 2026 in certain cases.
We maintain an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
We maintain an allowance for credit losses to provide for the estimated amount of receivables that may not be collected. 51 Table of Contents Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.
The net proceeds from the issuance of the 2025 Notes were $169.8 million after deducting transaction costs. The 2025 Notes are senior, unsecured obligations and accrue interest payable semiannually in arrears on June 1 and December 1 of each year at a rate of 3.00% per year.
The net proceeds from the issuance of the 2025 Notes were $169.8 million after deducting transaction costs. The 2025 Notes were senior, unsecured obligations and accrued interest payable semiannually in arrears on June 1 and December 1 of each year, at a rate of 3.00% per year.
Edge software components are installed on a vehicle’s head unit and can operate without access to external networks and information. Cloud-connected components are comprised of certain speech and natural language understanding related technologies, AI-enabled personalization and context-based response frameworks, and content integration platform. We generate revenue primarily by selling software licenses and cloud-connected services.
Edge software components are installed on a vehicle’s head unit and can operate without access to external networks and information. Cloud-connected components are comprised of certain speech and natural language understanding related technologies, AI-enabled personalization and context-based response frameworks, and content integration platform. We generate revenue primarily by selling software or intellectual property (“IP”) licenses and cloud-connected services.
The increase was partially offset by decreases in license revenue primarily due to lower volume of licensing royalties. License Revenue License revenue for fiscal year 2024 was $124.7 million, a decrease of $20.5 million, or 14.1%, from $145.2 million for fiscal year 2023.
The increase was partially offset by decreases in license revenue primarily due to lower volume of licensing royalties. 37 Table of Contents License Revenue License revenue for fiscal year 2024 was $124.7 million, a decrease of $20.5 million, or 14.1%, from $145.2 million for fiscal year 2023.
The change in cash flows were driven by a decrease of $1.2 million net proceeds from the sale of marketable securities.
The change in cash flows were driven by a decrease of $1.2 million net proceeds from the purchase and sale of marketable securities.
Tax laws and tax rates vary substantially in these jurisdictions and are subject to change given the political and economic climate. We report and pay income tax based on operational results and applicable law. Our tax provision contemplates tax rates currently enacted to determine both our current and deferred tax positions.
Tax laws and tax rates vary substantially in these jurisdictions and are subject to change given the political and economic climate. We report 53 Table of Contents and pay income tax based on operational results and applicable law. Our tax provision contemplates tax rates currently enacted to determine both our current and deferred tax positions.
In connection with the offering of the 2028 Notes, we repurchased $87.5 million in aggregate principal amount of the 2025 Notes in a privately negotiated transaction. We specifically negotiated the repurchase of the 2025 Notes with investors who concurrently purchased the 2028 Notes.
In connection with the offering of the 2028 Notes, we repurchased $87.5 million in aggregate principal amount of the 2025 Notes in a privately negotiated transaction. We specifically negotiated the repurchase of the 2025 45 Table of Contents Notes with investors who concurrently purchased the 2028 Notes.
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 (expense), net was primarily driven by foreign exchange gains.
The decrease in interest expense was primarily attributable to a lower applicable interest rate on our Notes. The change in other income (expense), net, was primarily driven by foreign exchange gains.
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 markets as needed.
Our ability to fund future operating needs will depend on our ability to generate positive cash flows from operations and access additional funding in the capital and debt markets as needed.
Net Cash Provided by (Used in) Investing Activities Fiscal Year 2024 Compared with Fiscal Year 2023 Net cash provided by investing activities for the fiscal year 2024 was $4.4 million, a net change of $1.4 million, or 24.8%, from net cash provided by investing activities of $5.8 million for fiscal year 2023.
Fiscal Year 2024 Compared with Fiscal Year 2023 Net cash provided by investing activities for fiscal year 2024 was $4.4 million, a net change of $1.4 million, or 24.8%, from net cash provided by investing activities of $5.8 million for fiscal year 2023.
Actual outcomes may differ from our estimates. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions may have a material impact on our results of operations and financial position.
As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and may revise our estimates. Such revisions may have a material impact on our results of operations and financial position.
