UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December~~March 31, ~~2025~~2026


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39030

CERENCE INC.

(Exact name of Registrant as specified in its Charter)


Delaware			83-4177087
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

25 Mall Road, Suite 416 Burlington, Massachusetts			01803
(Address of principal executive offices)			(Zip Code)

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

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

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CRNC

The Nasdaq Global Select Market

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~January~~April 30, 2026, the registrant had 45,~~018~~187,~~082~~809 shares of common stock, $0.01 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2025 and 2024	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2026 and 2025	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended December 31, 2025 and 2024	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 31, 2026 and 2025	4
	Condensed Consolidated Balance Sheets as of December 31, 2025 and September 30, 2025	5
	Condensed Consolidated Balance Sheets as of March 31, 2026 and September 30, 2025	5
	Consolidated Statements of Stockholders' Equity for the Three Months Ended December 31, 2025 and 2024	6
	Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended March 31, 2026 and 2025	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2025 and 2024	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2026 and 2025	8
	Notes to Condensed Consolidated Financial Statements	89
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2527
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3744
Item 4.	Controls and Procedures	3845
PART II.	OTHER INFORMATION	3946
Item 1.	Legal Proceedings	3946
Item 1A.	Risk Factors	4047
Item 5.	Other Information	4047
Item 6.	Exhibits	4148
Signatures		4249

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

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

•adverse conditions in the automotive industry or the global economy more generally, including consumer spending and preferences, changes in interest rate levels and credit availability, fuel costs and availability, governmental incentives and regulatory requirements, trade restrictions, customs regulations, tariffs and price or exchange controls, and the ongoing conflicts in Ukraine and the Middle East;

•volatility in the political, legal and regulatory environment in which we operate, including trade, tariffs and other policies implemented by the ~~new~~ administration in the United States or actions taken by other countries in response and automotive production curtailment or delays related thereto or other changes in law and regulation applicable to us;

•our inability to deliver improved financial results from our process optimization and cost-reduction efforts or to control and successfully manage our expenses and cash position;

•our strategy to increase cloud services and ability to successfully introduce new products, applications or services and deploy generative AI and large language models (“LLMs”) and price increases related thereto;

•pricing pressures from our customers;

•our failure to win, renew or implement service contracts or the cancellation or postponement of service contracts after a design win;

•the loss of business from any of our largest customers;

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

•fluctuations in our operating results from period to period, which may be contributed to by the following factors, among others: the volume, timing and fulfillment of customer contracts; changes in customer forecasts; the timing of receipt and accuracy of royalty reports; fluctuating sales by our customers to their end-users; pricing; the mix of revenue from customer contracts; the effect of one-time revenue or expense events, especially as a result of licensing transactions, litigation settlements or judgments; and the level of professional service projects;

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

•our inability to successfully ~~adopt~~develop and drive adoption of new products;

•our inability to expand into non-automotive markets, including, but not limited to, televisions, consumer devices like smart watches, voice-powered kiosks, and industrial applications in the timeframe or levels expected;

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•our inability to recruit, retain and manage transitions of management and other key personnel;

•our dependence on skilled employees and a shortage of critical skills;

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

•cybersecurity and data privacy incidents that damage client relations;

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

•compliance with global privacy and data security requirements which could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally;

•risks and challenges posed by the development and use of artificial intelligence, including, but not limited to, changes to the terms of use or licensing conditions for open source software embedded in our products could require us to suspend distribution, re-engineer or replace affected software, and/or delay patches and releases, which could disrupt customer operations and/or our ability to meet support, uptime, and delivery requirements;

•the evolving regulatory landscape governing artificial intelligence, including, but not limited to, existing and emerging laws, regulations, standards and conformity or compliance obligations related to artificial intelligence, machine learning, generative AI and LLMs;

•economic, political, regulatory, foreign exchange, tariff, trade, and other risks of international operations, including, but not limited to, those related to our business in China;

•unforeseen U.S. and foreign tax liabilities;

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

•impairment of our goodwill and other intangible assets;

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

•adverse developments related to our intellectual property enforcement litigations, the outcome of such litigations, or remedies that could be awarded in connection with such litigations;

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

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

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

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

•disruption from public health events, such as pandemics or disease outbreaks; and

•certain factors discussed elsewhere in this Form 10-Q.

These and other factors are more fully discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 and elsewhere in this Form 10-Q, including Part II, “Item 1A, Risk Factors.” These risks could cause actual results to differ materially from those implied by forward-looking statements in this Form 10-Q. Even if our results of operations, financial condition and liquidity and the development of our business or the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, those results or developments may not be indicative of results or developments in subsequent periods.

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

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

CERENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Revenues:
License	$	8737,~~758~~577	$	2251,~~725~~460	$	125,335	$	74,185
Connected services	1415,~~532~~310		1312,~~707~~648		29,843		26,355
Professional services	1211,~~786~~305		1413,~~464~~902		24,091		28,366
Total revenues	~~115~~64,~~076~~192		5078,~~896~~010		179,269		128,906
Cost of revenues:
License	1,~~323~~606		12,~~782~~432		2,929		4,214
Connected services	45,~~911~~043		64,~~311~~979		9,954		11,290
Professional services	910,~~492~~247		910,~~731~~418		19,739		20,149
Total cost of revenues	1516,~~726~~896		17,~~824~~829		32,622		35,653
Gross profit	9947,~~350~~296		3360,~~072~~181		146,647		93,253
Operating expenses:
Research and development	2430,~~701~~298		2023,~~869~~332		54,999		44,201
Sales and marketing	56,~~557~~519		4,~~766~~930		12,076		9,696
General and administrative	3112,~~987~~796		1211,~~754~~199		44,783		23,953
Amortization of intangible assets	—		~~554~~536		—		1,090
Restructuring and other costs, net	~~7,794~~127		112,~~062~~832		7,921		13,894
Total operating expenses	7049,~~039~~740		5042,~~005~~829		119,779		92,834
Income (loss) from operations	29,311		(16,933)
(Loss) income from operations	(2,444)		17,352		26,868		419
Interest income	~~865~~655		~~1,437~~918		1,520		2,355
Interest expense	(1,~~665~~477)		(32,~~393~~716)		(3,142)		(6,109)
Other income, net	~~1,550~~288		~~272~~499		1,837		771
Income (loss) before income taxes	30,061		(18,617)
(Loss) income before income taxes	(2,978)		16,053		27,083		(2,564)
Provision for income taxes	35,300		5,671
(Benefit from) provision for income taxes	(4,651)		(5,603)		30,649		68
Net loss	$	(5,239)	$	(24,288)
Net income (loss)	$	1,673	$	21,656	$	(3,566)	$	(2,632)
Net loss per share:
Net income (loss) per share:
Basic	$	(0.~~12)~~04	$	(0.~~57)~~50	$	(0.08)	$	(0.06)
Diluted	$	(0.~~12)~~04	$	(0.~~57)~~46	$	(0.08)	$	(0.06)
Weighted-average common shares outstanding:
Basic	4445,~~953~~095		4243,~~897~~223		45,023		43,059
Diluted	4446,~~953~~899		4251,~~897~~530		45,023		43,059

Refer to accompanying Notes to the unaudited condensed consolidated financial statements.

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CERENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(unaudited)

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Net loss	$	(5,239)	$	(24,288)
Net income (loss)	$	1,673	$	21,656	$	(3,566)	$	(2,632)
Other comprehensive loss:
Foreign currency translation adjustments	(~~284~~846)		~~(3,849)~~972		(1,130)		(2,877)
Pension adjustments, net	(1123)		(35)		(34)		(8)
Net unrealized losses on available-for-sale securities	(4)		(21)
Net unrealized (losses) gains on available-for-sale securities	(4)		4		(8)		(17)
Total other comprehensive loss	(299)		(3,873)
Total other comprehensive (loss) income	(873)		971		(1,172)		(2,902)
Comprehensive loss	$	(5,538)	$	(28,161)
Comprehensive income (loss)	$	800	$	22,627	$	(4,738)	$	(5,534)

Refer to accompanying Notes to the unaudited condensed consolidated financial statements.

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CERENCE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

December 31, 2025

September 30, 2025

March 31, 2026

September 30, 2025

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

92108,~~130~~260

84,017

Marketable securities

~~2,544~~—

3,433

Accounts receivable, net of allowances of $68 and $68 as of December 31, 2025 and September 30, 2025, respectively

51,228

58,937

Accounts receivable, net of allowances of $58 and $68 as of March 31, 2026 and September 30, 2025, respectively

63,606

58,937

Deferred costs

4,~~352~~482

4,481

Prepaid expenses and other current assets

3527,~~886~~956

39,889

Total current assets

~~186~~204,~~140~~304

190,757

Property and equipment, net

3633,~~418~~982

35,761

Deferred costs

1413,~~855~~606

15,501

Operating lease right of use assets

1513,~~135~~876

16,762

Goodwill

~~299~~296,~~037~~864

299,003

Deferred tax assets

3237,~~786~~238

54,207

Other assets

17,~~672~~081

18,600

Total assets

~~602~~616,~~043~~951

630,591

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

47,~~859~~519

901

Deferred revenue

5257,~~438~~223

51,865

Short-term operating lease liabilities

4,~~471~~104

4,344

Accrued expenses and other current liabilities

3738,~~471~~480

44,080

Total current liabilities

99107,~~239~~326

101,190

Long-term debt

~~171~~172,~~924~~686

199,693

Deferred revenue, net of current portion

141,~~905~~335

140,021

Long-term operating lease liabilities

1110,~~977~~731

13,083

Other liabilities

26,~~557~~328

25,928

Total liabilities

~~451~~458,~~602~~406

479,915

Commitments and contingencies (Note 12)

Stockholders' Equity:

Common stock, $0.01 par value, 560,000 shares authorized; 45,016 and 43,374 shares issued and outstanding as of December 31, 2025 and September 30, 2025, respectively

450

434

Common stock, $0.01 par value, 560,000 shares authorized; 45,170 and 43,374 shares issued and outstanding as of March 31, 2026 and September 30, 2025, respectively

451

434

Accumulated other comprehensive loss

(2526,~~768~~641)

(25,469)

Additional paid-in capital

1,~~121~~128,~~452~~755

1,116,165

Accumulated deficit

(~~945~~944,~~693~~020)

(940,454)

Total stockholders' equity

~~150~~158,~~441~~545

150,676

Total liabilities and stockholders' equity

~~602~~616,~~043~~951

630,591

Refer to accompanying Notes to the unaudited condensed consolidated financial statements.

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CERENCE INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(unaudited)

Three Months Ended December 31, 2025
Three Months Ended March 31, 2026
	Common Stock
	Shares	Amount		AdditionalPaid-InCapital		Accumulated Deficit		AccumulatedOtherComprehensiveLoss		Total
Balance at September 30, 2025	43,374	$	434	$	1,116,165	$	(940,454)	$	(25,469)	$	150,676
Net loss	—	—		—		(5,239)		—		(5,239)
Other comprehensive loss	—	—		—		—		(299)		(299)
Issuance of common stock	1,645	16		7,483		—		—		7,499
Common stock repurchases for tax withholdings for net settlement of equity awards	(3)	—		(7,541)		—		—		(7,541)
Stock-based compensation	—	—		5,345		—		—		5,345
Balance at December 31, 2025	45,016	$	450	$	1,121,452	$	(945,693)	$	(25,768)	$	150,441
Net income	—	—		—		1,673		—		1,673
Other comprehensive loss	—	—		—		—		(873)		(873)
Issuance of common stock	154	1		561		—		—		562
Common stock repurchases for tax withholdings for net settlement of equity awards	—	—		(13)		—		—		(13)
Stock-based compensation	—	—		6,755		—		—		6,755
Balance at March 31, 2026	45,170	$	451	$	1,128,755	$	(944,020)	$	(26,641)	$	158,545

Three Months Ended December 31, 2024
Three Months Ended March 31, 2025
	Common Stock
	Shares	Amount		AdditionalPaid-InCapital		Accumulated Deficit		AccumulatedOtherComprehensiveLoss		Total
Balance at September 30, 2024	41,924	$	419	$	1,088,330	$	(921,740)	$	(25,912)	$	141,097
Net loss	—	—		—		(24,288)		—		(24,288)
Other comprehensive loss	—	—		—		—		(3,873)		(3,873)
Issuance of common stock	1,066	11		1,353		—		—		1,364
Common stock repurchases for tax withholdings for net settlement of equity awards	(2)	—		(1,369)		—		—		(1,369)
Stock-based compensation	—	—		7,771		—		—		7,771
Balance at December 31, 2024	42,988	$	430	$	1,096,085	$	(946,028)	$	(29,785)	$	120,702
Net income	—	—		—		21,656		—		21,656
Other comprehensive income	—	—		—		—		971		971
Issuance of common stock	265	3		808		—		—		811
Common stock repurchases for tax withholdings for net settlement of equity awards	—	—		(802)		—		—		(802)
Stock-based compensation	—	—		5,931		—		—		5,931
Balance at March 31, 2025	43,253	$	433	$	1,102,022	$	(924,372)	$	(28,814)	$	149,269


Six Months Ended March 31, 2026
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
Balance at September 30, 2025	43,374	434		1,116,165		(940,454)		(25,469)		150,676
Net loss	—	—		—		(3,566)		—		(3,566)
Other comprehensive loss	—	—		—		—		(1,172)		(1,172)
Issuance of common stock	1,799	17		8,044		—		—		8,061
Common stock repurchases for tax withholdings for net settlement of equity awards	(3)	—		(7,554)		—		—		(7,554)
Stock-based compensation	—	—		12,100		—		—		12,100
Balance at March 31, 2026	45,170	$	451	$	1,128,755	$	(944,020)	$	(26,641)	$	158,545

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Six Months Ended March 31, 2025
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
Balance at September 30, 2024	41,924	$	419	$	1,088,330	$	(921,740)	$	(25,912)	$	141,097
Net loss	—	—		—		(2,632)		—		(2,632)
Other comprehensive loss	—	—		—		—		(2,902)		(2,902)
Issuance of common stock	1,331	14		2,161		—		—		2,175
Common stock repurchases for tax withholdings for net settlement of equity awards	(2)	—		(2,171)		—		—		(2,171)
Stock-based compensation	—	—		13,702		—		—		13,702
Balance at March 31, 2025	43,253	$	433	$	1,102,022	$	(924,372)	$	(28,814)	$	149,269

Refer to accompanying Notes to the unaudited condensed consolidated financial statements.

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CERENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Three Months Ended December 31,

Six Months Ended March 31,

2025

2024

2026

2025

Cash flows from operating activities:

Net loss

(53,~~239~~566)

(242,~~288~~632)

Adjustments to reconcile net loss to net cash provided by operations:

Depreciation and amortization

24,~~184~~975

25,~~445~~793

Provision for credit loss reserve

—(10)

~~207~~208

Stock-based compensation

512,~~345~~100

713,~~771~~702

Non-cash interest expense

~~881~~1,644

13,~~861~~348

Gain on debt extinguishment

(1,051)

(327)

Deferred tax provision

21,809

4,927

Deferred tax provision (benefit)

17,160

(4,271)

Unrealized foreign currency transaction losses

~~127~~302

~~1,997~~345

Other, net

~~686~~598

(33)

Changes in operating assets and liabilities:

Accounts receivable

5(9,~~986~~149)

(8,~~800~~029)

Prepaid expenses and other assets

616,~~086~~887

2725,~~201~~250

Deferred costs

~~735~~1,544

12,~~859~~041

Accounts payable

36,~~747~~489

32,~~814~~492

Accrued expenses and other liabilities

(65,~~021~~456)

(3323,~~087~~532)

Deferred revenue

29,~~619~~534

610,~~107~~365

Net cash provided by operating activities

3752,~~894~~001

924,~~254~~720

Cash flows from investing activities:

Capital expenditures

(2,~~249~~731)

(13,~~360~~703)

Sale and maturities of marketable securities

~~886~~3,425

23,493

Other investing activities

(~~426~~816)

(~~374~~716)

Net cash (used in) provided by investing activities

(1,789)

759

Net cash used in investing activities

(122)

(926)

Cash flows from financing activities:

Principal payments of long-term debt

(27,600)

—

Principal payments of short-term debt

—

(26,964)

Common stock repurchases for tax withholdings for net settlement of equity awards

(7,~~541~~554)

(12,~~369~~171)

Principal payment of lease liabilities arising from a finance lease

(12)

(~~115~~229)

Proceeds from the issuance of common stock

78,~~499~~061

12,~~364~~175

Net cash used in financing activities

(27,~~654~~105)

(27,~~084~~189)

Effects of exchange rate changes on cash and cash equivalents

(~~338~~531)

(~~311~~722)

Net change in cash and cash equivalents

824,~~113~~243

(174,~~382~~117)

Cash and cash equivalents at beginning of period

84,017

121,485

Cash and cash equivalents at end of period

92108,~~130~~260

~~104~~117,~~103~~368

Supplemental disclosure of cash flow information:

Cash paid for income taxes

89,~~592~~333

93,105

Cash paid for interest

1,575

3,077

Supplemental cash flow disclosures from non-cash investing activities:

Fixed asset additions included in accounts payable and other current liabilities

~~233~~78

—

Refer to accompanying Notes to the unaudited condensed consolidated financial statements.

