Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This item contains a discussion of our business, including a general overview of our business, results of operations, liquidity and capital resources and quantitative and qualitative disclosures about market risk.
The following discussion should be read in conjunction with Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K and the unaudited condensed financial statements and related notes beginning on page 5. This Item 2 contains “forward looking” statements that involve risks and uncertainties. See Forward-Looking Statements at the beginning of this Quarterly Report.
Overview
We are a leading provider of cloud-based, end-to-end SCM software. Our software combines networks, data and applications to provide a deeply embedded, mission-critical platform that allows customers to optimize their supply chain by accelerating growth, reducing costs, increasing visibility and driving improved resiliency. Given the mission-critical nature of our solutions, we maintain deep, long-term relationships with our customers, which is reflected by our gross retention and customer tenure.
Recent Events
On September 1, 2021, we completed the BluJay Acquisition with the issuance of 72,383,299 shares of Class A Common Stock to the BluJay Sellers and the payment of approximately $770 million of cash which includes the repayment of BluJay's debt facility. The total purchase consideration for the BluJay Acquisition was $1.6 billion.
In connection with the completion of the BluJay Acquisition, we secured $300 million in PIPE financing from institutional investors for the purchase of an aggregate of 28,909,022 shares of our Class A Common Stock. PIPE financing proceeds of $280 million were received in advance of the BluJay Acquisition and were recorded as a payable to sellers on our Condensed Consolidated Balance Sheet as of August 31, 2021. We also obtained a $380.0 million incremental term loan to our 2021 Term Loan and increased our 2021 Revolving Credit Facility by $80.0 million to $155.0 million. In addition, the letter of credit sublimit was increased from $15.0 million to $30.0 million upon completion of the BluJay Acquisition.
Additionally, the Investor Rights Agreement was amended and restated to add certain of BluJay's existing stockholders as parties, including certain affiliates of Francisco Partners and Temasek as well as include a six month lock-up period from September 1, 2021 through February 28, 2022 for certain equityholders of E2open and BluJay. The Investor Rights Agreement also provides Francisco Partners and Temasek the right to nominate one member each to our board of directors. Mr. Deep Shah and Mr. Martin Fichtner became new directors on September 1, 2021.
30
Results of Operations
The following table is our Condensed Consolidated Statements of Operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Revenue
|
|
$
|
78,079
|
|
|
|
$
|
81,817
|
|
|
$
|
144,406
|
|
|
|
$
|
164,941
|
|
Cost of revenue
|
|
|
(39,551
|
)
|
|
|
|
(30,157
|
)
|
|
|
(77,710
|
)
|
|
|
|
(60,951
|
)
|
Total gross profit
|
|
|
38,528
|
|
|
|
|
51,660
|
|
|
|
66,696
|
|
|
|
|
103,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
16,208
|
|
|
|
|
14,356
|
|
|
|
31,909
|
|
|
|
|
28,987
|
|
Sales and marketing
|
|
|
11,174
|
|
|
|
|
11,992
|
|
|
|
23,688
|
|
|
|
|
24,302
|
|
General and administrative
|
|
|
13,401
|
|
|
|
|
9,861
|
|
|
|
27,118
|
|
|
|
|
19,625
|
|
Acquisition-related expenses
|
|
|
7,174
|
|
|
|
|
2,018
|
|
|
|
16,952
|
|
|
|
|
5,386
|
|
Amortization of acquired intangible assets
|
|
|
3,543
|
|
|
|
|
8,447
|
|
|
|
7,373
|
|
|
|
|
16,914
|
|
Total operating expenses
|
|
|
51,500
|
|
|
|
|
46,674
|
|
|
|
107,040
|
|
|
|
|
95,214
|
|
(Loss) income from operations
|
|
|
(12,972
|
)
|
|
|
|
4,986
|
|
|
|
(40,344
|
)
|
|
|
|
8,776
|
|
Interest and other expense, net
|
|
|
(6,332
|
)
|
|
|
|
(16,308
|
)
|
|
|
(11,235
|
)
|
|
|
|
(35,680
|
)
|
Change in tax receivable agreement liability
|
|
|
(637
|
)
|
|
|
|
—
|
|
|
|
(3,136
|
)
|
|
|
|
—
|
|
Gain (loss) from change in fair value of warrant
liability
|
|
|
18,727
|
|
|
|
|
—
|
|
|
|
(41,216
|
)
|
|
|
|
—
|
|
Loss from change in fair value of contingent
consideration
|
|
|
(16,780
|
)
|
|
|
|
—
|
|
|
|
(90,040
|
)
|
|
|
|
—
|
|
Total other expenses
|
|
|
(5,022
|
)
|
|
|
|
(16,308
|
)
|
|
|
(145,627
|
)
|
|
|
|
(35,680
|
)
|
Loss before income taxes
|
|
|
(17,994
|
)
|
|
|
|
(11,322
|
)
|
|
|
(185,971
|
)
|
|
|
|
(26,904
|
)
|
Income tax expense
|
|
|
(5,994
|
)
|
|
|
|
(6,218
|
)
|
|
|
(7,372
|
)
|
|
|
|
(14,388
|
)
|
Net loss
|
|
|
(23,988
|
)
|
|
|
$
|
(17,540
|
)
|
|
|
(193,343
|
)
|
|
|
$
|
(41,292
|
)
|
Less: Net loss attributable to noncontrolling
interest
|
|
|
(3,471
|
)
|
|
|
|
|
|
|
(30,568
|
)
|
|
|
|
|
Net loss attributable to E2open Parent
Holdings, Inc.