Fiscal Year 2023 Compared with Fiscal Year 2022 Total other expense, net for fiscal year 2023 was $9.2 million, a change of $5.2 million from $14.4 million of expense for fiscal year 2022. The increase in interest income was primarily attributable to returns on investments.
Fiscal Year 2024 Compared with Fiscal Year 2023 Total other expense, net for fiscal year 2024 was $4.7 million, a change of $4.5 million from $9.2 million of expense for fiscal year 2023. The increase in interest income was primarily attributable to returns on investments.
Consequently, our provision for income taxes for fiscal year 2024 was $3.5 million, a net change of $16.4 million, or 82.5%, from a provision for income taxes of $19.9 million for fiscal year 2023.
Consequently, our provision for income taxes for fiscal year 2024 was $3.5 million, a decrease of $16.4 million, or 82.5%, from a provision for income taxes of $19.9 million for fiscal year 2023.
There was no goodwill impairment for the fiscal year ending September 30, 2023. For the purpose of testing goodwill for impairment, all goodwill acquired in a business combination is assigned to one or more reporting units.
There was no goodwill impairment for the fiscal years ending September 30, 2025 and 2023. For the purpose of testing goodwill for impairment, all goodwill acquired in a business combination is assigned to one or more reporting units.
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.
Subscription revenue is recognized over the subscription period and cash is expected to be collected at the start of the subscription period. Usage based 35 Table of Contents revenue is recognized and cash is collected as the service is used.
The charges that we expect to incur are subject to a number of assumptions, including legal requirements in various jurisdictions, and actual expenses and charges may differ materially from the estimates disclosed above. For additional details, refer to Item 1A. Risk Factors.
The charges that we expect to incur from the implementation of the 2025 Plan are subject to a number of assumptions, including legal requirements in various jurisdictions, and actual expenses and charges may differ materially from the estimates disclosed above. For additional details, refer to Item 1A.
The decrease primarily relates to certain intangible assets having been fully amortized during fiscal years 2024 and 2023. As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 0.3 percentage points from 0.4% for fiscal year 2023 to 0.1% for fiscal year 2024.
The decrease primarily relates to certain intangible assets having been fully amortized during fiscal years 2025 and 2024. As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 0.1 percentage points from 0.1% for fiscal year 2024 to none for fiscal year 2025.
The change in cash flows were driven by: • A decrease of $12.3 million in capital expenditures; and • An increase of $6.9 million net proceeds from the sale of marketable securities.
The change in cash flows were driven by an increase in capital expenditures of $9.4 million and a decrease of $5.6 million in net proceeds from the sale of marketable securities.
Net Cash Provided by (Used in) Financing Activities Fiscal Year 2024 Compared with Fiscal Year 2023 54 Net cash provided by financing activities for the fiscal year 2024 was $0.2 million, a net change of $5.5 million, from cash used in financing activities of $5.3 million for fiscal year 2023 .
Fiscal Year 2024 Compared with Fiscal Year 2023 Net cash provided by financing activities for fiscal year 2024 was $0.2 million, a net change of $5.5 million, or 104.2%, from cash used in financing activities of 5.3 million for fiscal year 2023.
As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 2.7 percentage points from 3.1% for fiscal year 2022 to 0.4% for fiscal year 2023.
As a percentage of total cost of revenues, intangible asset amortization within cost of revenues decreased by 0.3 percentage points from 0.4% for fiscal year 2023 to 0.1% for fiscal year 2024.
As of September 30, 2024, the 2028 Notes were not convertible. 3.00% Senior Convertible Notes due 2025 On June 2, 2020, we issued $175.0 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the “2025 Notes”), including the initial purchasers’ exercise in full of their option to purchase $25.0 million principal amount of the 2025 Notes, which are governed by an indenture (the “2025 Indenture”), between us and the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
As of September 30, 2025 and September 30, 2024, the if-converted value of the 2028 Notes was $85.0 million and $113.0 million, respectively, less than its principal amount. 3.00% Senior Convertible Notes due 2025 On June 2, 2020, we issued $175.0 million in aggregate principal amount of 3.00% Convertible Senior Notes due 2025 (the “2025 Notes”), including the initial purchasers’ exercise in full of their option to purchase $25.0 million principal amount of the 2025 Notes, which are governed by an indenture (the “2025 Indenture”), between us and the Trustee, in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended.