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CERENCE INC.

Notes to Condensed Consolidated Financial Statements

Note 1. Business Overview

Business

Cerence Inc. (referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “us,” “ourselves,” the “Company” or “Cerence”) is a global, premier provider of AI-powered assistants and innovations for connected and autonomous vehicles. Our customers include nearly all major automobile original equipment manufacturers (“OEMs”), or their tier 1 suppliers worldwide. 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 automobile brands and end users. 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.

Note 2. Significant Accounting Policies

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, as well as those of our wholly owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete financial statements.

The condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three and six months ended ~~December~~March 31, ~~2025~~2026 are not necessarily indicative of the results to be expected for any other interim period or for the fiscal year ending September 30, 2026. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

Use of Estimates

The financial statements are prepared in accordance with GAAP, which requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions can affect the reported amounts in the financial statements and the footnotes thereto. Actual results could differ materially from these estimates.

On an ongoing basis, we evaluate our estimates, assumptions and judgments. Significant estimates inherent to the preparation of financial statements include: revenue recognition; allowance for credit losses; accounting for deferred costs; accounting for internally developed software; the valuation of goodwill and intangible assets; accounting for stock-based compensation; accounting for income taxes; accounting for leases; and loss contingencies. We base our estimates on historical experience, market participant fair value considerations, projected future cash flows, and various other factors that are believed to be reasonable under the circumstances. Actual amounts could differ significantly from these estimates.

~~Concentration~~Stock-Based ~~of Risk~~Compensation

~~Financial~~We ~~instruments~~grant ~~that~~equity ~~potentially~~awards ~~subject us~~ to ~~significant~~certain ~~concentrations~~employees ofwhich ~~credit~~include ~~risk~~restricted ~~primarily~~stock ~~consist~~unit ofawards ~~trade~~in ~~accounts~~accordance ~~receivable.~~with Weprovisions ~~perform ongoing credit evaluations~~ of ~~our customers’ financial condition and limit~~ the ~~amount~~Cerence of2019 ~~credit~~Equity ~~extended~~Incentive ~~when~~Plan ~~deemed~~(“Equity ~~appropriate.~~Incentive ~~One customer accounted for 12~~Plan”).~~0% of our Accounts receivable, net balance at December 31, 2025. One customer accounted for 11.3% of our Accounts receivable, net balance at September 30, 2025.~~

8We account for stock-based compensation through recognition of the fair value of the stock-based compensation as a charge against earnings. The fair value for time-based restricted stock units and performance-based restricted stock units is based on the closing share price of our common stock on the date of grant. We recognize stock-based compensation as an expense on a straight-line basis, over the requisite service period. We account for forfeitures as they occur, rather than applying an estimated forfeiture rate.

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Certain of our performance-based restricted stock unit awards contain performance conditions that are contingent upon the achievement of strategic milestones within a specified time frame, in addition to a service-based vesting condition. The number of performance-based restricted stock units that ultimately vest varies based on the level of achievement of the performance condition. Due to the nature of these performance conditions, which are subject to significant external contingencies and uncertainties, the performance condition generally cannot be deemed probable until the milestone is substantially assured of completion. If and when the performance condition is deemed probable, a cumulative catch-up of compensation cost is recognized in the period of such determination, with remaining unrecognized cost recognized over any remaining requisite service period, based on the grant-date fair value at the probable achievement level. If the performance condition is not met within the specified time frame, the awards expire unvested and any previously recognized compensation cost is reversed. Management reassesses the probability of achievement at each reporting date.

Concentration of Risk

Financial instruments that potentially subject us to significant concentrations of credit risk primarily consist of trade accounts receivable. We perform ongoing credit evaluations of our customers’ financial condition and limit the amount of credit extended when deemed appropriate. Two customers accounted for 13.7% and 12.9% of our Accounts receivable, net balance at March 31, 2026. One customer accounted for 11.3% of our Accounts receivable, net balance at September 30, 2025.

Allowance for Credit Losses

We are exposed to credit losses primarily through our sales of software licenses and services to customers. We determine credit ratings for each customer in our portfolio based upon public information and information obtained directly from our customers. A credit limit for each customer is established and in certain cases we may require collateral or prepayment to mitigate credit risk. Our expected loss methodology is developed using historical collection experience, current customer credit information, current and future economic and market conditions and a review of the current status of the customer's account balances. We monitor our ongoing credit exposure through reviews of customer balances against contract terms and due dates, current economic conditions, and dispute resolution. Estimated credit losses are written off in the period in which the financial asset is no longer collectible.

The change in the allowance for credit losses for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 is as follows (dollars in thousands):

	Allowance for Credit Losses
Balance as of September 30, 2025	$	68
Credit loss provision	—
Write-offs, net of recoveries	—(9)
Effect of foreign currency translation	—(1)
Balance as of December 31, 2025	$	68
Balance as of March 31, 2026	$	58

Inventory

Inventory, consisting primarily of finished goods related to our Cerence Link product, is accounted for using the first in, first out method, and is valued at the lower of cost and net realizable value. Inventory is included within Prepaid expenses and other current assets. As of ~~December~~March 31, ~~2025~~2026 and September 30, 2025, inventory was $1.20 million and $1.1 million, respectively.

Recently Adopted Accounting Standards

In November 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires enhanced disclosures of segment information on an annual and interim basis. We adopted this standard during the fiscal year ended September 30, 2025. Refer to Note 2, (i) Segment information, in our Annual Report on Form 10-K for additional segment reporting information.

Issued Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid and is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued. The amendments should be applied on a prospective basis although retrospective application is permitted. We are currently in the process of evaluating the effects of this pronouncement on our condensed consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”), which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted, and may be applied either prospectively or retrospectively. We are currently evaluating this pronouncement to determine its impact on our disclosures.10

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~~they~~income ~~develop~~tax ~~reasonable~~rate reconciliation and ~~supportable~~income ~~forecasts~~taxes aspaid ~~part~~and ofis ~~estimating~~effective ~~expected~~for ~~credit~~fiscal ~~losses.~~years ~~This~~beginning ~~removes~~after ~~the~~December ~~requirement~~15, ~~to rely on macroeconomic forecasts~~2024. ~~Additionally,~~Early ifadoption ~~selected,~~is anpermitted ~~accounting~~for ~~policy~~annual ~~election~~financial ~~permits~~statements ~~eligible~~that ~~entities~~have tonot ~~consider~~yet ~~post-balance~~been ~~sheet collection activity when estimating expected credit losses~~issued. ~~This~~The ~~will~~amendments should be ~~effective~~applied ~~for~~on ~~fiscal~~a ~~years~~prospective ~~starting~~basis ~~after~~although ~~December~~retrospective ~~15,~~application ~~2025,~~is ~~with~~permitted. ~~early~~We ~~adoption~~are ~~permissible~~currently onin athe ~~prospective~~process ~~basis.~~of Weevaluating ~~are~~the ~~currently~~effects ~~evaluating~~of this pronouncement toon ~~determine~~our ~~its~~condensed ~~impact~~consolidated onfinancial ~~our~~statements and disclosures.

In July 2025, the FASB issued ASU 2025-05, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (ASU 2025-05)", which introduces targeted relief to reduce complexity and cost when estimating expected credit losses for current accounts receivable and current contract assets arising from revenue transactions accounted for under Topic 606. Currently, guidance requires entities to incorporate macroeconomic forecasts in determining expected credit loss estimates. The current provision provides relief for these aforementioned credit losses by utilizing a practical expedient available to all entities, allowing an entity to assume that current conditions as of the balance sheet date remain unchanged over the remaining life of an asset; assuming they develop reasonable and supportable forecasts as part of estimating expected credit losses. This removes the requirement to rely on macroeconomic forecasts. Additionally, if selected, an accounting policy election permits eligible entities to consider post-balance sheet collection activity when estimating expected credit losses. This will be effective for fiscal years starting after December 15, 2025, with early adoption permissible on a prospective basis. We are currently evaluating this pronouncement to determine its impact on our disclosures.

In September 2025, the FASB issued ASU 2025-06, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software", which removes all references to prescriptive and sequential software development stages. It will now require entities to start capitalizing software cost when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used to perform the function intended. The standard also specifies that the disclosures in "Subtopic 360-10, Property Plant, and Equipment" are required for all capitalized internal-use software costs. This will be effective for fiscal years starting after December 15, 2027, with early adoption permissible on a prospective basis. We are currently evaluating this pronouncement to determine its impact on our disclosures.

Note 3. Revenue Recognition

We primarily derive revenue from the following sources: (1) royalty-based software or intellectual property “IP” license arrangements, (2) connected services, and (3) professional services. Revenue is reported net of applicable sales and use tax, value-added tax and other transaction taxes imposed on the related transaction including mandatory government charges that are passed through to our customers. We account for a contract when both parties have approved and committed to the contract, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The timing and amount of revenue recognized from IP or patent licensing relating to technology developed and commercialized in the ordinary course of our business depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. These agreements could include, without limitation, performance obligations related to consideration for past patent royalties, patent licensing royalties on covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and access to a portfolio of technology at a point in time along with promises to provide any technology updates to the portfolio during the term on a when-and-if basis. Such licenses could be fixed and non-refundable in nature and/or variable over time. Certain components of revenue recognized with respect to IP license agreements may require the use of estimates, which may be significant. Related revenue is recognized at the point in time when the software and technology is made available to the customer and control is transferred and, if applicable, according to usage. Revenues relating to IP licensing accounted for $49.5 million, or 4327.06% of total revenues for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026. As a component of License revenues, IP licensing revenues represented 5639.45% of License revenues for the six months ended March 31, 2026. There were no revenues relating to IP licensing during the three months ended ~~December~~March 31, 2026. Additionally, there were no revenues relating to IP licensing during the three and six months ended March 31, 2025.

~~(a)Disaggregated Revenue~~11

Revenues, classified by the major geographic region in which our customers are located, for the three months ended December 31, 2025 and 2024 (dollars in thousands):

	Three Months Ended December 31,
	2025		2024
Revenues:
United States	$	8,616	$	9,448
Other Americas	338		197
Germany	19,908		19,409
Other Europe, Middle East and Africa	7,949		5,543
Japan	13,052		5,957
Other Asia-Pacific	65,213		10,342
Total revenues	$	115,076	$	50,896

For the three months ended December 31, 2025, revenues within Korea were $57.3 million, which were more than 10% of total revenues. For the three months ended December 31, 2025, revenues within China were $5.5 million, which were less than 10% of total revenues.

Revenues relating to one customer accounted for $49.5 million, or 43.0%, of revenue for the three months ended December 31, 2025.

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~~Revenues~~(a)Disaggregated ~~relating to three customers accounted for $7.4 million, or 14.5%, $6.2 million, or 12.2%, and $6.0 million, or 11.8%, of revenues for the three months ended December 31, 2024.~~Revenue

Revenues, classified by the major geographic region in which our customers are located, for the three and six months ended March 31, 2026 and 2025 (dollars in thousands):


	Three Months Ended March 31,				Six Months Ended March 31,
	2026		2025		2026		2025
Revenues:
United States	$	9,194	$	9,348	$	17,810	$	18,796
Other Americas	262		450		600		647
Germany	23,941		19,698		43,850		39,107
Other Europe, Middle East and Africa	7,276		5,610		15,225		11,153
Japan	5,425		18,501		18,477		24,458
Other Asia-Pacific	18,094		24,403		83,307		34,745
Total revenues	$	64,192	$	78,010	$	179,269	$	128,906

For the three and six months ended March 31, 2026, revenues within Korea were $8.9 million and $66.3 million, respectively, which were more than 10% of total revenues. For the three and six months ended March 31, 2026, revenues within China were $6.4 million and $12.0 million, respectively, which were less than 10% of total revenues.

Revenues relating to four customers accounted for $7.8 million, or 12.1%, $7.3 million, or 11.3%, $7.2 million, or 11.2%, and $6.5 million, or 10.2%, of revenues for the three months ended March 31, 2026. Revenues relating to one customer accounted for $49.5 million, or 27.6%, of revenues for the six months ended March 31, 2026.

Revenues relating to two customers accounted for $13.4 million, or 17.1%, and $8.1 million, or 10.4%, of revenues for the three months ended March 31, 2025. Revenues relating to two customers accounted for $14.6 million, or 11.3%, and $14.1 million, or 10.9%, of revenues for the six months ended March 31, 2025.

(b)Contract Acquisition Costs

We are required to capitalize certain contract acquisition costs. The capitalized costs primarily relate to paid commissions. The current and noncurrent portions of contract acquisition costs are included in Prepaid expenses and other current assets and in Other assets, respectively. As of ~~December~~March 31, ~~2025~~2026 and September 30, 2025, we had $4.85 million and $5.3 million of contract acquisition costs, respectively. We had amortization expense of $0.5 million and $0.6 million related to these costs during the three months ended ~~December~~March 31, 2026 and 2025, respectively, and ~~2024~~amortization expense of $0.9 million and $1.2 million related to these costs during the six months ended March 31, 2026 and 2025, respectively. There was no impairment related to contract acquisition costs.

(c)Capitalized Contract Costs

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. The current and noncurrent portions of capitalized contract fulfillment costs are presented as Deferred costs.

We had amortization expense of $1.0 million and $21.41 million related to these costs during the three months ended ~~December~~March 31, 2026 and 2025, respectively, and ~~2024~~$1.9 million and $3.5 million related to these costs during the six months ended March 31, 2026 and 2025, respectively. There was no impairment related to contract costs capitalized.

(d)Trade Accounts Receivable and Contract Balances

We classify our right to consideration in exchange for deliverables as either a receivable or a contract asset. A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due). We present such receivables in Accounts receivable, net at their net estimated realizable value. Accounts receivable, net as of ~~December~~March 31, ~~2025~~2026 and September 30, 2025 was $5163.26 million and $58.9 million, respectively. We maintain an allowance for credit losses to provide for the estimated amount of receivables and contract assets 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.

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Contract assets include unbilled amounts from long-term contracts when revenue recognized exceeds the amount billed to the customer, and right to payment is not solely subject to the passage of time. The current and noncurrent portions of contract assets are included in Prepaid expenses and other current assets and Other assets, respectively. The table below shows significant changes in contract assets (dollars in thousands):

	Contract assets
Balance as of September 30, 2025	$	13,978
Revenues recognized but not billed	715,~~555~~173
Amounts reclassified to Accounts receivable, net	(919,~~723~~610)
Effect of foreign currency translation	(~~291~~429)
Balance as of December 31, 2025	$	11,519
Balance as of March 31, 2026	$	9,112

Our contract liabilities, which we present as deferred revenue, consist of advance payments and billings in excess of revenues recognized. We classify deferred revenue as current or noncurrent based on when we expect to recognize the revenues. The table below shows significant changes in deferred revenue (dollars in thousands):

	Deferred revenue
Balance as of September 30, 2025	$	191,886
Amounts billed but not recognized	1834,~~000~~100
Revenue recognized	(2043,~~595~~664)
Effect of foreign currency translation	~~138~~2,892
Balance as of December 31, 2025	$	194,343
Balance as of March 31, 2026	$	198,558

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(e) Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at ~~December~~March 31, ~~2025~~2026 (dollars in thousands):

Within OneYear

Two to FiveYears

GreaterthanFive Years

Total

Total revenue

8285,~~898~~145

~~113~~116,~~792~~881

3433,~~599~~616

~~231~~235,~~288~~642

The table above includes fixed remaining performance obligations and does not include contingent usage-based activities, such as royalties and usage-based connected services.

Note 4. Earnings Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of restricted stock units is reflected in diluted net income (loss) per share by applying the treasury stock method.

The dilutive effect of the Notes (as defined in Note 14) is reflected in net income (loss) per share by application of the “if-converted” method. The “if-converted” method is only assumed in periods where such application would be dilutive. In applying the “if-converted” method for diluted net income (loss) per share, we would assume conversion of the Notes at the respective conversion ratio as further described in Note 14. Assumed converted shares of our common stock are weighted for the period the Notes were outstanding.

~~The following table presents the reconciliation of the numerator and denominator for calculating net loss per share:~~13

	Three Months Ended December 31,
in thousands, except per share data	2025		2024
Numerator:
Net loss	$	(5,239)	$	(24,288)
Denominator:
Weighted average common shares outstanding - basic and diluted	44,953		42,897
Net loss per common share:
Basic	$	(0.12)	$	(0.57)
Diluted	$	(0.12)	$	(0.57)

We exclude weighted-average potential shares from the calculations of diluted net loss per share during the applicable periods when their inclusion is anti-dilutive. The following table sets forth potential shares that were considered anti-dilutive during the three months ended December 31, 2025 and 2024.