The change in cash flows were primarily due to: • A decrease of $210.0 million in proceeds from long-term debt; • A decrease of $198.4 million in principal payments of long-term debt; • A decrease of $16.8 million in payments for long-term debt issuance costs; • An increase of $5.3 million in proceeds from the issuance of our common stock; and • An increase of $5.0 million in payments of tax related withholdings due to the net settlement of equity awards.
The change in cash flows were primarily due to: • An increase of $87.1 million in principal payments of short-term debt; • A decrease of $0.4 million in payments for long-term debt issuance costs; • A decrease of $8.0 million in proceeds from the issuance of our common stock; and • A decrease of $7.5 million in payments of tax related withholdings due to the net settlement of equity awards.
Liquidity and Capital Resources Financial Condition As of September 30, 2024, we had $130.4 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.
Liquidity and Capital Resources Financial Condition As of September 30, 2025, we had $87.5 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 corporate bonds, and government securities.
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 decrease in revenues was driven by connected services revenue due to the early termination of a legacy contract in fiscal year 2024 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 (hereinafter the "2013 Nuance Legacy Contract Termination").
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 September 30, 2024, the carrying amount of the 2025 Modified Notes was $161.2 million, net of unamortized costs of $13.8 million.
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 September 30, 2025, the carrying amount of the 2025 Modified Notes was $78.5 million, net of unamortized costs of $9.0 million.
Whenever the holders have a contractual right to convert, the carrying amount of the convertible debt is reclassified to current liabilities. 60 Prior to the adoption of ASU 2020-06: (i) we bifurcate the debt and equity (the contingently convertible feature) components of our convertible debt instruments in a manner that reflects our nonconvertible debt borrowing rate at the time of issuance; (ii) the equity components of our convertible debt instruments were recorded within stockholders’ equity with an allocated issuance premium or discount; and (iii) the debt issuance premium or discount was amortized to Interest expense in our Consolidated Statements of Operations using the effective interest method over the expected term of the convertible debt.
Prior to the adoption of ASU 2020-06: (i) we bifurcate the debt and equity (the contingently convertible feature) components of our convertible debt instruments in a manner that reflects our nonconvertible debt borrowing rate at the time of issuance; (ii) the equity components of our convertible debt instruments were recorded within stockholders’ equity with an allocated issuance premium or discount; and (iii) the debt issuance premium or discount was amortized to Interest expense in our Consolidated Statements of Operations using the effective interest method over the contractual term of the convertible debt.
Total other expense, net consists primarily of foreign exchange gains (losses), losses on the extinguishment of debt and interest expense related to the Notes and Senior Credit Facilities. 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.
Total other expense, net consists primarily of foreign exchange gains (losses), losses on our investments in convertible notes, gains (losses) on the extinguishment of debt and interest expense related to the Notes. We expect our revenue to continue to be impacted by the changing dynamics in the global automotive industry which has experienced production delays and slowdowns.
Total interest expense relating to the Senior Credit Facilities for the fiscal year ended September 30, 2024, 2023 and 2022 was $0.4 million, $6.7 million, $4.3 million, respectively, reflecting the coupon and accretion of the discount.
Total interest expense relating to the Senior Credit Facilities for the fiscal years ended September 30, 2025, 2024 and 2023 were 0.4 million, $0.4 million, $6.7 million, respectively, reflecting the coupon and accretion of the discount.
Our solutions power natural conversational and intuitive interactions between automobiles, drivers and passengers, and the broader digital world. We possess one of the world’s most popular software platforms for building automotive virtual assistants. Our customers include nearly all major OEMs or their tier 1 suppliers worldwide.
Our solutions power natural conversational and intuitive interactions between automobiles, drivers and passengers, and the broader digital world. We possess one of the leading software platforms for building automotive virtual assistants. Our automotive customers include nearly all major automobile original equipment manufacturers (“OEMs”) or their tier 1 suppliers worldwide.
Provision for Income Taxes Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Provision for income taxes $ 3,468 $ 19,865 $ 112,075 (82.5 )% (82.3 )% Effective income tax rate% (0.6 )% (54.6 )% (56.4 )% Fiscal Year 2024 Compared with Fiscal Year 2023 Our effective income tax rate for fiscal year 2024 was negative 0.6%, compared to negative 54.6% for fiscal year 2023.