	Three Months Ended December 31,
in thousands	2025	2024
Restricted stock unit awards	1,587	—
Contingently issuable stock awards	1,215	121
Conversion option of our Notes	5,141	7,431

Note 5. Fair Value Measurements

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~~and~~The ~~liabilities~~following ~~recorded~~table atpresents ~~fair~~the ~~value,~~reconciliation weof ~~consider~~ the ~~principal~~numerator ~~or most advantageous market in which we would transact~~ and ~~consider~~denominator ~~assumptions~~for ~~that~~calculating ~~market~~net ~~participants~~income ~~would~~(loss) ~~use~~per ~~in pricing the asset or liability.~~share:


	Three Months Ended March 31,				Six Months Ended March 31,
in thousands, except per share data	2026		2025		2026		2025
Numerator:
Net income (loss)	$	1,673	$	21,656	$	(3,566)	$	(2,632)
Interest on the Notes, net of tax	—		2,093		—		—
Net income (loss) - diluted	$	1,673	$	23,749	$	(3,566)	$	(2,632)

Denominator:
Weighted average common shares outstanding - basic	45,095		43,223		45,023		43,059
Dilutive effect of restricted stock awards	531		1,481		—		—
Dilutive effect of contingently issuable stock awards	1,273		62		—		—
Dilutive effect of the Notes	—		6,764		—		—
Weighted average common shares outstanding - diluted	46,899		51,530		45,023		43,059

Net income (loss) per common share:
Basic	$	0.04	$	0.50	$	(0.08)	$	(0.06)
Diluted	$	0.04	$	0.46	$	(0.08)	$	(0.06)


	Three Months Ended March 31,		Six Months Ended March 31,
in thousands	2026	2025	2026	2025
Restricted stock unit awards	—	—	1,059	—
Contingently issuable stock awards	—	—	1,199	92
Conversion option of our Notes	4,420	—	4,781	7,099

Note 5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques must maximize the use of observable inputs and minimize the use of unobservable inputs. When determining fair value measurements for assets and liabilities recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use in pricing the asset or liability.

The classification of a financial asset or liability within the hierarchy is based upon the lowest level input that is significant to the fair value measurement as of the measurement date as follows:

•Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

•Level 2 - Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the assets or liabilities.

•Level 3 - Unobservable inputs that are supported by little or no market activity.

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The following table presents information about our financial assets that are measured at fair value and indicates the fair value hierarchy of the valuation inputs used (dollars in thousands) as of:

	December 31, 2025
	March 31, 2026
	Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 1:
Money market funds, $27,365 at cost (a)	$	27,365	$	27,365	$	—
Money market funds, $30,224 at cost (a)	$	30,224	$	30,224	$	—
Level I Government Securities, $1,015 at cost (b)	1,016		—		1,016
Corporate bonds, $1,525 at cost (b)	1,528		—		1,528
Level 2:
Time deposits, $4,450 at cost (a)	4,450		4,450		—
Time deposits, $4,790 at cost (a)	4,790		4,790		—
Convertible debt, $0 at cost (c)	779		—		—
Convertible debt, $— at cost (c)	788		—		—
Total assets	$	35,~~138~~802	$	3135,~~815~~014	$	~~2,544~~—

	September 30, 2025
	Fair Value		Cash and Cash Equivalents		Marketable Securities
Level 1:
Money market funds, $20,898 at cost (a)	$	20,898	$	20,898	$	—
Level I Government Securities, $1,003 at cost (b)	1,006		—		1,006
Corporate bonds, $2,017 at cost (b)	2,022		—		2,022
Level 2:
Level II Government Securities, $405 at cost (b)	405		—		405
Time deposits, $3,040 at cost (a)	3,040		3,040		—
Convertible debt, $0 at cost (c)	770		—		—
Convertible debt, $— at cost (c)	770		—		—
Total assets	$	28,141	$	23,938	$	3,433

(a)Money market funds and other highly liquid investments with original maturities of 90 days or less are included within Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

(b)Government securities, commercial paper and corporate bonds with original maturities greater than 90 days are included within Marketable securities in the Condensed Consolidated Balance Sheets and classified as current or noncurrent based upon whether the maturity of the financial asset is less than or greater than 12 months.

(c)Debt securities within the Condensed Consolidated Balance Sheets are classified as current or noncurrent based upon whether the maturity of the financial asset is less than or greater than 12 months.

During the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025, unrealized gains related to our marketable securities were immaterial within Accumulated other comprehensive loss.

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The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, and accounts payable, approximate fair value due to their short-term maturities and are excluded from the fair value tables above.

Derivative financial instruments are recognized at fair value using quoted forward rates and prices and classified within Level 2 of the fair value hierarchy. See Note 6 – Derivative Financial Instruments for additional details.

Long-term debt

The estimated fair value of our Long-term debt is determined by Level 1 inputs and is based on observable market data including prices for similar instruments. As of ~~December~~March 31, ~~2025~~2026 and September 30, 2025, the estimated fair value of our Notes was $~~165~~156.68 million and $174.2 million, respectively. The Notes are recorded at face value less unamortized discount and transaction costs on our Condensed Consolidated Balance Sheets.

Equity securities

We have a non-controlling equity ~~investments~~investment in a privately held company. We evaluated the equity investment under the voting model and concluded consolidation was not applicable. We accounted for the investment by electing the measurement alternative for investments without readily determinable fair values. The non-marketable equity investment is carried at cost less any impairment, plus or minus adjustments resulting from observable price changes in ~~orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the Condensed Consolidated Statements of Operations.~~

Investments without readily determinable fair values were $2.6 million as of December 31, 2025 and September 30, 2025. The investments are included within Other assets on the Condensed Consolidated Balance Sheets. No impairment was recorded for the three months ended December 31, 2025 and 2024.15

Note 6. Derivative Financial Instruments

We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates related to third-party vendor and intercompany payments for goods and services within our non-U.S. subsidiaries. We use foreign exchange forward contracts that are not designated as hedges to manage currency risk. The contracts can have maturities up to three years. As of December 31, 2025 and September 30, 2025, the total notional amount of forward contracts was $9.5 million and $16.7 million, respectively. As of December 31, 2025 and September 30, 2025, the weighted-average remaining maturity of these instruments was approximately 5.2 and 6.0 months, respectively.

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative instruments as of December 31, 2025 and September 30, 2025 (dollars in thousands):

		Fair Value
Derivatives not designated as hedges	Classification	December 31, 2025		September 30, 2025
Foreign currency forward contracts	Prepaid expenses and other current assets	$	—	$	16
Foreign currency forward contracts	Accrued expenses and other current liabilities	477		974
Foreign currency forward contracts	Other liabilities	66		97

The following tables display a summary of the loss related to foreign currency forward contracts for the three months ended December 31, 2025 and 2024 (dollars in thousands):

		Loss recognized in earnings
		Three Months Ended December 31,
Derivatives not designated as hedges	Classification	2025		2024
Foreign currency forward contracts	Other income, net	$	(354)	$	(104)

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orderly transactions for the identical or a similar investment of the same issuer, which is recorded within the Condensed Consolidated Statements of Operations.

Investments without readily determinable fair values were $2.6 million as of March 31, 2026 and September 30, 2025. The investments are included within Other assets on the Condensed Consolidated Balance Sheets. No impairment was recorded for the three and six months ended March 31, 2026 and 2025.

Note 6. Derivative Financial Instruments

We operate internationally and, in the normal course of business, are exposed to fluctuations in foreign currency exchange rates related to third-party vendor and intercompany payments for goods and services within our non-U.S. subsidiaries. We use foreign exchange forward contracts that are not designated as hedges to manage currency risk. The contracts can have maturities up to three years. As of March 31, 2026 and September 30, 2025, the total notional amount of forward contracts was $2.7 million and $16.7 million, respectively. As of March 31, 2026 and September 30, 2025, the weighted-average remaining maturity of these instruments was approximately 7.5 and 6.0 months, respectively.

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheet for derivative instruments as of March 31, 2026 and September 30, 2025 (dollars in thousands):


		Fair Value
Derivatives not designated as hedges	Classification	March 31, 2026		September 30, 2025
Foreign currency forward contracts	Prepaid expenses and other current assets	$	—	$	16

Foreign currency forward contracts	Accrued expenses and other current liabilities	294		974
Foreign currency forward contracts	Other liabilities	—		97

The following tables display a summary of the loss related to foreign currency forward contracts for the three and six months ended March 31, 2026 and 2025 (dollars in thousands):


		Loss recognized in earnings
		Three Months Ended March 31,				Six Months Ended March 31,
Derivatives not designated as hedges	Classification	2026		2025		2026		2025
Foreign currency forward contracts	Other income, net	$	(137)	$	(888)	$	(491)	$	(992)

Note 7. Goodwill and Other Intangible Assets

(a) Goodwill

We consider our Chief Executive Officer (“CEO”) to be our CODM. Our CEO approves all major decisions, including reorganizations and new business initiatives. Our CODM reviews routine consolidated operating information and makes decisions on the allocation of resources at this level, as such, we have concluded that we have one operating segment.

All goodwill is assigned to one or more reporting units. A reporting unit represents an operating segment or a component within an operating segment for which discrete financial information is available and is regularly reviewed by segment management for performance assessment and resource allocation. Upon consideration of our components, we have concluded that we have one reporting unit.

The changes in the carrying amount of goodwill for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 are as follows (dollars in thousands):

	Total
Balance as of September 30, 2025	$	299,003
Effect of foreign currency translation	34(2,139)
Balance as of December 31, 2025	$	299,037
Balance as of March 31, 2026	$	296,864

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(b) Intangible Assets, Net

As of September 30, 2025, our intangible assets were fully amortized. The following table summarizes the gross carrying amounts and accumulated amortization of intangible assets by major class as of September 30, 2025 (dollars in thousands):


	September 30, 2025
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted Average Remaining Life (Years)
Customer relationships	$	110,236	$	(110,236)	$	—	0.0
Technology and patents	90,502		(90,502)		—		0.0
Total	$	200,738	$	(200,738)	$	—

Amortization expense related to intangible assets in the aggregate was $0.65 million and $1.1 million for the three and six months ended ~~December~~March 31, ~~2024~~2025, respectively.

Note 8. Leases

We have entered into a number of facility and equipment leases which qualify as operating leases under GAAP. We also have a limited number of equipment leases that qualify as finance leases.

The following table presents certain information related to lease term and incremental borrowing rates for leases as of ~~December~~March 31, ~~2025~~2026 and September 30, 2025:

	December 31, 2025		September 30, 2025
	March 31, 2026		September 30, 2025
Weighted-average remaining lease term (in months):
Operating leases	4349.04		46.9
Finance leases	2.90		3.4
Weighted-average discount rate:
Operating leases	7.1	%	7.2	%
Finance leases	4.4	%	4.4	%

The following table presents lease expense for the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 (dollars in thousands):


	Three Months Ended March 31,				Six Months Ended March 31,
	2026		2025		2026		2025
Finance lease costs:
Amortization of right of use asset	$	22	$	96	$	49	$	192
Interest on lease liability	—		2		—		5
Operating lease cost	1,364		1,375		3,308		2,785
Variable lease cost	640		463		708		918
Sublease income	(64)		(54)		(118)		(97)
Total lease cost	$	1,962	$	1,882	$	3,947	$	3,803

The following table presents cash payments related to operating and finance leases for the three and six months ended March 31, 2026 and 2025 (dollars in thousands):

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	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Finance lease costs:
Cash payments related to:
Amortization of right of use asset	$	27	$	96
Operating leases	$	1,461	$	1,369	$	2,695	$	2,709
Interest on lease liability	—		3
Finance leases	—		104		12		229
Operating lease cost	1,983		1,410
Variable lease cost	28		455
Sublease income	(53)		(43)
Total lease cost	$	1,985	$	1,921

For the three months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025, ~~cash~~right ~~payments~~of ~~related~~use toassets ~~operating~~obtained ~~leases~~in exchange for lease obligations were less than $10.31 million and $15.39 million, respectively~~. For the three months ended December 31~~, ~~2025~~ and ~~2024, cash payments related to finance leases were~~ less than $0.1 million and $07.19 million, ~~respectively,~~for ~~of which an immaterial amount related to~~ the ~~interest~~six ~~portion of the lease liability. For the three~~ months ended ~~December~~March 31, ~~2025~~2026 and ~~December 31~~2025, ~~2024, right of use assets obtained in exchange for lease obligations were none and $2.0 million,~~ respectively.

The table below reconciles the undiscounted future minimum lease payments under non-cancelable leases to the total lease liabilities recognized on the Condensed Consolidated Balance Sheet as of ~~December~~March 31, ~~2025~~2026 (dollars in thousands):

Year Ending September 30,	Operating Leases		Financing Leases		Total
2026	$	42,~~467~~856	$	5426	$	42,~~521~~882
2027	5,~~440~~317		—		5,~~440~~317
2028	4,~~604~~561		—		4,~~604~~561
2029	32,~~032~~996		—		32,~~032~~996
2030	1,~~127~~121		—		1,~~127~~121
Thereafter	110		—		110
Total future minimum lease payments	$	1816,~~780~~961	$	5426	$	1816,~~834~~987
Less effects of discounting	(2,~~332~~126)		—		(2,~~332~~126)
Total lease liabilities	$	1614,~~448~~835	$	5426	$	1614,~~502~~861
Reported as of December 31, 2025
Reported as of March 31, 2026
Short-term lease liabilities	$	4,~~471~~104	$	5426	$	4,~~525~~130
Long-term lease liabilities	1110,~~977~~731		—		1110,~~977~~731
Total lease liabilities	$	1614,~~448~~835	$	5426	$	1614,~~502~~861

Note 9. Accrued Expenses and Other Liabilities

Accrued expenses and other current liabilities consisted of the following (dollars in thousands):

	December 31, 2025		September 30, 2025
	March 31, 2026		September 30, 2025
Compensation	$	1718,~~763~~258	$	30,719
Professional fees	56,~~287~~030		4,657
Cost of revenue related liabilities	23,~~967~~369		2,007
Sales and other taxes payable	64,~~322~~465		1,777
Interest payable	—675		788
Other	5,~~132~~683		4,132
Total	$	3738,~~471~~480	$	44,080

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Note 10. Restructuring and Other Costs, Net

Restructuring and other costs, net includes restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside of the ordinary course of our business. The following table sets forth accrual activity relating to restructuring reserves for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 (dollars in thousands):

	Personnel		Facilities		Restructuring Subtotal		Other		Total
Balance as of September 30, 2025	$	56	$	—	$	56	$	2,929	$	2,985
Restructuring and other costs, net	7,~~450~~577		253		7,~~703~~830		91		7,~~794~~921
Non-cash adjustments	—		(61)		(61)		—		(61)
Cash payments	(67,~~752~~536)		(192)		(67,~~944~~728)		(2,~~910~~933)		(910,~~854~~661)
Effect of foreign currency translation	2(11)		—		2(11)		(87)		(8598)
Balance at December 31, 2025	$	756	$	—	$	756	$	23	$	779
Balance at March 31, 2026	$	86	$	—	$	86	$	—	$	86

The following table sets forth restructuring and other costs, net recognized for the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 (dollars in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Personnel	$	~~7,450~~127	$	101,~~196~~774	$	7,577	$	11,970
Facilities	~~253~~—		—		253		—
Other	91—		~~866~~1,058		91		1,924
Restructuring and other costs, net	$	~~7,794~~127	$	112,~~062~~832	$	7,921	$	13,894

Fiscal Year 2026

For the three months ended ~~December~~March 31, ~~2025~~2026, we recorded restructuring and other costs, net of $70.81 million, ~~which included a $7.5 million charge~~ related to the elimination of personnel~~, a $0~~.~~3 million charge resulting from the closure of facilities that will no longer be utilized, and $0.1 million relating to our transformation initiatives and other one-time charges.~~

For the six months ended March 31, 2026, we recorded restructuring and other costs, net of $7.9 million, which included a $7.6 million charge related to the elimination of personnel, a $0.3 million charge resulting from the closure of facilities that will no longer be utilized, and a $0.1 million charge relating to our transformation initiatives and other one-time charges.

Fiscal Year 2025

For the three months ended ~~December~~March 31, ~~2024~~2025, we recorded restructuring and other costs, net of $112.18 million, which included a $101.28 million charge related to the elimination of personnel, ~~of which $3.0 million related to the stock-based compensation expense related to the termination of our former senior management employees,~~ and a $01.90 million charge relating to our transformation initiatives.

For the six months ended March 31, 2025, we recorded restructuring and other costs, net of $13.9 million, which included a $12.0 million charge related to the elimination of personnel, of which $3.0 million related to the stock-based compensation expense related to the termination of our former senior management employees, and a $1.9 million charge relating to our transformation initiatives.

Note 11. Stockholders’ Equity

On October 2, 2019, we registered the issuance of 6,350,000 shares of common stock, par value $0.01 per share, consisting of 5,300,000 shares of common stock reserved for issuance upon the exercise of options granted, or in respect of awards granted, under the Cerence 2019 Equity Incentive Plan (“Equity Incentive Plan”), and 1,050,000 shares of common stock that are reserved for issuance under the Cerence 2019 Employee Stock Purchase Plan (“ESPP”). The Equity Incentive Plan provides for the grant of incentive stock options, stock awards, stock units, stock appreciation rights, and certain other stock-based awards. The shares available for issuance will automatically increase on January 1st of each year, by the lesser of (A) 3% of the number of shares of common stock outstanding as of the close of business on the ~~immediately preceding December 31st; and (B) the number of shares of common stock determined by our board of directors on or prior to such date for such year.~~

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~~Amendment~~immediately ~~No.~~preceding 2December to31st; ~~the~~and ~~Inducement~~(B) ~~Plan, which increased~~ the number of ~~authorized~~ shares of ~~our~~ common stock ~~available~~determined ~~for~~by ~~issuance~~our ~~under~~board ~~the~~of ~~Inducement~~directors ~~Plan~~on ~~from~~or ~~3,000,000~~prior to ~~4,500,000~~such date for such year.

On March 4, 2024, we registered the issuance of 600,000 shares of common stock, reserved for issuance under the Cerence Inc. 2024 Inducement Plan (the "Inducement Plan"). On October 6, 2024, we adopted Amendment No. 1 to the Inducement Plan, which increased the number of authorized shares of our common stock available for issuance under the Inducement Plan from 600,000 to 3,000,000. On November 29, 2024, we adopted Amendment No. 2 to the Inducement Plan, which increased the number of authorized shares of our common stock available for issuance under the Inducement Plan from 3,000,000 to 4,500,000.

Restricted Stock Units

Information with respect to our non-vested restricted stock units for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 was as follows:

	Non-Vested Restricted Stock Units
	Time-BasedShares	Performance-Based Shares	Total Shares	Weighted-AverageGrant-DateFair Value		Weighted-AverageRemainingContractualTerm (years)	AggregateIntrinsicValue(in thousands)
Non-vested at September 30, 2025	4,350,213	2,299,186	6,649,399	$	12.99
Granted	~~172~~1,~~452~~777,001	2895,~~009~~332	~~174~~2,~~461~~672,333	$	12.0625
Vested	(1,~~636~~713,~~635~~796)	(8,729)	(1,~~645~~722,~~364~~525)	$	15.2519
Forfeited	(97117,~~788~~170)	(149,~~506~~725)	(~~247~~266,~~294~~895)	$	16.9786
Non-vested at December 31, 2025	2,788,242	2,142,960	4,931,202	$	11.45
Non-vested at March 31, 2026	4,296,248	3,036,064	7,332,312	$	11.76
Expected to vest			47,~~931~~332,~~202~~312	$	11.4576	1.3348	$	5246,~~665~~194

Stock-based Compensation

Stock-based compensation was included in the following captions in our Condensed Consolidated Statements of Operations for the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 (in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Cost of connected services	$	5369	$	5376	$	122	$	129
Cost of professional services	~~303~~357		~~437~~481		660		918
Research and development	2,~~005~~810		12,~~829~~566		4,815		4,395
Sales and marketing	~~777~~1,388		~~509~~887		2,165		1,396
General and administrative	2,~~207~~131		1,~~980~~921		4,338		3,901
Restructuring and other costs, net	—		~~2,963~~—		—		2,963
	$	56,~~345~~755	$	75,~~771~~931	$	12,100	$	13,702

During the three months ended ~~December~~March 31, ~~2024~~2026 and 2025, we recorded $21.61 million and $1.0 million, respectively, in stock-based compensation ~~due~~expense attributable to ~~the~~performance-based ~~termination~~restricted ofstock ~~employment~~unit ofawards ~~our~~included ~~former~~in ~~CEO and~~ the ~~resulting~~amounts ~~vesting of certain stock-based awards in Restructuring and other costs, net~~above. ~~During~~For the ~~three~~six months ended ~~December~~ March 31, ~~2024~~2026 and 2025, we recorded $2.0 million and $2.43 million, respectively, in stock-based compensation ~~due~~expense attributable to performance-based restricted stock unit awards included in the ~~termination~~amounts ofabove. ~~employment~~Stock-based ofcompensation aexpenses ~~former~~recognized ~~senior~~attributable to performance-based restricted stock unit awards are reflective of management's ~~employee~~assessment ~~and~~of the ~~resulting~~probability ~~vesting~~of achievement of certain ~~stock-based~~performance ~~awards~~conditions inas ~~Restructuring~~of ~~and~~the ~~other~~reporting ~~costs, net~~date.

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During the six months ended March 31, 2025, we recorded $2.6 million in stock-based compensation due to the termination of employment of our former CEO and the resulting vesting of certain stock-based awards in Restructuring and other costs, net, and $0.4 million in stock-based compensation due to the termination of employment of a former senior management employee and the resulting vesting of certain stock-based awards in Restructuring and other costs, net.

Note 12. Commitments and Contingencies

Litigation and Other Claims

Similar to many companies in the software industry, we are involved in a variety of claims, demands, suits, investigations and proceedings that arise from time to time relating to matters incidental to the ordinary course of our business, including at times actions with respect to contracts, intellectual property, employment, benefits and securities matters. At each balance sheet date, we evaluate contingent liabilities associated with these matters in accordance with ASC 450 “Contingencies.” If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgments are required for the determination of probability and the range of the outcomes, and estimates are based only on the best information available at the time. Due to the inherent uncertainties involved in claims and legal proceedings and in estimating losses that may arise, actual outcomes may differ from our estimates. Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods, which may have a material impact on our results of operations and financial position. As of March 31, 2026, accrued losses were not material to our condensed consolidated financial statements, and we do not expect any pending matter to have a material impact on our condensed consolidated financial statements.

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determination of probability and the range of the outcomes, and estimates are based only on the best information available at the time. Due to the inherent uncertainties involved in claims and legal proceedings and in estimating losses that may arise, actual outcomes may differ from our estimates. Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods, which may have a material impact on our results of operations and financial position. As of December 31, 2025, accrued losses were not material to our condensed consolidated financial statements, and we do not expect any pending matter to have a material impact on our condensed consolidated financial statements.

A.P., a minor, by and through her guardian, Carlos Pena and Carlos Pena Action

On March 24, 2023, plaintiffs A.P., a minor, by and through her guardian, Carlos Pena, and Carlos Pena, each individually and on behalf of similarly situated individuals filed a purported class action lawsuit in the Circuit Court of Cook County, Illinois, Chancery Division (Case. No. 2023CH02866 (Cir. Ct. Cook Cnty. 2023)). The case was removed to Federal Court (Case No. 1:23CV2667 (N.D. Ill.)), and then severed and remanded back in part, so there are two pending cases. Plaintiffs subsequently amended the federal complaint twice, with the latest second amended complaint, filed on July 13, 2023, adding plaintiffs Randolph Freshour and Vincenzo Allan, each also filing individually and on behalf of similarly situated individuals. Plaintiffs allege that Cerence violated the Illinois Biometric Information Privacy Act (“BIPA”), 740 ILCS 14/1 et seq. through Cerence’s Drive Platform technology, which is integrated in various automobiles. The named plaintiffs allegedly drove or rode in a vehicle with Cerence’s Drive Platform technology. 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. 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. 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). Cerence filed its answers in both and the parties concluded fact discovery. On October 24, 2025, plaintiffs moved tofor ~~certify~~class ~~the~~certification ~~class~~(fully briefed), and ~~that~~the ~~motion~~Circuit isCourt ~~fully~~held ~~briefed.~~a Onhearing ~~November~~on 3,May ~~2025~~5, ~~plaintiffs~~2026. ~~moved~~Additional topending ~~stay~~motions ~~the~~include: ~~Federal~~(i) ~~Court~~a ~~case~~federal-court stay request pending the Circuit Court’s ~~ruling on~~ class certification. Ondecision; ~~December~~(ii) ~~10, 2025,~~ Cerence’s ~~filed~~summary ajudgment ~~Motion~~motion ~~for Summary Judgment~~ as to ~~Plaintiff~~plaintiff Vincenzo Allan; onand ~~the~~(iii) ~~basis~~Cerence’s ~~that~~motion heto ~~did~~exclude ~~not~~plaintiffs’ ~~use~~class ~~Cerence’s~~certification ~~technology~~expert ~~during~~(denied by the ~~relevant~~Circuit ~~period,~~Court; asfederal ~~well~~ruling aspending). aPlaintiffs ~~Motion~~have also sought to ~~Exclude~~stay ~~Testimony~~the offederal ~~Plaintiffs’~~case ~~class~~(most ~~certification~~recently ~~expert~~February 13, 2026). Plaintiffs are seeking statutory damages of $5,000 for each willful and/or reckless violation of BIPA and, alternatively, damages of $1,000 for each negligent violation of BIPA. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from this action.

Samsung Electronics Co. Ltd and Samsung Electronics America, Inc.

On October 13, 2023, Cerence filed its first patent infringement complaint against Samsung alleging infringement of five Cerence patents (“Samsung I”). On March 15, 2024, Cerence filed its second patent infringement complaint against Samsung alleging infringement of four additional Cerence patents (“Samsung II”). 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 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, which payment was received, net of tax, during the three months ended December 31, 2025. The lump-sum payment represents fixed consideration for a right-to-use intellectual property license. The related performance obligation was satisfied upon execution of the cross-license agreement. Accordingly, the full amount was recognized as license revenue during the three months ended December 31, 2025, consistent with the Company’s revenue recognition policy (see Note 3) and ASC 606. 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 resulted in us incurring approximately $20.7 million in legal fees, included in General and administrative expenses, which were paid in full during the three months ended December 31, 2025.

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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 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, which payment was received, net of tax, during the three months ended December 31, 2025. The lump-sum payment represents fixed consideration for a right-to-use intellectual property license. The related performance obligation was satisfied upon execution of the cross-license agreement. Accordingly, the full amount was recognized as license revenue during the three months ended December 31, 2025, consistent with the Company’s revenue recognition policy (see Note 3) and ASC 606. 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 resulted in us incurring approximately $20.7 million in legal fees, included in General and administrative expenses, which were paid in full during the three months ended December 31, 2025.

Guarantees and Other

We include indemnification provisions in the contracts we enter with customers and business partners. Generally, these provisions require us to defend claims arising out of our products’ infringement of third-party intellectual property rights, breach of contractual obligations and/or unlawful or otherwise culpable conduct. The indemnity obligations generally cover damages, costs and attorneys’ fees arising out of such claims. In most, but not all cases, our total liability under such provisions is limited to either the value of the contract or a specified, agreed-upon amount. In some cases, our total liability under such provisions is unlimited. In many, but not all cases, the term of the indemnity provision is perpetual. While the maximum potential amount of future payments we could be required to make under all the indemnification provisions is unlimited, we believe the estimated fair value of these provisions is minimal due to the low frequency with which these provisions have been triggered.

We indemnify our directors and officers to the fullest extent permitted by Delaware law, which provides among other things, indemnification to directors and officers for expenses, judgments, fines, penalties and settlement amounts incurred by such persons in their capacity as a director or officer of the Company, regardless of whether the individual is serving in any such capacity at the time the liability or expense is incurred. Additionally, in connection with certain acquisitions, we agreed to indemnify the former officers and members of the boards of directors of those companies, on similar terms as described above, for a period of six years from the acquisition date. In certain cases, we purchase director and officer insurance policies related to these obligations, which fully cover the six-year period. To the extent that we do not purchase a director and officer insurance policy for the full period of any contractual indemnification, and such directors and officers do not have coverage under separate insurance policies, we would be required to pay for costs incurred, if any, as described above.

As of ~~December~~March 31, ~~2025~~2026, our letters of credit in connection with security deposits for facility leases totaled $0.76 million in the aggregate. These letters of credit have various terms and expiration dates that align with the underlying facilities for which they relate.

Note 13. Income Taxes

The components of income (loss) before income taxes are as follows (dollars in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Domestic	$	29(19,~~973~~473)	$	~~(11~~3,~~825)~~525	$	10,500	$	(8,300)
Foreign	8816,495		(612,~~792)~~528		16,583		5,736
Income (loss) before income taxes	$	30,061	$	(18,617)
(Loss) income before income taxes	$	(2,978)	$	16,053	$	27,083	$	(2,564)

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The components of the provision for income taxes are as follows (dollars in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,						Six Months Ended March 31,
	2025			2024
	2026			2025			2026			2025
Domestic	$	20(4,~~383~~046)		$	~~1,291~~(821)		$	16,337		$	470
Foreign	~~14,917~~(605)			(4,~~380~~782)			14,312			(402)
Provision for income taxes	$	35,300		$	5,671
(Benefit from) provision for income taxes	$	(4,651)		$	(5,603)		$	30,649		$	68
Effective income tax rate	~~117~~156.42		%	(3034.59)		%	113.2		%	(2.7)		%

The effective tax rates for the periods presented are based upon estimated income for the fiscal year and the statutory tax rates enacted in the jurisdictions in which we operate. For all periods presented, the effective tax rate differs from the 21.0% statutory U.S. tax rate due to the impact of the nondeductible stock-based compensation and our mix of jurisdictional earnings and related differences in foreign statutory tax rates.

Our effective tax rate for the three months ended ~~December~~March 31, ~~2025~~2026 was ~~117~~156.42% compared to negative 3034.59% for the three months ended ~~December~~March 31, ~~2024~~2025. Consequently, our ~~provision~~benefit ~~for~~from income taxes for the three months ended ~~December~~March 31, ~~2025~~2026 was $354.37 million, a net change of $291.60 million from a ~~provision~~benefit ~~for~~from income taxes of $5.76 million for the three months ended ~~December~~March 31, ~~2024~~2025. This difference was attributable to the tax impacts of foreign ~~valuation~~income ~~allowances~~inclusions, stock-based compensation, research credits, and our composition of jurisdictional earnings.

20Our effective tax rate for the six months ended March 31, 2026 was 113.2% compared to negative 2.7% for the six months ended March 31, 2025. Consequently, our provision for income taxes for the six months ended March 31, 2026 was $30.6 million, a net change of $30.6 million from a provision for income taxes of $0.1 million for the six months ended March 31, 2025. This difference was attributable to the tax impacts of valuation allowances, stock-based compensation, research credits, and our composition of jurisdictional earnings.

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Deferred tax assets and liabilities are measured using the statutory tax rates and laws expected to apply to taxable income in the years in which the temporary differences are expected to reverse. Valuation allowances are provided against net deferred tax assets if, based upon all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the timing of the temporary differences becoming deductible. Management considers, among other available information, scheduled reversals of deferred tax liabilities, projected future taxable income, limitations of availability of net operating loss carryforwards, and other matters in making this assessment.

Note 14. Long-Term Debt

Long-term debt consisted of the following (in thousands):

December 31, 2025

March 31, 2026

Description

Maturity Date

Convertible Debt Coupon Rate

Effective Interest Rate

Principal

Unamortized Discount

Deferred Issuance Costs

Carrying Value

2025 Modified Notes

7/1/2028

1.50%

5.52%

75,000

(1,~~460~~323)

(5,~~571~~049)

6768,~~969~~628

2028 Notes

7/1/2028

1.50%

1.91%

105,000

—

(~~1,045~~942)

~~103~~104,~~955~~058

Total debt

180,000

(1,~~460~~323)

(65,~~616~~991)

~~171~~172,~~924~~686

Less: current portion of long-term debt

—

Total long-term debt

~~171~~172,~~924~~686

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September 30, 2025
Description	Maturity Date	Convertible Debt Coupon Rate	Effective Interest Rate	Principal		Unamortized Discount		Deferred Issuance Costs		Carrying Value
2025 Modified Notes	7/1/2028	1.50%	5.52%	87,500		(1,862)		(7,106)		78,532
2028 Notes	7/1/2028	1.50%	1.91%	122,500		—		(1,339)		121,161
Total debt				$	210,000	$	(1,862)	$	(8,445)	199,693
Less: current portion of long-term debt										—
Total long-term debt										$	199,693

The following table summarizes the maturities of our borrowing obligations as of ~~December~~March 31, ~~2025~~2026 (in thousands):

Fiscal Year	2028 Notes		2025 Modified Notes		Total
2026	$	—	$	—	$	—
2027	—		—		—
2028	105,000		75,000		180,000
2029	—		—		—
2030	—		—		—
Thereafter	—		—		—
Total before unamortized discount and issuance costs and current portion	$	105,000	$	75,000	$	180,000
Less: unamortized discount and issuance costs	(~~1,045~~942)		(76,~~031~~372)		(87,~~076~~314)
Less: current portion of long-term debt	—		—		—
Total long-term debt	$	~~103~~104,~~955~~058	$	6768,~~969~~628	$	~~171~~172,~~924~~686

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. 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. The initial net proceeds from the issuance of the 2028 Notes were $193.2 million after deducting transaction costs.

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issued an additional $20.0 million in aggregate principal amount of 2028 Notes. 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. The 2028 Notes will mature on July 1, 2028, unless earlier converted, redeemed, or repurchased. The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.