Provision for Income Taxes Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 Provision for income taxes $ 9,893 $ 3,468 $ 19,865 185.3 % (82.5) % Effective income tax rate % (112.2) % (0.6) % (54.6) % Fiscal Year 2025 Compared with Fiscal Year 2024 Our effective income tax rate for fiscal year 2025 was negative 112.2%, compared to negative 0.6% for fiscal year 2024.
Fiscal Year 2023 Compared with Fiscal Year 2022 Intangible asset amortization for fiscal year 2023 was $6.3 million, a decrease of $8.2 million, or 56.8%, from $14.5 million for fiscal year 2022. The decrease primarily relates to certain intangible assets having been fully amortized during fiscal year 2023.
Fiscal Year 2024 Compared with Fiscal Year 2023 Intangible asset amortization for fiscal year 2024 was $2.3 million, a decrease of $4.0 million, or 63.2%, from $6.3 million for fiscal year 2023. The decrease primarily relates to certain intangible assets having been fully amortized during fiscal year 2024.
Fiscal Year 2023 Compared with Fiscal Year 2022 Restructuring and other costs, net for fiscal year 2023 were $11.9 million, an increase of $2.9 million, from $9.0 million for fiscal year 2022.
Fiscal Year 2024 Compared with Fiscal Year 2023 Restructuring and other costs, net for fiscal year 2024 were $17.1 million, an increase of $5.2 million, from $11.9 million for fiscal year 2023.
Fiscal Year 2023 Compared with Fiscal Year 2022 Our effective income tax rate for fiscal year 2023 was negative 54.6%, compared to 56.4% for fiscal year 2022.
Fiscal Year 2024 Compared with Fiscal Year 2023 Our effective income tax rate for fiscal year 2024 was negative 0.6% , compared to negative 54.6% for fiscal year 2023.
Going forward, we will continue to assess the levels of fixed license contracts and make adjustments, as necessary. See Note 3 to the accompanying consolidated financial statements for further discussion of our revenue, deferred revenue performance obligations and the timing of revenue recognition. Costs of license revenue primarily consist of third-party royalty expenses for certain external technologies we leverage.
Going forward, we will continue to assess the levels of fixed license contracts and make adjustments, as necessary. See Note 3 to the accompanying consolidated financial statements for further discussion of our revenue, deferred revenue performance obligations and the timing of revenue recognition.
We assess each valuation methodology based upon the relevance and availability of the data at the time we perform the valuation and weight the methodologies appropriately. At September 30, 2022, we performed a quantitative impairment test. We concluded indicators of impairment were present due to the current macroeconomic conditions, including continued declines in our stock price.
We assess each valuation methodology based upon the relevance and availability of the data at the time we perform the valuation and weight the methodologies appropriately. At March 31, 2024, we concluded indicators of impairment were present due to the current macroeconomic conditions, including declines in our stock price.
Revenue is recognized when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.
Other forms of contingent revenue or variable consideration are infrequent. 49 Table of Contents Revenue is recognized when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services.
Based on our expectation to generate positive cash flows and the $130.4 million of cash, cash equivalents and marketable securities as of September 30, 2024, we believe we will be able to meet our liquidity needs over 49 the next 12 months.
Based on our expectations to generate positive cash flows and the $87.5 million of cash, cash equivalents and marketable securities as of September 30, 2025, we believe that we will be able to meet our liquidity needs over the next 12 months.
Other definite-lived assets are amortized over their estimated economic lives using the straight-line method. The remaining useful lives of long-lived assets are re-assessed periodically at the asset group level for any events and circumstances that may change the future cash flows expected to be generated from the long-lived asset or asset group.
The remaining useful lives of long-lived assets are re-assessed periodically at the asset group level for any events and circumstances that may change the future cash flows expected to be generated from the long-lived asset or asset group.
General & Administrative Expenses Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 General and administrative $ 52,468 $ 57,903 $ 42,653 (9.4 )% 35.8 % 46 Fiscal Year 2024 Compared with Fiscal Year 2023 General and administrative expenses for fiscal year 2024 were $52.5 million, a decrease of $5.4 million, or 9.4%, from $57.9 million for fiscal year 2023.