A holder of 2028 Notes may convert all or any portion of its 2028 Notes at its option at any time prior to the close of business on the business day immediately preceding April 3, 2028 only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on September 30, 2023 (and only during such fiscal quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period (the “measurement period”) in which the “trading price” (as defined in the 2028 Indenture) per $1,000 principal amount of 2028 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; (3) if we call such 2028 Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after April 3, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, a holder may convert all or any portion of its 2028 Notes at any time, regardless of the foregoing circumstances.

The conversion rate is 24.5586 shares of our common stock per $1,000 principal amount of 2028 Notes (equivalent to an initial conversion price of approximately $40.72 per share of our common stock). The conversion rate is subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest. 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.

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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.

We may not redeem the 2028 Notes prior to July 6, 2026. We may redeem for cash all or any portion of the 2028 Notes (subject to certain limitations), at our option, on a redemption date occurring on or after July 6, 2026 and on or before the 31st scheduled trading day immediately before the maturity date, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the 2028 Notes.

If we undergo a “fundamental change”, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2028 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The 2028 Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of not less than 25% in aggregate principal amount of the 2028 Notes then outstanding may declare the entire principal amount of all the 2028 Notes plus accrued special interest, if any, to be immediately due and payable.

During the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026, we repurchased $30.0 million aggregate principal amount of our 2028 Notes for $28.0 million in cash, including accrued interest and fees, via privately negotiated transactions with certain holders. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $1.1 million. The gain was calculated by subtracting the net carrying amount of the repurchased notes from the reacquisition price in accordance with ASC 470-50. The net carrying amount of the repurchased notes was calculated by allocating debt discount and issuance costs on a pro rata basis between amounts applicable to the 2025 Modified Notes and 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 Notes with investors who concurrently purchased the 2028 Notes. We evaluated the transaction to determine whether the exchange should be accounted for as a modification or extinguishment under the provisions of ASC 470-50, which allows for an exchange of debt instruments between the same debtor and creditor to be accounted for as a modification so long as the instruments do not have substantially different terms. Because the concurrent redemption of the 2025 Notes and a portion of issuance of the 2028 Notes were executed with the same investors, we evaluated the transaction as a debt modification, on a creditor by creditor basis. 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.

22As 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 (the “2025 Modified Notes” and together with the 2028 Notes, the “Notes”). We recorded $14.3 million of fees paid directly to the lenders as deferred debt issuance costs, and $3.8 million of fees paid to third-parties were expensed in the period. As of March 31, 2026, the carrying amount of the 2025 Modified Notes was $68.6 million, net of unamortized costs of $6.4 million.

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for an exchange of debt instruments between the same debtor and creditor to be accounted for as a modification so long as the instruments do not have substantially different terms. Because the concurrent redemption of the 2025 Notes and a portion of issuance of the 2028 Notes were executed with the same investors, we evaluated the transaction as a debt modification, on a creditor by creditor basis. 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.

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 (the “2025 Modified Notes” and together with the 2028 Notes, the “Notes”). We recorded $14.3 million of fees paid directly to the lenders as deferred debt issuance costs, and $3.8 million of fees paid to third-parties were expensed in the period. As of December 31, 2025, the carrying amount of the 2025 Modified Notes was $68.0 million, net of unamortized costs of $7.0 million.

If a convertible debt instrument is modified or exchanged in a transaction that is not accounted for as an extinguishment, an increase in the fair value of the embedded conversion option shall reduce the carrying amount of the debt instrument with a corresponding increase in Additional paid-in capital. We recognized the increase in the fair value of the embedded conversion feature of $4.1 million as Additional paid-in capital and an equivalent discount that reduced the carrying value of the 2025 Modified Notes.

We accounted for $122.5 million of the 2028 Notes, that were not negotiated with the investors of the 2025 Notes, as a single liability. We incurred transaction costs of $2.4 million relating to the issuance of the 2028 Notes, which were recorded as a direct deduction from the face amount of the 2028 Notes and are being amortized as interest expense over the term of the 2028 Notes using the interest method. As of ~~December~~March 31, ~~2025~~2026, the carrying amount of the 2028 Notes was $104.01 million and had unamortized issuance costs of $1.0 million. As of ~~December~~March 31, ~~2025~~2026, the 2028 Notes were ~~not convertible. As of December 31, 2025 and September 30, 2025, the if-converted value of the 2028 Notes was $77.4 million and $85.0 million, respectively, less than its principal amount.~~

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not convertible. As of March 31, 2026 and September 30, 2025, the if-converted value of the 2028 Notes was $88.7 million and $85.0 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 June 1, 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 were 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. 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. For a complete description of the 2025 Notes, please refer to Footnote 17, Long-Term Debt as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

During the year ended September 30, 2025, we repurchased $27.4 million aggregate principal amount of our 2025 Notes for $27.0 million in cash, including accrued interest and fees, via privately negotiated transactions with certain holders. The repurchased 2025 Notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $0.3 million. The remaining outstanding principal balance on the 2025 Notes and accrued interest of $61.0 million was repaid in its entirety at maturity during the three months ended June 30, 2025.

The interest expense recognized related to the Notes for the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 was as follows (dollars in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Contractual interest expense	$	~~784~~675	$	1,~~425~~221	$	1,459	$	2,646
Amortization of debt discount	~~158~~137		~~265~~263		295		528
Amortization of issuance costs	~~721~~626		1,~~281~~224		1,347		2,505
Total interest expense related to the Notes	$	1,~~663~~438	$	2,~~971~~708	$	3,101	$	5,679

Senior Credit Facilities

On June 12, 2020 (the “Financing Closing Date”), we entered into a Credit Agreement, by and among the Borrower, the lenders and issuing banks party thereto and Wells Fargo Bank, N.A., as administrative agent (the “Credit Agreement”), consisting of a four-year senior secured term loan facility in the aggregate principal amount of $125.0 million (the “Term Loan Facility”). The net proceeds from the issuance of the Term Loan Facility were $123.0 million. We also entered into a senior secured first-lien revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Senior Credit Facilities”), which could have been drawn on in the event that our working capital and other cash needs were not supported by our operating cash flow.

23In connection with the issuance of the 2028 Notes, in the third quarter of fiscal year 2023, we borrowed $24.7 million under our Revolving Facility and paid $106.3 million towards our Term Loan Facility. As a result, we recorded $104.9 million extinguishment of debt and $1.3 million loss on the extinguishment of debt. All principal and interest on the Term Loan Facility have been paid in full. As of March 31, 2026 and September 30, 2025, there were no amounts outstanding under the Revolver Facility.

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Agreement”), consisting of a four-year senior secured term loan facility in the aggregate principal amount of $125.0 million (the “Term Loan Facility”). The net proceeds from the issuance of the Term Loan Facility were $123.0 million. We also entered into a senior secured first-lien revolving credit facility in an aggregate principal amount of $50.0 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Senior Credit Facilities”), which could have been drawn on in the event that our working capital and other cash needs were not supported by our operating cash flow.

In connection with the issuance of the 2028 Notes, in the third quarter of fiscal year 2023, we borrowed $24.7 million under our Revolving Facility and paid $106.3 million towards our Term Loan Facility. As a result, we recorded $104.9 million extinguishment of debt and $1.3 million loss on the extinguishment of debt. All principal and interest on the Term Loan Facility have been paid in full. As of December 31, 2025 and September 30, 2025, there were no amounts outstanding under the Revolver Facility.

On December 31, 2024, we terminated the Credit Agreement. On the date of termination, there were no revolving loans outstanding under the Credit Agreement. As a result of the Credit Agreement termination, we will not have access to the Revolving Facility and we will not be subject to the applicable Credit Agreement covenants.

Total interest expense relating to the Senior Credit Facilities for the three months ended ~~December~~March 31, 2026 and 2025 was none for both periods, and ~~2024~~for the six months ended March 31, 2026 and 2025 was none and $0.4 million, respectively. Amounts reflect the coupon and accretion of the discount.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our Unaudited Condensed Consolidated Financial Statements, and the related notes thereto, appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and our consolidated financial statements and the related notes and other financial information included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the Securities and Exchange Commission (“SEC”) on November 20, 2025. Some of the information contained in this discussion and analysis or elsewhere in this Quarterly Report, including, but not limited to, information with respect to our plans and strategy for our business, our performance and future success, our liquidity and capital resources, including our ability to meet our liquidity needs, macroeconomic conditions, volatility in the political, legal and regulatory environment in which we operate including trade, tariffs and other policies implemented by the United States or actions taken by other countries in response, trends in the global auto industry and adjacent markets, including shipping and production issues, new products, process optimization efforts and cost management, litigation, and tax estimates and other tax matters, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Statements.” You should review the “Risk Factors” sections in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Note that the results of operations for the three and six months ended ~~December~~March 31, ~~2025~~2026 are not necessarily indicative of what our operating results for the full fiscal year will be. In this Item, “we,” “us,” “our,” “Cerence” and the “Company” refer to Cerence Inc. and its consolidated subsidiaries, collectively.

Overview

Cerence builds conversational and agentic AI solutions 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 as well as the Internet of Things industry as a whole, including televisions, smart watches, voice-powered kiosks, and more. 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. 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 automobile brands and end users. Our vision is to enable a more enjoyable, safer journey for everyone.

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. Our software platform has a hybrid architecture combining edge software components with cloud-connected components. 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 embedded in and developed in connection with our operating software platform and cloud-connected services. Our edge software components are typically sold under a traditional per unit perpetual software license model, in which a per unit fee is charged on a variable basis for each software instance installed on an automotive head unit. We typically license cloud-connected software components in the form of a service to the vehicle end user, which is paid for in advance. In addition, we generate professional services revenue from our work with our customers during the design, development and deployment phases of the vehicle model lifecycle and through maintenance and enhancement projects. We have existing relationships with nearly all major automotive OEMs or their tier 1 suppliers, and while our customer contracts vary, they generally represent multi-year engagements, giving us some visibility into future revenue; however, such revenue may not materialize as expected due to delays in automobile production, volatility in the political, legal and regulatory environment in which we operate including trade, tariffs and other policies implemented by the administration in the United States or actions taken by other countries in response, automotive production curtailment or delays related thereto, changing customer forecasts, macroeconomic conditions or other factors discussed elsewhere in this Quarterly Report.

Basis of Presentation

The financial information presented in the accompanying unaudited condensed consolidated financial statements has been prepared in accordance with U.S. GAAP and in accordance with rules and regulations of the SEC

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regarding interim financial reporting. Accordingly, the financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The condensed consolidated balance sheet data as of September 30, 2025 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of our financial position and results of operations. The operating results for the three and six months ended ~~December~~March 31, ~~2025~~2026 are not necessarily indicative of the results expected for the full fiscal year ending September 30, 2026.

The accompanying unaudited condensed 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 Financial Metrics

In evaluating our financial condition and operating performance, we focus on revenue, operating margins, and cash flow from operations.

For the three months ended ~~December~~March 31, ~~2025~~ 2026 as compared to the three months ended ~~December~~March 31, ~~2024~~2025:

•Total revenue ~~increased~~decreased by $6413.28 million, or ~~126~~17.17%, to $~~115~~64.12 million from $5078.90 million.

•Operating margin ~~increased~~decreased 5826.71 percentage points to ~~positive~~negative 253.58% from ~~negative~~positive 3322.32%.

•Cash provided by operating activities was $3714.91 million, ana ~~increase~~reduction of $281.64 million, or ~~309~~8.58%, from cash provided by operating activities of $915.35 million.

26For the six months ended March 31, 2026 as compared to the six months ended March 31, 2025:

•Total revenue increased by $50.4 million, or 39.1%, to $179.3 million from $128.9 million.

•Operating margin increased 14.7 percentage points to positive 15.0% from positive 0.3%.

•Cash provided by operating activities was $52.0 million, an increase of $27.3 million, or 110.4%, from cash provided by operating activities of $24.7 million.

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Operating Results

The following table shows the Condensed Consolidated Statements of Operations for the three and six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 (dollars in thousands):

	Three Months Ended December 31,
	Three Months Ended March 31,				Six Months Ended March 31,
	2025		2024
	2026		2025		2026		2025
Revenues:
License	$	8737,~~758~~577	$	2251,~~725~~460	$	125,335	$	74,185
Connected services	1415,~~532~~310		1312,~~707~~648		29,843		26,355
Professional services	1211,~~786~~305		1413,~~464~~902		24,091		28,366
Total revenues	~~115~~64,~~076~~192		5078,~~896~~010		179,269		128,906
Cost of revenues:
License	1,~~323~~606		12,~~782~~432		2,929		4,214
Connected services	45,~~911~~043		64,~~311~~979		9,954		11,290
Professional services	910,~~492~~247		910,~~731~~418		19,739		20,149
Total cost of revenues	1516,~~726~~896		17,~~824~~829		32,622		35,653
Gross profit	9947,~~350~~296		3360,~~072~~181		146,647		93,253
Operating expenses:
Research and development	2430,~~701~~298		2023,~~869~~332		54,999		44,201
Sales and marketing	56,~~557~~519		4,~~766~~930		12,076		9,696
General and administrative	3112,~~987~~796		1211,~~754~~199		44,783		23,953
Amortization of intangible assets	—		~~554~~536		—		1,090
Restructuring and other costs, net	~~7,794~~127		112,~~062~~832		7,921		13,894
Total operating expenses	7049,~~039~~740		5042,~~005~~829		119,779		92,834
Income (loss) from operations	29,311		(16,933)
(Loss) income from operations	(2,444)		17,352		26,868		419
Interest income	~~865~~655		~~1,437~~918		1,520		2,355
Interest expense	(1,~~665~~477)		(32,~~393~~716)		(3,142)		(6,109)
Other income, net	~~1,550~~288		~~272~~499		1,837		771
Income (loss) before income taxes	30,061		(18,617)
(Loss) income before income taxes	(2,978)		16,053		27,083		(2,564)
Provision for income taxes	35,300		5,671
(Benefit from) provision for income taxes	(4,651)		(5,603)		30,649		68
Net loss	$	(5,239)	$	(24,288)
Net income (loss)	$	1,673	$	21,656	$	(3,566)	$	(2,632)

Our revenue consists primarily of license revenue, connected services revenue and revenue from professional services. License revenue primarily consists of license royalties associated with our edge software components and revenue associated with the licensing of our Intellectual Property or “IP” that underpins and is deployed as part of our products and services. Our edge software components are typically sold under a traditional per unit perpetual software license model, in which a per unit fee is charged for each software instance installed on an automotive head unit. Our contracts contain variable, fixed prepaid or fixed minimum purchase commitment components. 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. Revenue for fixed contracts is recognized when the software is made available to the customer, which has typically occurred at the time the contract is signed. Cash is typically expected to be collected for a fixed prepaid deal at the inception of the contract. Cash is expected to be collected for a fixed minimum commitment deal over the license distribution period. Going forward, we will continue to assess the levels of fixed license contracts and make adjustments, as necessary. The timing and amount of revenue recognized from IP or patent licensing relating to technology developed and commercialized in the ordinary course of our business depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations. These agreements could include, without limitation, performance obligations related to consideration for past patent royalties, patent licensing royalties on covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and access to a portfolio of technology at a point in time along with promises to provide any technology updates to the portfolio during the term on a when-and-if basis. Such licenses could be fixed and non-refundable in nature and/or variable over time. Certain components of revenue ~~recognized with respect to IP license agreements may require the use of estimates, which may be significant. Related revenue is recognized at the point in time~~

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recognized with respect to IP license agreements may require the use of estimates, which may be significant. Related revenue is recognized at the point in time when the software and technology is made available to the customer and control is transferred and, if applicable, according to usage. See Note 3 to the accompanying unaudited condensed consolidated financial statements for further discussion of our revenue, deferred revenue performance obligations and the timing of revenue recognition. Costs of license revenue primarily consists of third-party royalty expenses for certain external technologies we leverage and costs associated with our Cerence Link product.

Connected services revenue primarily represents the subscription fee that provides access to our connected services components, including the customization and construction of our connected services solutions. We also derive revenue within our connected services business from usage contracts and there can be instances where a customer purchases a software license that allows them to take possession of the software to enable hosting by the customer or a third-party. Subscription and usage contracts typically have a term of one to five years. Subscription revenue is recognized over the subscription period and cash is expected to be collected at the start of the subscription period. Usage based revenue is recognized and cash is collected as the service is used. If the customer takes possession of the software to have it hosted by the customer or a third-party, revenue is recognized, and cash is collected at the time the license is delivered.

Professional services revenue is primarily comprised of porting, integrating, and customizing our embedded solutions, with costs primarily consisting of compensation for services personnel, contractors and overhead.

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, legal, finance, human resources, general management, fees for external professional advisers including accountants and attorneys, and provisions for credit losses.

Amortization of acquired patents and core technology are included within cost of revenues whereas the amortization of other intangible assets, such as acquired customer relationships, trade names and trademarks, are included within operating expenses. Customer relationships are amortized over their estimated economic lives based on the pattern of economic benefits expected to be generated from the use of the asset. Other identifiable intangible assets are amortized on a straight-line basis over their estimated useful lives.

Restructuring and other costs, net include restructuring expenses as well as other charges that are unusual in nature, are the result of unplanned events, and arise outside the ordinary course of our business.

Total other expense, net consists primarily of foreign exchange gains (losses), interest income 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. Volatility in the political, legal and regulatory environment in which we operate, including trade, tariffs and related policies also has resulted in increased pricing pressure from customers and delays in program timelines. Macroeconomic conditions such as high interest rates and lack of credit availability have contributed to these production delays and slowdowns. In addition, the software and technology systems in automobiles have become increasingly complex, leading to substantial challenges and delays in production for some of our customers. Our business in adjacent markets, such as two-wheeled vehicles, trucks and AIoT, is also developing slower than anticipated due to the challenges of introducing different technology into a new market. In light of these challenges, we intend to make efforts to streamline our operations, and we continue to focus on our cost management and have taken, and expect to continue to take, cost reduction actions, which may result in additional restructuring costs. In particular, in September 2025, we announced the 2025 Plan intended to streamline certain foreign operations. In August 2024, we announced the 2024 Plan intended to reduce operating expenses and position us for profitable growth. The implementation of the 2024 Plan was substantially complete by the end of the first quarter of fiscal year 2025 and iswas formally concluded as of December 31, 2025. The implementation of the 2025 Plan was substantially completed during the three months ended December 31, 2025. Potential position eliminations are subject to legal requirements that vary by jurisdiction, which may extend this process beyond the ~~first~~second quarter of fiscal year 2026 in certain cases. 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~~previously ~~above~~disclosed. For additional details, refer to the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

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Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

Total Revenues

The following table shows total revenues by product type, including the corresponding percentage change, for the three months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025 (dollars in thousands):

	Three Months Ended December 31,						% Change
	Three Months Ended March 31,						% Change
	2025		% of Total	2024		% of Total	2025 vs. 2024
	2026		% of Total	2025		% of Total	2026 vs. 2025
License	$	8737,~~758~~577	7658.35%	$	2251,~~725~~460	4466.60%	~~286~~(27.20	%)
Connected services	1415,~~532~~310		1223.69%	1312,~~707~~648		2616.92%	621.0	%
Professional services	1211,~~786~~305		1117.16%	1413,~~464~~902		2817.48%	(1118.67)	%
Total revenues	$	~~115~~64,~~076~~192		$	5078,~~896~~010		~~126~~(17.17	%)

Total revenues for the three months ended ~~December~~March 31, ~~2025~~2026 were $~~115~~64.12 million, ana ~~increase~~decrease of $6413.28 million, or ~~126~~17.17%, from $5078.90 million for the three months ended ~~December~~March 31, ~~2024~~2025. ~~The~~Decreases ~~increase~~ in revenue ~~was~~were ~~primarily~~attributable ~~driven~~to bylower ~~our~~fixed IP license ~~agreement~~contracts ~~with~~compared ~~Samsung,~~to ~~resulting~~the inthree ~~$49.5~~months ~~million~~ended ofMarch ~~one-time~~31, ~~revenue.~~2025, ~~Additional~~and ~~increases~~lower ~~in revenue were attributable to higher~~ volume of ~~both~~professional ~~license volumes and connected~~ services, ~~and~~partially anoffset ~~increase~~by ofincreased ~~$7.8~~connected ~~million~~services ~~of fixed contracts~~revenue.

License Revenue

License revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $8737.86 million, ana ~~increase~~decrease of $6513.09 million, or ~~286~~27.20%, from $2251.75 million for the three months ended ~~December~~March 31, ~~2024~~2025. The ~~increase~~decrease in ~~revenue was primarily driven by our IP~~ license ~~agreement with Samsung, resulting in $49.5 million of one-time~~ revenue, ~~recognized in accordance with ASC 606. The additional increase in license revenue~~ was primarily driven by a $715.87 million ~~increase~~decrease in fixed contracts, ~~and~~offset aby ~~$7.8~~an ~~million~~ increase in variable license revenue ~~due~~of to$1.9 ~~higher~~million, ~~volume~~driven ofprimarily ~~licensing~~by ~~royalties~~increased volumes reported. As a percentage of total revenues, license revenue ~~increased~~decreased 317.64 percentage points from 4466.60% for the three months ended ~~December~~March 31, ~~2024~~2025 to 7658.35% for the three months ended ~~December~~March 31, ~~2025~~2026.

Connected Services Revenue

Connected services revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $1415.53 million, an increase of $02.87 million, or 621.0%, from $1312.76 million for the three months ended ~~December~~March 31, ~~2024~~2025. This increase was primarily driven by ~~higher~~continued ~~reported~~expansion ~~volumes~~of our connected installed base. As a percentage of total revenues, connected services revenue ~~decreased~~increased by 147.36 percentage points from 2616.92% for the three months ended ~~December~~March 31, ~~2024~~2025 to 1223.69% for the three months ended ~~December~~March 31, ~~2025~~2026.

Professional Services Revenue

Professional services revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $1211.83 million, a decrease of $12.76 million, or 1118.67%, from $1413.59 million for the three months ended ~~December~~March 31, ~~2024~~2025. This decrease was primarily driven by the increased standardization of our software product offerings, which requires less professional services effort to implement, other efficiencies in our professional services processes and, in some cases, customers opting to perform these activities internally. As a percentage of total revenues, professional services revenue decreased by 170.32 percentage points from 2817.48% for the three months ended ~~December~~March 31, ~~2024~~2025 to 1117.16% for the three months ended ~~December~~March 31, ~~2025~~2026.

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~~Three~~ Six Months Ended ~~December~~March 31, ~~2025~~2026 Compared with ~~Three~~Six Months Ended ~~December~~March 31, ~~2024~~2025

Total Revenues

The following table shows total revenues by product type, including the corresponding percentage change, for the six months ended March 31, 2026 and 2025 (dollars in thousands):


	Six Months Ended March 31,						% Change
	2026		% of Total	2025		% of Total	2026 vs. 2025
License	$	125,335	69.9%	$	74,185	57.5%	68.9	%
Connected services	29,843		16.6%	26,355		20.4%	13.2	%
Professional services	24,091		13.4%	28,366		22.1%	(15.1)	%
Total revenues	$	179,269		$	128,906		39.1	%

Total revenues for the six months ended March 31, 2026 were $179.3 million, an increase of $50.4 million, or 39.1%, from $128.9 million for the six months ended March 31, 2025. The increase in revenue was primarily driven by our IP license agreement with Samsung, resulting in $49.5 million of revenue recognized in the applicable period pursuant to ASC 606.

License Revenue

License revenue for the six months ended March 31, 2026 was $125.3 million, an increase of $51.2 million, or 68.9%, from $74.2 million for the six months ended March 31, 2025. The increase in revenue was primarily driven by our IP license agreement with Samsung, resulting in $49.5 million of one-time revenue, recognized in accordance with ASC 606. Other license revenue activity included a $9.6 million increase associated with variable contract revenue attributable to higher reported volumes, partially offset by a $8.0 million decrease in fixed license contracts as the timing of fixed license contracts between quarters differs year over year. As a percentage of total revenues, license revenue increased 12.4 percentage points from 57.5% for the six months ended March 31, 2025 to 69.9% for the six months ended March 31, 2026.

Connected Services Revenue

Connected services revenue for the six months ended March 31, 2026 was $29.8 million, an increase of $3.5 million, or 13.2%, from $26.4 million for the six months ended March 31, 2025. This increase was primarily driven by continued expansion of our connected installed base. As a percentage of total revenues, connected services revenue decreased by 3.8 percentage points from 20.4% for the six months ended March 31, 2025 to 16.6% for the six months ended March 31, 2026.

Professional Services Revenue

Professional service revenue for the six months ended March 31, 2026 was $24.1 million, a decrease of $4.3 million, or 15.1%, from $28.4 million for the six months ended March 31, 2025. This decrease was primarily driven by the increased standardization of our software product offerings, which requires less professional services effort to implement, other efficiencies in our professional services processes and, in some cases, customers opting to perform these activities internally. As a percentage of total revenues, professional services revenue decreased by 8.7 percentage points from 22.1% for the six months ended March 31, 2025 to 13.4% for the six months ended March 31, 2026.

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Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

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):

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
License	$	1,~~323~~606	$	12,~~782~~432	(2534.80	%)
Connected services	45,~~911~~043		64,~~311~~979		~~(22~~1.2)3	%
Professional services	910,~~492~~247		910,~~731~~418		(21.56)	%
Total cost of revenues	$	1516,~~726~~896	$	17,~~824~~829	(115.82)	%

The following table shows total gross profit by product type and the corresponding percentage change (dollars in thousands):

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
License	$	8635,~~435~~971	$	2049,~~943~~028	~~312~~(26.76	%)
Connected services	910,~~621~~267		7,~~396~~669		3033.19	%
Professional services	31,~~294~~058		43,~~733~~484		(3069.46)	%
Total gross profit	$	9947,~~350~~296	$	3360,~~072~~181	~~200~~(21.4)	%

Total cost of revenues for the three months ended ~~December~~March 31, ~~2025~~2026 were $1516.79 million, a decrease of $20.19 million, or 115.82%, from $17.8 million for the three months ended ~~December~~March 31, ~~2024~~2025.

We experienced ana ~~increase~~decrease in total gross profit of $6612.39 million, or ~~200~~21.4%, from $3360.12 million for the three months ended ~~December~~March 31, ~~2024~~2025 to $9947.43 million for the three months ended ~~December~~March 31, ~~2025~~2026. The ~~increase~~decrease was primarily driven by ~~the~~a ~~Samsung~~decrease ~~patent~~in fixed license revenue of $15.7 million.

Cost of License Revenue

Cost of license revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $1.36 million, a decrease of $0.58 million, or 2534.80%, from $12.84 million for the three months ended ~~December~~March 31, ~~2024~~2025. Cost of license revenues decreased due to lower hardware costs attributable to decreased volume of our Cerence Link product revenue. As a percentage of total cost of revenues, cost of license revenue decreased by 14.61 percentage points from 1013.06% for the three months ended ~~December~~March 31, ~~2024~~2025 to 89.45% for the three months ended ~~December~~March 31, ~~2025~~2026.

License gross profit ~~increased~~decreased by $6513.51 million, or ~~312~~26.76%, for the three months ended ~~December~~March 31, ~~2025~~2026 when compared to the three months ended ~~December~~March 31, ~~2024~~2025, primarily driven by ~~the~~a ~~Samsung~~decrease ~~patent~~in fixed license revenue of $15.7 million, offset by an increase in variable license revenue of $1.9 million.

Cost of Connected Services Revenue

Cost of connected services revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $45.90 million, aan ~~decrease~~increase of $10.41 million, or 221.23%, from $65.30 million for the three months ended ~~December~~March 31, ~~2024~~2025. Cost of connected services revenue ~~decreased~~increased primarily due to a ~~$1.0~~higher ~~million~~volume ~~decrease associated with lower amortization expense~~ of ~~capitalized~~connected ~~project~~service ~~costs~~deliveries and ~~lower~~related ~~overall~~costs ~~in-period~~incurred ~~deferrals~~ of ~~project delivery costs, a~~ $0.34 million, ~~reduction~~partially inoffset ~~internal~~by ~~allocated~~lower labor, ~~and~~costs aof $0.12 million ~~decrease in our cloud infrastructure costs~~. As a percentage of total cost of revenues, cost of connected services revenue ~~decreased~~increased by 41.29 percentage points from 3527.49% for the three months ended ~~December~~March 31, ~~2024~~2025 to 3129.28% for the three months ended ~~December~~March 31, ~~2025~~2026.

Connected services gross profit increased $2.26 million, or 3033.19%, from $7.47 million for the three months ended ~~December~~March 31, ~~2024~~2025 to $910.63 million for the three months ended ~~December~~March 31, ~~2025~~2026, primarily due to ~~higher~~our ~~reported~~continued ~~volumes~~expansion of our connected installed base resulting in increased revenue, and ~~lower~~similar overall costs associated with the delivery of connected services.

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Cost of Professional Services Revenue

Cost of professional services revenue for the three months ended ~~December~~March 31, ~~2025~~2026 was $910.52 million, a decrease of $0.2 million, or 21.56%, from $910.74 million for the three months ended ~~December~~March 31, ~~2024~~2025. Cost of professional services revenue decreased primarily due to a decrease in allocated facilities and infrastructure costs of $0.34 million, ~~decrease~~offset by an increase in ~~third-party~~personnel ~~contractor~~related costs of $0.2 million. As a percentage of total cost of revenues, cost of professional services revenue increased by 52.82 percentage points from 5458.64% for the three months ended ~~December~~March 31, ~~2024~~2025 to 60.46% for the three months ended ~~December~~March 31, ~~2025~~2026.

Professional services gross profit decreased $12.4 million, or 3069.46%, from $43.75 million for the three months ended ~~December~~March 31, ~~2024~~2025 to $31.31 million for the three months ended ~~December~~March 31, ~~2025~~2026, which was primarily due to a decrease in related revenues.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025

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):


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
License	$	2,929	$	4,214	(30.5	%)
Connected services	9,954		11,290		(11.8)	%
Professional services	19,739		20,149		(2.0)	%

Total cost of revenues	$	32,622	$	35,653	(8.5)	%

The following table shows total gross profit by product type and the corresponding percentage change (dollars in thousands):


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
License	$	122,406	$	69,971	74.9	%
Connected services	19,889		15,065		32.0	%
Professional services	4,352		8,217		(47.0)	%

Total gross profit	$	146,647	$	93,253	57.3	%

Total cost of revenues for the six months ended March 31, 2026 were $32.6 million, a decrease of $3.0 million, or 8.5%, from $35.7 million for the six months ended March 31, 2025.

We experienced an increase in total gross profit of $53.4 million, or 57.3%, from $93.3 million for the six months ended March 31, 2025 to $146.6 million for the six months ended March 31, 2026. The increase was primarily driven by our IP license agreement with Samsung, resulting in $49.5 million revenue recognized in the applicable period pursuant to ASC 606.

Cost of License Revenue

Cost of license revenue for the six months ended March 31, 2026 was $2.9 million, a decrease of $1.3 million, or 30.5%, from $4.2 million for the six months ended March 31, 2025. Cost of license revenue decreased due to lower costs attributable to lower volume of our Cerence Link product revenue. As a percentage of total cost of revenues, cost of license revenue decreased by 2.8 percentage points from 11.8% for the six months ended March 31, 2025 to 9.0% for the six months ended March 31, 2026.

License gross profit increased by $52.4 million, or 74.9%, for the six months ended March 31, 2026 when compared to the six months ended March 31, 2025, primarily due to the increase in license revenues attributable to the IP license agreement with Samsung, as well as increased variable license revenue due to higher reported volumes.

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Cost of Connected Services Revenue

Cost of connected services revenue for the six months ended March 31, 2026 was $10.0 million, a decrease of $1.3 million, or 11.8%, from $11.3 million for the six months ended March 31, 2025. Cost of connected services revenue decreased primarily due to a $0.8 million decrease in amortization of costs previously deferred and a $0.5 million decrease in internally allocated labor costs. As a percentage of total cost of revenues, cost of connected services revenue decreased by 1.2 percentage points from 31.7% for the six months ended March 31, 2025 to 30.5% for the six months ended March 31, 2026.

Connected services gross profit increased $4.8 million, or 32.0%, from $15.1 million for the six months ended March 31, 2025 to $19.9 million for the six months ended March 31, 2026, due to the combination of increased connected services revenues and decreased cost of connected services revenues.

Cost of Professional Services Revenue

Cost of professional services revenue for the six months ended March 31, 2026 was $19.7 million, a decrease of $0.4 million, or 2.0%, from $20.1 million for the six months ended March 31, 2025. Decreases were driven by lower direct costs of professional service delivery and lower infrastructure costs, partially offset by higher personnel related costs. As a percentage of total cost of revenues, cost of professional services revenue increased by 4.0 percentage points from 56.5% for the six months ended March 31, 2025 to 60.5% for the six months ended March 31, 2026.

Professional services gross profit decreased $3.9 million, or 47.0%, from $8.2 million for the six months ended March 31, 2025 to $4.4 million for the six months ended March 31, 2026, which was primarily due to the reduction in professional services revenue.

Operating Expenses

The tables below show each component of operating expense. Total other expense, net and (benefit from) provision for income taxes are non-operating expenses and presented in a similar format (dollars in thousands).