General & Administrative Expenses Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 General and administrative $ 48,770 $ 52,468 $ 57,903 (7.0) % (9.4) % Fiscal Year 2025 Compared with Fiscal Year 2024 General and administrative expenses for fiscal year 2025 were $48.8 million, a decrease of $3.7 million, or 7.0%, from $52.5 million for fiscal year 2024.
Amortization of Intangible Assets Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Cost of revenues $ 103 $ 414 $ 2,984 (75.1 )% (86.1 )% Operating expense 2,203 5,854 11,516 (62.4 )% (49.2 )% Total amortization $ 2,306 $ 6,268 $ 14,500 (63.2 )% (56.8 )% Fiscal Year 2024 Compared with Fiscal Year 2023 Intangible asset amortization for fiscal year 2024 was $2.3 million, a decrease of $4.0 million, or 63.2%, from $6.3 million for fiscal year 2023.
Amortization of Intangible Assets Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 Cost of revenues $ — $ 103 $ 414 (100.0) % (75.1) % Operating expense 1,668 2,203 5,854 (24.3) % (62.4) % Total amortization $ 1,668 $ 2,306 $ 6,268 (27.7) % (63.2) % Fiscal Year 2025 Compared with Fiscal Year 2024 Intangible asset amortization for fiscal year 2025 was $1.7 million, a decrease of $0.6 million, or 27.7%, from $2.3 million for fiscal year 2024.
Revenue is recognized and cash is collected for variable contracts over the license distribution period. The fixed contracts typically provide the customer with a price discount and can include the conversion of a variable contract that was previously included in our estimated future revenues from variable forecasted royalties.
Revenue is recognized and cash is collected for variable contracts over the license distribution period. The fixed contracts typically provide the customer with a price discount and can include the conversion of a variable contract that is already in our variable backlog.
The change in cash flows were primarily due to: • A decrease of $53.9 million from income before non-cash charges; • An increase of $56.8 million due to changes in working capital primarily related to accounts receivable and prepaid expenses and other assets; and • An increase of $6.8 million from changes in deferred revenue.
The change in cash flows were primarily due to: • A decrease of $34.2 million from income before non-cash charges; • A decrease of $6.2 million due to changes in working capital primarily related to prepaid expenses and other assets and accrued expenses and other liabilities; and • An increase of $84.3 million from changes in deferred revenue.
Cash Flows Cash flows from operating, investing and financing activities for the fiscal years ended September 30, 2024, 2023, and 2022, as reflected in the audited Consolidated Statements of Cash Flows included in Item 8 of this Form 10-K, are summarized in the following table (dollars in thousands): Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net cash provided by (used in) operating activities $ 17,196 $ 7,498 $ (2,138 ) 129.4 % (450.7 )% Net cash provided by (used in) investing activities 4,379 5,820 (10,565 ) (24.8 )% (155.1 )% Net cash provided by (used in) financing activities 225 (5,334 ) (19,606 ) (104.2 )% (72.8 )% Effect of foreign currency exchange rates on cash and cash equivalents (1,469 ) (1,677 ) (1,272 ) (12.4 )% 31.8 % Net changes in cash and cash equivalents $ 20,331 $ 6,307 $ (33,581 ) 222.4 % (118.8 )% 53 Net Cash Provided by (Used in) Operating Activities Fiscal Year 2024 Compared with Fiscal Year 2023 Net cash provided by operating activities for fiscal year 2024 was $17.2 million, a net change of $9.7 million, or 129.4%, from net cash provided by operating activities of $7.5 million for fiscal year 2023.
Cash Flows Cash flows from operating, investing and financing activities for the fiscal years ended September 30, 2025, 2024, and 2023, as reflected in the audited Consolidated Statements of Cash Flows included in Item 8 of this Form 10-K, are summarized in the following table (dollars in thousands): Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 Net cash provided by operating activities $ 61,173 $ 17,196 $ 7,498 255.7 % 129.4 % Net cash (used in) provided by investing activities (10,554) 4,379 5,820 (341.0) % (24.8) % Net cash (used in) provided by financing activities (87,001) 225 (5,334) (38767.1) % (104.2) % Effect of foreign currency exchange rates on cash and cash equivalents (1,086) (1,469) (1,677) (26.1) % (12.4) % Net changes in cash and cash equivalents $ (37,468) $ 20,331 $ 6,307 (284.3) % 222.4 % Net Cash Provided By Operating Activities Fiscal Year 2025 Compared with Fiscal Year 2024 Net cash provided by operating activities for fiscal year 2025 was $61.2 million, a net change of $44.0 million, or 255.7%, from net cash provided by operating activities of $17.2 million for fiscal year 2024.
The repurchase of the 2025 Notes and issuance of the 2028 Notes were deemed to not have substantially different terms on the basis that (1) the present value of the cash flows under the terms of the new debt instrument were less than 10% different from the present value of the remaining cash flows under the terms of the original instrument and (2) the fair value of the conversion feature did not change by more than 10% of the carrying value of the 2025 Notes, and therefore, the repurchase of the 2025 Notes was accounted for as a debt modification. 50 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” and together with the 2028 Notes, the “Notes”) that were not repurchased as part of the transaction.
The repurchase of the 2025 Notes and issuance of the 2028 Notes were deemed to not have substantially different terms on the basis that (1) the present value of the cash flows under the terms of the new debt instrument were less than 10% different from the present value of the remaining cash flows under the terms of the original instrument and (2) the fair value of the conversion feature did not change by more than 10% of the carrying value of the 2025 Notes, and therefore, the repurchase of the 2025 Notes was accounted for as a debt modification.
We believe 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).
We that believe we will meet longer-term expected future cash requirements and obligations, through a combination of cash flows from operating activities and available cash balances.
As a percentage of total revenue, professional services revenue decreased by 0.3 percentage points from 25.5% for fiscal year 2022 to 25.2% for fiscal year 2023. 43 Total Cost of Revenues and Gross Profits The following table shows total cost of revenues by product type and the corresponding percentage change (dollars in thousands): Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 License $ 6,060 $ 8,522 $ 2,698 (28.9 )% 215.9 % Connected services 24,787 22,995 22,722 7.8 % 1.2 % Professional services 56,282 63,232 68,764 (11.0 )% (8.0 )% Amortization of intangibles 103 414 2,984 (75.1 )% (86.1 )% Total cost of revenues $ 87,232 $ 95,163 $ 97,168 (8.3 )% (2.1 )% The following table shows total gross profit by product type and the corresponding percentage change (dollars in thousands): Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 License $ 118,686 $ 136,637 $ 155,912 (13.1 )% (12.4 )% Connected services 108,657 52,076 62,849 108.7 % (17.1 )% Professional services 17,032 11,013 14,946 54.7 % (26.3 )% Amortization of intangibles (103 ) (414 ) (2,984 ) (75.1 )% (86.1 )% Total gross profit $ 244,272 $ 199,312 $ 230,723 22.6 % (13.6 )% Fiscal Year 2024 Compared with Fiscal Year 2023 Total cost of revenues for fiscal year 2024 was $87.2 million, a decrease of $8.0 million, or 8.3%, from $95.2 million for fiscal year 2023.
Total Cost of Revenues and Gross Profits The following table shows total cost of revenues by product type and the corresponding percentage change (dollars in thousands): Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 License $ 6,941 $ 6,060 $ 8,522 14.5 % (28.9) % Connected services 21,418 24,787 22,995 (13.6) % 7.8 % Professional services 40,286 56,282 63,232 (28.4) % (11.0) % Amortization of intangibles — 103 414 (100.0) % (75.1) % Total cost of revenues $ 68,645 $ 87,232 $ 95,163 (21.3) % (8.3) % The following table shows total gross profit by product type and the corresponding percentage change (dollars in thousands): Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 License $ 133,684 $ 118,686 $ 136,637 12.6 % (13.1) % Connected services 31,940 108,657 52,076 (70.6) % 108.7 % Professional services 17,512 17,032 11,013 2.8 % 54.7 % Amortization of intangibles — (103) (414) (100.0) % (75.1) % Total gross profit $ 183,136 $ 244,272 $ 199,312 (25.0) % 22.6 % Fiscal Year 2025 Compared with Fiscal Year 2024 Total cost of revenues for fiscal year 2025 was $68.6 million, a decrease of $18.6 million, or 21.3%, from $87.2 million for fiscal year 2024.