R&D Expenses

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
Research and development	$	2430,~~701~~298	$	2023,~~869~~332	1829.49	%

Historically, R&D expenses are our largest operating expense as we continue to build on our existing software platforms and develop new technologies. R&D expenses for the three months ended ~~December~~March 31, ~~2025~~2026 were $2430.73 million, an increase of $37.80 million, or 1829.49%, from $2023.93 million for the three months ended ~~December~~March 31, ~~2024~~2025. The increase was primarily attributable to $2.1 million of international tax credit catch-ups recorded in three months ended ~~December~~March 31, ~~2024~~2025 which did not recur in the three months ended ~~December~~March 31, ~~2025~~2026, a $02.92 million increase in ~~employee~~personnel ~~compensation~~related costs, a $01.47 million increase indue ~~third~~to lower capitalization of internal-~~party~~use ~~contractor~~software development costs, and a $0.48 million increase in ~~depreciation and~~ amortization ~~related~~of tocapitalized ~~facilities~~internal-use ~~and~~software ~~equipment~~recently ~~required~~placed toin ~~support our AI infrastructure~~service. As a percentage of total operating expenses, R&D expenses ~~decreased~~increased by 6.54 percentage points from 4154.75% for the three months ended ~~December~~March 31, ~~2024~~2025 to 3560.39% for the three months ended ~~December~~March 31, ~~2025~~2026.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
Research and development	$	54,999	$	44,201	24.4	%

Historically, R&D expenses are our largest operating expense as we continue to build on our existing software platforms and develop new technologies. R&D expenses for the six months ended March 31, 2026 were $55.0 million, an increase of $10.8 million, or 24.4%, from $44.2 million for the six months ended March 31, 2025. The increase was primarily attributable to $4.4 million of international tax credit catch-ups recorded in six months ended March 31,

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2025 which did not recur in the six months ended March 31, 2026, a $3.7 million increase in personnel related costs, a $1.5 million increase due to lower capitalization of internal software development costs, and a $1.0 million increase in amortization of capitalized internal-use software recently placed in service. As a percentage of total operating expenses, R&D expenses decreased by 1.7 percentage points from 47.6% for the six months ended March 31, 2025 to 45.9% for the six months ended March 31, 2026.

Sales & Marketing Expenses

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
Sales and marketing	$	56,~~557~~519	$	4,~~766~~930	1632.62	%

Sales and marketing expenses for the three months ended ~~December~~March 31, ~~2025~~2026 were $5.6.5 million, an increase of $01.86 million, or 1632.62%, from $4.89 million for the three months ended ~~December~~March 31, ~~2024~~2025. This increase was primarily driven by ~~stock-based~~increased employee compensation ~~expense~~costs of $01.31 million and ~~other~~a ~~employee~~$0.5 ~~compensation~~million increase in marketing costs ofassociated ~~$0.3~~primarily ~~million~~with trade shows. As a percentage of total operating expenses, sales and marketing expenses ~~decreased~~increased by 1.6 percentage points from 911.5% for the three months ended ~~December~~March 31, ~~2024~~2025 to 713.91% for the three months ended ~~December~~March 31, ~~2025~~2026.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
Sales and marketing	$	12,076	$	9,696	24.5	%

Sales and marketing expenses for the six months ended March 31, 2026 were $12.1 million, an increase of $2.4 million, or 24.5%, from $9.7 million for the six months ended March 31, 2025. The increase in sales and marketing expenses was primarily driven by increased employee compensation costs of $1.7 million and a $0.7 million increase in marketing costs associated primarily with trade shows. As a percentage of total operating expenses, sales and marketing expenses decreased by 0.4 percentage points from 10.4% for the six months ended March 31, 2025 to 10.1% for the six months ended March 31, 2026.

General & Administrative Expenses

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
General and administrative	$	3112,~~987~~796	$	1211,~~754~~199	~~150~~14.83	%

General and administrative expenses for the three months ended ~~December~~March 31, ~~2025~~2026 were $3212.08 million, an increase of $191.26 million, or ~~150~~14.83%, from $1211.82 million for the three months ended ~~December~~March 31, ~~2024~~2025. The increase in general and administrative expenses was primarily ~~attributable~~driven toby aincreased ~~$20.8 million increase in~~ legal ~~professional~~expenses ~~services~~as ~~driven~~we bycontinue ~~costs~~our ~~related~~efforts to ~~the~~protect, ~~Samsung~~enforce, IPand license ~~agreement~~our intellectual property portfolio. As a percentage of total operating expenses, general and administrative expenses decreased by 0.4 percentage points from 26.1% for the three months ended March 31, 2025 to 25.7% for the three months ended March 31, 2026.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
General and administrative	$	44,783	$	23,953	87.0	%

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General and administrative expenses ~~increased~~for bythe six months ended March 31, 2026 were $44.8 million, an increase of $20.8 million, or 87.0%, from $24.0 million for the six months ended March 31, 2025. The increase in general and administrative expenses was primarily attributable to a $20.8 million increase in legal professional services driven by costs related to the Samsung IP license agreement, $2.0 million driven by other increased legal expenses as we continue our efforts to protect, enforce, and license our intellectual property portfolio. These increases were partially offset by lower depreciation of $0.7 million due to one-time acceleration of depreciation for facilities closures recognized during the six months ended March 31, 2025 which did not recur, lower insurance and other infrastructure costs of $0.6 million, and lower personnel related costs of $0.6 million. As a percentage of total operating expenses, general and administrative expenses increased by 11.6 percentage points from 25.58% for the ~~three~~six months ended ~~December~~March 31, ~~2024~~2025 to 4537.74% for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026.

Amortization of Intangible Assets

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
Operating expense	—		~~554~~536		(100.0)	%
Total amortization	$	—	$	~~554~~536	(100.0)	%

Amortization expense for acquired technology and patents is included in the cost of revenues in the accompanying Condensed Consolidated Statements of Operations. Acquired technology and patents were fully amortized as of December 31, 2024. Amortization expense for customer relationships is included in operating expenses in the accompanying Condensed Consolidated Statements of Operations. Customer relationships were fully amortized as of June 30, 2025.

As a percentage of total operating expenses, intangible asset amortization expenses within operating expenses decreased by 1.13 percentage points from 1.13% for the three months ended ~~December~~March 31, ~~2024~~2025, as compared to zero percent for the three months ended ~~December~~March 31, ~~2025~~2026.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025

Operating expense	—		1,090		(100.0)	%
Total amortization	$	—	$	1,090	(100.0)	%

Amortization expense for customer relationships is included in operating expenses in the accompanying Condensed Consolidated Statements of Operations. Customer relationships were fully amortized as of June 30, 2025.

As a percentage of total operating expenses, intangible asset amortization expenses within operating expenses decreased by 1.2 percentage points from 1.2% for the six months ended March 31, 2025 as compared to zero percent for the six months ended March 31, 2026.

Other Components of Operating Expense

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,				% Change
	Three Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
Restructuring and other costs, net	$	~~7,794~~127	$	112,~~062~~832	(2995.5)	%

Fiscal Year 2026

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Fiscal Year 2025

As a percentage of total operating expenses, restructuring and other costs, net decreased by 116.04 percentage points from 226.16% for the three months ended ~~December~~March 31, ~~2024~~2025 to 110.13% for the three months ended ~~December~~March 31, ~~2025~~2026.

32Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
Restructuring and other costs, net	$	7,921	$	13,894	(43.0)	%

Fiscal Year 2026

Fiscal Year 2025

As a percentage of total operating expenses, restructuring and other costs, net decreased by 8.4 percentage points from 15.0% for the six months ended March 31, 2025 to 6.6% for the six months ended March 31, 2026.

Total Other (Expense) Income, Net

Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025


	Three Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
Interest income	$	655	$	918	(28.6)	%
Interest expense	(1,477)		(2,716)		(45.6)	%
Other income, net	288		499		(42.3)	%
Total other (expense) income, net	$	(534)	$	(1,299)	(58.9)	%

Total other (expense) income, net for the three months ended March 31, 2026 was expense of $0.5 million, a change of $0.8 million from $1.3 million of expense for the three months ended March 31, 2025. The decrease in interest income was primarily attributable to a lower balance of cash, cash equivalents and marketable securities, and a lower interest rate environment when compared to the three months ended March 31, 2025. The decrease in interest expense was primarily attributable to a lower overall principal balance outstanding coupled with a lower applicable interest rate on our Notes. The decrease in other income, net was primarily driven by comparatively unfavorable foreign exchange movements. For further information, see “Liquidity and Capital Resources” below.

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~~Total~~Six ~~Other~~Months ~~Income~~Ended ~~(Expense)~~March 31, ~~Net~~2026 Compared with Six Months Ended March 31, 2025

Three Months Ended December 31, 2025 Compared with Three Months Ended December 31, 2024


	Six Months Ended March 31,				% Change
	2026		2025		2026 vs. 2025
Interest income	$	1,520	$	2,355	(35.5)	%
Interest expense	(3,142)		(6,109)		(48.6)	%
Other income, net	1,837		771		138.3	%
Total other income (expense), net	$	215	$	(2,983)	(107.2	%)

	Three Months Ended December 31,				% Change
	2025		2024		2025 vs. 2024
Interest income	$	865	$	1,437	(39.8)	%
Interest expense	(1,665)		(3,393)		(50.9)	%
Other income, net	1,550		272		469.9	%
Total other income (expense), net	$	750	$	(1,684)	(144.5)	%

Total other income (expense), net for the six months ended March 31, 2026 was income of $0.2 million, a change of $3.2 million from $3.0 million of expense for the six months ended March 31, 2025. The decrease in interest income was primarily attributable to a lower balance of cash, cash equivalents and marketable securities, and a lower interest rate environment when compared to the six months ended March 31, 2025. The decrease in interest expense was primarily attributable to a lower overall principal balance outstanding coupled with a lower applicable interest rate on our Notes. The increase in other income, net was driven primarily by the gain on debt repurchase of the Notes during the six months ended March 31, 2026. For further information, see “Liquidity and Capital Resources” below.

Total other income (expense), net for the three months ended December 31, 2025 was income of $0.8 million, a change of $2.4 million from $1.7 million of expense for the three months ended December 31, 2024. The decrease in interest income was primarily attributable to lower balances of marketable securities and a generally lower interest rate environment when compared to the three months ended December 31, 2024. The decrease in interest expense was primarily attributable to a lower applicable interest rate on our Notes and a lower overall principal balance outstanding. The change in Other income, net was driven primarily by the gain on debt repurchase of the Notes. For further information, see “Liquidity and Capital Resources” below.

Provision For Income Taxes

Three Months Ended ~~December~~March 31, ~~2025~~2026 Compared with Three Months Ended ~~December~~March 31, ~~2024~~2025

	Three Months Ended December 31,						% Change
	Three Months Ended March 31,						% Change
	2025			2024			2025 vs. 2024
	2026			2025			2026 vs. 2025
Provision for income taxes	$	35,300		$	5,671		522.5	%
(Benefit from) provision for income taxes	$	(4,651)		$	(5,603)		(17.0)	%
Effective income tax rate %	~~117~~156.42		%	(3034.59)		%

Our effective income tax rate for the three months ended ~~December~~March 31, ~~2025~~2026 was positive ~~117~~156.42%, compared to negative 3034.59% for the three months ended ~~December~~March 31, ~~2024~~2025. Our ~~provision~~benefit ~~for~~from income taxes for the three months ended ~~December~~March 31, ~~2025~~2026 was $354.37 million, a net change of $291.60 million from a ~~provision~~benefit ~~for~~from income taxes of $5.76 million for the three months ended ~~December~~March 31, ~~2024~~2025. This difference was attributable to the tax impacts of foreign ~~valuation~~income ~~allowances~~inclusions, stock-based compensation, research credits, and our composition of jurisdictional earnings.

Six Months Ended March 31, 2026 Compared with Six Months Ended March 31, 2025


	Six Months Ended March 31,						% Change
	2026			2025			2026 vs. 2025
(Benefit from) provision for income taxes	$	30,649		$	68		44972.1	%
Effective income tax rate %	113.2		%	(2.7)		%

Our effective income tax rate for the six months ended March 31, 2026 was 113.2%, compared to negative 2.7% for the six months ended March 31, 2025. Our provision for income taxes for the six months ended March 31, 2026 was $30.6 million, a net change of $30.6 million from a provision for income taxes of $0.1 million for the six months ended March 31, 2025. This difference was attributable to the tax impacts of valuation allowances, stock-based compensation, research credits, and our composition of jurisdictional earnings.

Liquidity and Capital Resources

Financial Condition

As of ~~December~~March 31, ~~2025~~2026, we had $94108.73 million in cash, ~~cash equivalents,~~ and ~~marketable~~cash ~~securities~~equivalents. 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~~have historically included corporate bonds and government securities. As of March 31, 2026, all marketable securities were fully matured.

~~Sources and Material Cash Requirements~~39

Our principal sources of liquidity are our cash, cash equivalents, and marketable securities, as well as the cash flows we generate from our operations. The primary uses of cash include costs of revenues, funding of R&D activities, capital expenditures and debt obligations.

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. Based on our expectations to generate positive cash flows and the $94.7 million of cash, cash equivalents, and marketable securities as of December 31, 2025, we believe that we will be able to meet our liquidity needs over the next 12 months.

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Sources and Material Cash Requirements

Our principal sources of liquidity are our cash and cash equivalents, as well as the cash flows we generate from our operations. The primary uses of cash include costs of revenues, funding of R&D activities, capital expenditures and debt obligations.

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. Based on our expectations to generate positive cash flows and the $108.3 million of cash and cash equivalents as of March 31, 2026, we believe that we will be able to meet our liquidity needs over the next 12 months.

The following table presents our material cash requirements for future periods (dollars in thousands):

	Material Cash Requirements Due by Period
	2026		2027-2028		2029-2030		Thereafter		Total
2028 Notes	$	—	$	105,000	$	—	$	—	$	105,000
Cash interest payable on the 2028 Notes (a)	788		3,150		—		—		3,938
2025 Modified Notes	—		75,000		—		—		75,000
Cash interest payable on the 2025 Modified Notes (a)	563		2,250		—		—		2,813
Operating leases	42,~~467~~856		109,~~044~~878		4,~~159~~117		110		1816,~~780~~961
Financing leases	5426		—		—		—		5426
Total material cash requirements	$	54,~~871~~232	$	195,~~444~~278	$	4,~~159~~117	$	110	$	~~205~~203,~~584~~737

(a)Interest per annum is due and payable semiannually and is determined based on the outstanding principal as of ~~December~~March 31, ~~2025~~2026.

Should we need to secure additional sources of liquidity, we believe that we could finance our needs through the issuance of equity securities or debt offerings. However, we cannot guarantee that we will be able to obtain financing through the issuance of equity securities or debt offerings or that, if such financing is obtained, that it will be on acceptable terms. Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or in the solvency of our customers or suppliers or if there are other significantly unfavorable changes in economic conditions. For instance, inflation and persistently high interest rates, changes in the political, legal and regulatory environment, including trade policies and tariffs, and disruptions have negatively impacted the global economy and created significant volatility and disruption of financial markets. 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

During the three months ended December 31, 2025, we repurchased $30.0 million aggregate principal amount of our 2028 Notes for $28.0 million in cash, including accrued interest and fees, via privately negotiated transactions with certain holders. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $1.1 million.40

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During the ~~instruments~~six domonths ~~not~~ended ~~have~~March 31, ~~substantially~~2026, ~~different~~we ~~terms~~repurchased $30.0 ~~Because~~million ~~the~~aggregate ~~concurrent~~principal ~~redemption~~amount of ~~the~~our ~~2025 Notes and a portion of issuance of the~~ 2028 Notes ~~were~~for ~~executed~~$28.0 ~~with~~million ~~the~~in ~~same investors~~cash, weincluding ~~evaluated~~accrued ~~the~~interest ~~transaction~~and ~~as a debt modification~~fees, onvia aprivately ~~creditor~~negotiated bytransactions ~~creditor~~with ~~basis~~certain holders. The ~~repurchase~~repurchased ofnotes ~~the~~were ~~2025~~subsequently ~~Notes~~cancelled and ~~issuance~~retired, ofresulting ~~the~~in ~~2028~~a ~~Notes~~gain ~~were deemed to not have substantially different terms~~ on ~~the~~extinguishment ~~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~~$1.1 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 modificationmillion.

AsIn aconnection ~~result~~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. ~~are~~We ~~considered~~evaluated the transaction to determine whether the exchange should be accounted for as a modification or extinguishment under the provisions of ASC 470-50, which allows for an exchange of debt instruments between the ~~2025~~same ~~Notes~~debtor and ~~are~~creditor ~~included~~to inbe accounted for as a modification so long as the ~~balances~~instruments ofdo not have substantially different terms. Because the ~~2025~~concurrent ~~Notes~~redemption (of the “2025 ~~Modified~~ Notes” and ~~together~~a ~~with~~portion of issuance of the 2028 Notes were executed with the same investors, we evaluated the ~~“Notes”).~~transaction Weas ~~recorded~~a ~~$14~~debt modification, on a creditor by creditor basis.3 ~~million~~The repurchase of ~~fees~~the ~~paid~~2025 ~~directly~~Notes and issuance of the 2028 Notes were deemed to not have substantially different terms on the ~~lenders~~basis asthat ~~deferred~~(1) ~~debt~~the ~~issuance~~present ~~costs,~~value ~~and~~of ~~$3.8~~the ~~million~~cash flows under the terms of ~~fees~~the ~~paid~~new todebt ~~third-parties~~instrument were ~~expensed~~less inthan 10% different from the ~~period.~~present Asvalue of ~~December 31,~~the ~~2025,~~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 ~~amount~~value of the 2025 ~~Modified~~ Notes, ~~was~~and ~~$68.0 million~~therefore, ~~net~~the repurchase of ~~unamortized~~the ~~costs~~2025 ofNotes ~~$7.0~~was ~~million~~accounted for as a debt modification.

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 (the “2025 Modified Notes” and together with the 2028 Notes, the “Notes”). We recorded $14.3 million of fees paid directly to the lenders as deferred debt issuance costs, and $3.8 million of fees paid to third-parties were expensed in the period. As of March 31, 2026, the carrying amount of the 2025 Modified Notes was $68.6 million, net of unamortized costs of $6.4 million.

We accounted for $122.5 million of the 2028 Notes, that were not negotiated with the investors of the 2025 Notes, as a single liability. We incurred transaction costs of $2.4 million relating to the issuance of the 2028 Notes, which were recorded as a direct deduction from the face amount of the 2028 Notes and are being amortized as interest expense over the term of the 2028 Notes using the interest method. As of ~~December~~March 31, ~~2025~~2026, the carrying amount of the 2028 Notes was $104.01 million and had unamortized issuance costs of $1.0 million. As of ~~December~~March 31, ~~2025~~2026, the 2028 Notes were not convertible. As of ~~December~~March 31, ~~2025~~2026 and September 30, 2025, the if-converted value of the 2028 Notes was $7788.47 million and $85.0 million, respectively, less than its principal amount.

3.00% Senior Convertible Notes due 2025

~~The interest expense recognized related to the Notes for the three months ended December 31, 2025 and 2024 was as follows (dollars in thousands):~~41

	Three Months Ended December 31,
	2025		2024
Contractual interest expense	$	784	$	1,425
Amortization of debt discount	158		265
Amortization of issuance costs	721		1,281
Total interest expense related to the Notes	$	1,663	$	2,971

Senior Credit Facilities

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~~Agreement”), consisting of a four-year senior secured term loan facility in the aggregate principal amount of $125.0 million (the “Term Loan Facility”).~~ The ~~net~~interest ~~proceeds~~expense ~~from~~recognized ~~the~~related ~~issuance~~to of the ~~Term~~Notes ~~Loan~~for ~~Facility were $123.0 million. We also entered into a senior secured first-lien revolving credit facility in an aggregate principal amount of $50.0 million (~~the ~~“Revolving~~three ~~Facility”~~ and, ~~together~~six ~~with~~months ~~the~~ended ~~Term Loan Facility~~March 31, ~~the~~2026 ~~“Senior~~and ~~Credit~~2025 ~~Facilities”),~~was ~~which~~as ~~could~~follows ~~have~~(dollars ~~been drawn on~~ in ~~the event that our working capital and other cash needs were not supported by our operating cash flow.~~thousands):


	Three Months Ended March 31,				Six Months Ended March 31,
	2026		2025		2026		2025
Contractual interest expense	$	675	$	1,221	$	1,459	$	2,646
Amortization of debt discount	137		263		295		528
Amortization of issuance costs	626		1,224		1,347		2,505
Total interest expense related to the Notes	$	1,438	$	2,708	$	3,101	$	5,679

Senior Credit Facilities

In connection with the issuance of the 2028 Notes, in the third quarter of fiscal year 2023, we borrowed $24.7 million under our Revolving Facility and paid $106.3 million towards our Term Loan Facility. As a result, we recorded $104.9 million extinguishment of debt and $1.3 million loss on the extinguishment of debt. All principal and interest on the Term Loan Facility have been paid in full. As of March 31, 2026 and September 30, 2025, there were no amounts outstanding under the Revolver Facility.

Total interest expense relating to the Senior Credit Facilities was none and $0.4 million for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 and ~~2024~~2025, respectively. There was ~~none~~no ~~and~~interest ~~$0.4~~expense ~~million~~incurred relating to the Senior Credit Facilities during the three months ended March 31, ~~respectively~~2026 and 2025. Amounts reflect the coupon and accretion of the discount.

Cash Flows

Cash flows from operating, investing and financing activities for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 and 2025, as reflected in the unaudited Condensed Consolidated Statements of Cash Flows included in Item 1 of this Form 10-Q, are summarized in the following table (dollars in thousands):

	Three Months Ended December 31,				% Change
	Six Months Ended March 31,				% Change
	2025		2024		2025 vs. 2024
	2026		2025		2026 vs. 2025
Net cash provided by operating activities	$	3752,~~894~~001	$	924,~~254~~720	~~309~~110.54	%
Net cash (used in) provided by investing activities	(1,789)		759		(335.7	%)
Net cash used in investing activities	(122)		(926)		(86.8	%)
Net cash used in financing activities	(27,~~654~~105)		(27,~~084~~189)		2(0.13	%)
Effects of exchange rate changes on cash and cash equivalents	(~~338~~531)		(~~311~~722)		8(26.75	%)
Net changes in cash and cash equivalents	$	824,~~113~~243	$	(174,~~382~~117)	(~~146~~688.79)	%

Net Cash Provided by Operating Activities

Net cash provided by operating activities for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 was $3752.90 million, a net change of $2827.63 million, or ~~309~~110.54%, from net cash provided by operating activities of $924.37 million for the ~~three~~six months ended ~~December~~March 31, ~~2024~~2025. The change in cash flows ~~were~~was primarily due to:

•An increase of $3016.20 million from income before non-cash charges primarily driven by the net impact of the lump sum payment, net of taxes, received from Samsung and related legal expenses;

~~•A increase of $1.9 million due to favorable changes in working capital primarily related to accrued expenses and other liabilities, accounts receivable, prepaid expenses and other assets; and~~42

•A decrease of $3.5 million from changes in deferred revenue.

Deferred revenue represents a significant portion of our net cash used in or provided by operating activities and, depending on the nature of our contracts with customers and foreign currency exchange rates, this balance can fluctuate significantly from period to period. Fluctuations in deferred revenue are not a reliable indicator of future performance and the related revenue associated with these contractual commitments. We do not expect any changes in deferred revenue to affect our ability to meet our obligations.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities for the three months ended December 31, 2025 was $1.8 million, a net change of $2.5 million, or 335.7%, from $0.8 million of cash provided by investing activities for the three months ended December 31, 2024. The change in cash flows were primarily due to a decrease of $1.6 million related to marketable securities and $0.9 million related to additional capital expenditures.

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•An increase of $12.1 million due to favorable changes in working capital primarily related to accrued expenses and other liabilities, accounts receivable, prepaid expenses and other assets; and

•A decrease of $0.8 million from changes in deferred revenue.

Net Cash Used in Investing Activities

Net cash used in investing activities for the six months ended March 31, 2026 was $0.1 million, a net change of $0.8 million, or 86.8%, from $0.9 million of cash used in investing activities for the six months ended March 31, 2025. The change in cash flows was primarily due to a $1.0 million decrease related to less capital expenditures.

Net Cash Used in Financing Activities

Net cash used in financing activities for the ~~three~~six months ended ~~December~~March 31, ~~2025~~2026 was $27.71 million, a net change of $0.61 million, from cash used in financing activities of $27.12 million for the ~~three~~six months ended ~~December~~March 31, ~~2024~~2025. The change in cash flows ~~were~~was primarily due to:

•An increase of $27.6 million in cash used for principal payments for long-term debt;

•A decrease of $27.0 million in cash used for principal payments for short-term debt;

•An increase of $65.19 million in cash provided by proceeds from the issuance of our common stock; and

•An increase of $65.24 million in cash used for payments of tax related withholdings due to the net settlement of equity awards.

Critical Accounting Estimates

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that have a material impact on the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities and the amounts of revenues and expenses. Actual results may differ from these estimates.

We believe that our critical accounting estimates are those related to revenue recognition; allowance for credit losses; accounting for deferred costs; accounting for internally developed software; the valuation of goodwill and intangible assets; accounting for stock-based compensation; accounting for income taxes; accounting for convertible debt; and loss contingencies. We believe these estimates are critical because they most significantly affect the portrayal of our financial condition and results of operations and involve our most complex and subjective estimates and judgments. A discussion of our critical accounting estimates may be found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Estimates” and below.

Stock-Based Compensation

We grant equity awards to certain employees which include restricted stock unit awards in accordance with the Cerence 2019 Equity Incentive Plan. The fair value for time-based and performance-based restricted stock units is based on the closing share price of our common stock on the date of grant. For performance-based restricted stock units, compensation cost is recognized based on the number of units expected to vest upon the achievement of the applicable performance conditions. We recognize stock-based compensation as an expense on a straight-line basis over the requisite service period and account for forfeitures as they occur.

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We consider stock-based compensation to be a critical accounting estimate due to the significant judgment required in assessing the probability of achievement of certain performance conditions associated with our performance-based restricted stock units awards. Certain of these awards vest upon the achievement of strategic milestones that are subject to factors largely outside of our control, including the actions and decisions of third parties. As a result, we may not be able to conclude that achievement of certain performance conditions is probable until certain underlying milestone outcomes are substantially complete.

No compensation cost is recognized for these awards until the performance condition is deemed probable. If and when the performance condition becomes probable, we would recognize a cumulative catch-up adjustment for stock-based compensation expense in the period of the probability determination, the magnitude of which would depend on the level of achievement, the grant-date fair value of the underlying awards, and the proportion of the requisite service period completed at that time. The resulting charge could be significant to our results of operations in the period of recognition. If the performance condition is not achieved within the specified time frame, the awards would expire unvested and no compensation cost would be recognized.

We reassess the probability of achievement at each reporting date. Changes in our assessment could result in material adjustments to stock-based compensation expense in the period of such reassessment.

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements To Be Adopted

Refer to Note 2 to the accompanying unaudited condensed consolidated financial statements for a description of certain issued accounting standards that have been recently adopted and are expected to be adopted by us and may impact our results of operations in future reporting periods.

Item 3. 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 our 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.

Exchange Rate Sensitivity

We are exposed to changes in foreign currency exchange rates. Any foreign currency transaction, defined as a transaction denominated in a currency other than the local functional currency, will be reported in the functional currency at the applicable exchange rate in effect at the time of the transaction. A change in the value of the functional currency compared to the foreign currency of the transaction will have either a positive or negative impact on our financial position and results of operations.

Assets and liabilities of our foreign entities are translated into U.S. dollars at exchange rates in effect at the balance sheet date and income and expense items are translated at average rates for the applicable period. Therefore, the change in the value of the U.S. dollar compared to foreign currencies will have either a positive or negative effect on our financial position and results of operations. Historically, our primary exposure has been related to transactions denominated in the Canadian dollar, Chinese yuan, Euro, and Japanese yen.

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 $2.7 million at March 31, 2026. 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 $0.3 million at March 31, 2026. Such losses would be offset by corresponding gains in the remeasurement of the underlying transactions being hedged. We believe these foreign currency forward exchange contracts and the offsetting underlying commitments, when taken together, do not create material market risk.

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outstanding foreign currency forward contracts was $9.5 million at December 31, 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 $1.0 million at December 31, 2025. Such losses would be offset by corresponding gains in the remeasurement of the underlying transactions being hedged. 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. As of ~~December~~March 31, ~~2025~~2026, we held approximately $92108.13 million of cash and cash equivalents consisting of cash and highly liquid investments, including money-market funds and time deposits. Assuming a 1% increase in interest rates, our interest income on our highly liquid investments would increase by $0.34 million per annum, based on ~~December~~March 31, ~~2025~~2026 reported balances.

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Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report. Based on this evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of ~~December~~March 31, ~~2025~~2026 to ensure that all material information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to them as appropriate to allow timely decisions regarding required disclosure and that all such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations of the effectiveness of internal control. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

A.P., a minor, by and through her guardian, Carlos Pena and Carlos Pena Action

Samsung Electronics Co. Ltd and Samsung Electronics America, Inc.

On October 13, 2023, Cerence filed its first patent infringement complaint against Samsung alleging infringement of five Cerence patents (“Samsung I”). On March 15, 2024, Cerence filed its second patent infringement complaint against Samsung alleging infringement of four additional Cerence patents (“Samsung II”). 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 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, which payment was received, net of tax, during the three months ended December 31, 2025, and the entirety of which was recorded as license revenue in accordance with ASC 606 during the three months ended December 31, 2025, consistent with the Company’s revenue recognition policy. 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 resulted in us incurring approximately $20.7 million in legal fees, included in General and administrative expenses, which were paid in full during the three months ended December 31, 2025.

IP Enforcement Actions

From time to time, we may need to file actions to enforce our intellectual property rights. As of the date of this report, we have filed the following pending actions: (1) a complaint with the United States International Trade Commission (ITC) against Amazon.com, Inc. and Amazon.com Services, LLC (collectively, "Amazon") to block the importation of products infringing the Company's patents; (2) two complaints against Amazon and Amazon Web Services, Inc. in the United States District Court for the Eastern District of Texas seeking damages for such infringement and for infringement of additional patents; (3) a complaint against Apple Inc. in the United States District Court for the Western District of Texas for patent infringement and seeking damages for such infringement; (24) a complaint with the United States ~~International Trade Commission (~~ITC) against Sony Group Corporation ("Sony") and TCL Technology Group Corporation ("TCL") to block the importation of products infringing the Company's patents; (35) complaints against both Sony and TCL in the United States District Court for the Eastern District of Texas seeking damages for such infringement; and (6) a complaint against Microsoft Corp. and Nuance Communications, Inc. in the United States District Court for the District of Delaware seeking damages for copyright infringement and breach of contract. The potential outcomes of litigation are unpredictable and, as a result, there can be no assurance that we will prevail in any such litigation or, if we prevail, what remedies might be awarded or whether any revenue may be recognized.

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damages for such infringement; and (4) a complaint against Microsoft Corp. and Nuance Communications, Inc. in the United States District Court for the District of Delaware seeking damages for copyright infringement and breach of contract. The potential outcomes of litigation are unpredictable and, as a result, there can be no assurance that we will prevail in any such litigation or, if we prevail, what remedies might be awarded or whether any revenue may be recognized.

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. 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.~~

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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 1A. Risk Factors.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, which could materially affect our business, financial condition or future results of operations. The risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 and those described in this Quarterly Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. Other than as updated below, there are no material changes to the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.

Benefits realized by our intellectual property ~~monetization~~enforcement ~~efforts~~and licensing activities, which are undertaken to protect and commercialize technology integral to our operating business, may result in unpredictable or variable accounting ~~treatments~~treatment.

Any agreements reached or damages awarded to us in connection with our intellectual property ~~monetization~~enforcement ~~efforts~~and licensing activities are subject to the appropriate application of relevant accounting standards under USU.S. GAAP based on the terms and conditions of any future potential agreement to license our IP. Our historical accounting treatment of such receipts and application of the relevant accounting standards may not be indicative of how future benefits may be accounted for. The revenue we may recognize from licenses, settlements or judgments in our favor may have a ~~one~~period-~~time~~specific ~~effect~~impact ofon ~~increasing~~reported revenue indue ~~the~~to ~~applicable period as~~ required ~~under applicable~~ accounting ~~standards~~treatment, which may make comparisons with prior and future periods more difficult, even where the underlying intellectual property forms part of our ongoing technology platform and operating business. For example, we recognized $49.5 million of revenue associated with the settlement of our litigation and IP license with Samsung and a ~~one-time~~ lump -sum payment, which was recognized in ~~connection~~accordance ~~therewith~~with applicable accounting standards, during the first quarter of fiscal year 2026.

Item 5. Other Information.

Rule 10b5-1 Plans. Our policy governing transactions in our securities by directors, officers and employees permits our officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company.

During the three-month period ended ~~December~~March 31, ~~2025~~2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

We anticipate that, as permitted by Rule 10b5-1 and our policy governing transactions in our securities, some or all of our officers, directors and employees may establish trading plans in the future. We intend to disclose the names of executive officers and directors who establish a trading plan in compliance with Rule 10b5-1 and Regulation S-K, Item 408(a) and the requirements of our policy governing transactions in our securities in our future quarterly and annual reports on Form 10-Q and 10-K filed with the SEC. However, we undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan, other than in such quarterly and annual reports.

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Item 6. Exhibits.

The exhibits listed on the Exhibit Index are filed or furnished as part of this Quarterly Report on Form 10-Q.

EXHIBIT INDEX

Incorporated by Reference

Exhibit Index #

Exhibit Description

Filed Herewith

Form

File No.

Exhibit

Filing Date

3.1

Amended and Restated Certification of Incorporation of Cerence Inc.

8-K

001-39030

3.1

October 2, 2019

3.2

Second Amended and Restated By-laws of Cerence Inc.

8-K

001-39030

3.1

May 4, 2023

3.3

Amendment No. 1 to Second Amended and Restated By-laws of Cerence Inc.

10-Q

001-39030

3.3

May 7, 2025

31.1

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

104

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

*Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Cerence Inc.
Date: February 4, 2026	By:	/s/ Brian Krzanich
Date: May 7, 2026	By:	/s/ Brian Krzanich
		Brian Krzanich
		Chief Executive Officer(Principal Executive Officer)
Date: February 4, 2026	By:	/s/ Tony Rodriquez
Date: May 7, 2026	By:	/s/ Tony Rodriquez
		Tony Rodriquez
		Executive Vice President, Chief Financial Officer(Principal Financial and Accounting Officer)

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