We assess the short-term and long-term classification of our convertible debt on each balance sheet date. Whenever the holders have a contractual right to convert, the carrying amount of the convertible debt is reclassified to current liabilities, with the corresponding equity component classified from additional paid-in capital to mezzanine equity, as needed.
We assess the short-term and long-term classification of our convertible debt on each balance sheet date. Whenever the holders have a contractual right to convert, the carrying amount of the convertible debt is reclassified to current liabilities.
As a percentage of total cost of revenue, cost of license revenue decreased by 2.1 percentage points from 9.0% for fiscal year 2023 to 6.9% for fiscal year 2024. License gross profit decreased by $17.9 million, or 13.1%, primarily due to declines in license revenues.
As a percentage of total cost of revenue, cost of license revenue increased by 3.2 percentage points from 6.9% for fiscal year 2024 to 10.1% for fiscal year 2025. License gross profit increased by $15.0 million, or 12.6%, primarily due to increased license revenues.
Connected Services Revenue Connected services revenue for fiscal year 2024 was $133.4 million, an increase of $58.3 million, or 77.8%, from $75.1 million for fiscal year 2023.
Connected Services Revenue Connected services revenue for fiscal year 2024 was $133.4 million, an increase of $58.3 million, or 77.8%, from $75.1 million for fiscal year 2023. This increase was primarily driven by the 2013 Nuance Legacy Contract Termination.
Total Other Expense, Net Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Interest income $ 5,353 $ 4,471 $ 1,007 19.7 % 344.0 % Interest expense (12,553 ) (14,769 ) (14,394 ) (15.0 )% 2.6 % Other income (expense), net 2,526 1,108 (1,019 ) 128.0 % (208.7 )% Total other expense, net $ (4,674 ) $ (9,190 ) $ (14,406 ) (49.1 )% (36.2 )% 48 Fiscal Year 2024 Compared with Fiscal Year 2023 Total other expense, net for fiscal year 2024 was $4.7 million, a change of $4.5 million from $9.2 million of expense for fiscal year 2023.
Total Other Expense, Net Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 Interest income $ 3,853 $ 5,353 $ 4,471 (28.0) % 19.7 % Interest expense (10,223) (12,553) (14,769) (18.6) % (15.0) % Other income (expense), net (160) 2,526 1,108 (106.3) % 128.0 % Total other expense, net $ (6,530) $ (4,674) $ (9,190) 39.7 % (49.1) % Fiscal Year 2025 Compared with Fiscal Year 2024 Total other expense, net for fiscal year 2025 was $6.5 million, a change of $1.9 million from $4.7 million of expense for fiscal year 2024.
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 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.
Sales & Marketing Expenses Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Sales and marketing $ 21,725 $ 27,504 $ 31,098 (21.0 )% (11.6 )% Fiscal Year 2024 Compared with Fiscal Year 2023 Sales and marketing expenses for fiscal year 2024 were $21.7 million, a decrease of $5.8 million, or 21.0%, from $27.5 million for fiscal year 2023.
Fiscal Year 2024 Compared with Fiscal Year 2023 Sales and marketing expenses for fiscal year 2024 were $21.7 million, a decrease of $5.8 million, or 21.0%, from $27.5 million for fiscal year 2023.
The consolidated financial statements include the accounts of the Company, as well as those of its wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation. Key Metrics In evaluating our financial condition and operating performance, we focus on revenue, operating margins, and cash flow from operations.
All significant intercompany transactions and balances are eliminated in consolidation. Key Financial Metrics In evaluating our financial condition and operating performance, we focus on revenue, operating margins, and cash flow from operations.
Cost of License Revenue Cost of license revenue for fiscal year 2024 was $6.1 million, a decrease of $2.4 million, or 28.9%, from $8.5 million for fiscal year 2023. Cost of license revenues decreased primarily due to costs associated with our Cerence Link product.
Cost of license revenues decreased primarily due to costs associated with our Cerence Link product. As a percentage of total cost of revenue, cost of license revenue decreased by 2.1 percentage points from 9.0% for fiscal year 2023 to 6.9% for fiscal year 2024.
Our edge software components are typically sold under a traditional per unit perpetual software license model, in which a per unit fee is charged 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.
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.
Other Components of Operating Expense Year Ended September 30, % Change % Change 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Restructuring and other costs, net $ 17,077 $ 11,917 $ 8,965 43.3 % 32.9 % Goodwill impairment $ 609,172 $ - $ 213,720 100.0 % (100.0 )% 47 Fiscal Year 2024 Compared with Fiscal Year 2023 Fiscal Year 2024 For the fiscal year ended September 30, 2024, we recorded restructuring and other costs, net of $17.1 million, which included a $13.4 million severance charge related to the elimination of personnel, of which $8.1 million related to the Plan, and $2.8 million of consulting costs relating to our transformation initiatives, and $0.8 million of other one-time charges.
Other Components of Operating Expense Year Ended September 30, % Change % Change 2025 2024 2023 2025 vs. 2024 2024 vs. 2023 Restructuring and other costs, net $ 15,418 $ 17,077 $ 11,917 (9.7) % 43.3 % Goodwill impairment $ — $ 609,172 $ — 100.0 % — % Fiscal Year 2025 Compared with Fiscal Year 2024 Fiscal Year 2025 For the fiscal year ended September 30, 2025, we recorded restructuring and other costs, net of $15.4 million, which included a $12.1 million severance charge related to the elimination of personnel, of which $3.0 million related to the stock-based compensation expense for the termination of former senior management employees, and a $3.3 million charge related to our transformation initiatives.
There can be instances where the customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party. For such arrangements, the performance obligation of the license is completed at a point in time once the customer takes possession of the software.
There can be instances where the customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−1 removed4 unchanged
Biggest changeAssuming a 1% increase in interest rates, our interest income on our money-market funds and time deposits classified as cash and cash equivalents would increase by $0.8 million per annum, based on September 30, 2024 reported balances. The borrowings under our Senior Credit Facilities are subject to interest rates based on SOFR.
Biggest changeAssuming a 1% increase in interest rates, our interest income on our money-market funds and time deposits classified as cash and cash equivalents would increase by $0.2 million per annum, based on September 30, 2025 reported balances. 55 Table of Contents
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk. We are exposed to market risk from changes in foreign currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities, and through the use of derivative financial instruments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk from changes in foreign currency exchange rates and interest rates which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities, and through the use of derivative financial instruments.
We believe these foreign currency forward exchange contracts and the offsetting underlying commitments, when taken together, do not create material market risk. Interest Rate Sensitivity We are exposed to interest rate risk as a result of our cash and cash equivalents and indebtedness related to the Senior Credit Facilities.
We believe these foreign currency forward exchange contracts and the offsetting underlying commitments, when taken together, do not create material market risk. Interest Rate Sensitivity We are exposed to interest rate risk as a result of our cash and cash equivalents.
We use foreign currency forward contracts to hedge the foreign currency exchange risk associated with forecasted foreign denominated payments related to our ongoing business. The aggregate notional amount of our outstanding foreign currency forward contracts was $59.1 million at September 30, 2024. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
We use foreign currency forward contracts to hedge the foreign currency exchange risk associated with forecasted foreign denominated payments related to our ongoing business. The aggregate notional amount of our outstanding foreign currency forward contracts was $16.7 million at September 30, 2025. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
A 10% unfavorable exchange rate movement in our portfolio of foreign currency contracts would have resulted in unrealized losses of $5.0 million at September 30, 2024. Such losses would be offset by corresponding gains in the remeasurement of the underlying transactions being hedged.
A 10% unfavorable exchange rate movement in our portfolio of foreign currency contracts would have resulted in unrealized losses of $1.7 million at September 30, 2025. Such losses would be offset by corresponding gains in the remeasurement of the underlying transactions being hedged.
At September 30, 2024, we held approximately $121.5 million of cash and cash equivalents consisting of cash and highly liquid investments, including money-market funds and time deposits.
At September 30, 2025, we held approximately $84.0 million of cash and cash equivalents consisting of cash and highly liquid investments, including money-market funds and time deposits.
Removed
As of September 30, 2024, assuming a 1% increase in interest rates and our Revolving Facility is fully drawn, our interest expense on our Senior Credit Facilities would increase by approximately $0.5 million per annum. 61

Other CRNC 10-K year-over-year comparisons