|
|
$
|
(20,517
|
)
|
|
|
|
|
|
$
|
(162,775
|
)
|
|
|
|
|
Net loss attributable to E2open Parent
Holdings, Inc. Class A common
stockholders per share - diluted
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
$
|
(0.85
|
)
|
|
|
|
|
Weighted-average common shares
outstanding - diluted
|
|
|
195,148
|
|
|
|
|
|
|
|
191,099
|
|
|
|
|
|
Three Months Ended August 31, 2021 compared to Three Months Balance at August 31, 2020
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
61,725
|
|
|
|
$
|
69,035
|
|
|
$
|
(7,310
|
)
|
|
|
-11
|
%
|
Professional services
|
|
|
16,354
|
|
|
|
|
12,782
|
|
|
|
3,572
|
|
|
|
28
|
%
|
Total revenue
|
|
$
|
78,079
|
|
|
|
$
|
81,817
|
|
|
$
|
(3,738
|
)
|
|
|
-5
|
%
|
Percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
79
|
%
|
|
|
|
84
|
%
|
|
|
|
|
|
|
Professional services
|
|
|
21
|
%
|
|
|
|
16
|
%
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
31
Subscriptions revenue was $61.7 million for the three months ended August 31, 2021, a $7.3 million, or 11%, decrease compared to subscriptions revenue of $69.0 million for the three months ended August 31, 2020. The decrease in subscriptions revenue was primarily due to $14.2 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, partially offset by new organic subscription sales predominantly driven by increases in products utilized across our current customer portfolio.
Professional services revenue was $16.4 million for the three months ended August 31, 2021, a $3.6 million, or 28%, increase compared to $12.8 million for the three months ended August 31, 2020. The increase was primarily related to new subscription sales in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
Our subscriptions revenue as a percentage of total revenue decreased to 79% for the second quarter of fiscal year 2022 compared to 84% for the second quarter of fiscal 2021 driven primarily by amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, in addition to the increase in professional services revenue.
Cost of Revenue, Gross Profit and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
16,246
|
|
|
|
$
|
14,860
|
|
|
$
|
1,386
|
|
|
|
9
|
%
|
Professional services
|
|
|
10,967
|
|
|
|
|
10,350
|
|
|
|
617
|
|
|
|
6
|
%
|
Amortization of acquired intangible assets
|
|
|
12,338
|
|
|
|
|
4,947
|
|
|
|
7,391
|
|
|
nm
|
|
Total cost of revenue
|
|
$
|
39,551
|
|
|
|
$
|
30,157
|
|
|
$
|
9,394
|
|
|
|
31
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
33,141
|
|
|
|
$
|
49,227
|
|
|
$
|
(16,086
|
)
|
|
|
-33
|
%
|
Professional services
|
|
|
5,387
|
|
|
|
|
2,433
|
|
|
|
2,954
|
|
|
nm
|
|
Total gross profit
|
|
$
|
38,528
|
|
|
|
$
|
51,660
|
|
|
$
|
(13,132
|
)
|
|
|
-25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
54
|
%
|
|
|
|
71
|
%
|
|
|
|
|
|
|
Professional services
|
|
|
33
|
%
|
|
|
|
19
|
%
|
|
|
|
|
|
|
Total gross margin
|
|
|
49
|
%
|
|
|
|
63
|
%
|
|
|
|
|
|
|
Cost of subscriptions was $16.2 million for the three months ended August 31, 2021, a $1.4 million, or 9%, increase compared to $14.9 million for the three months ended August 31, 2020. The increase was attributable to our subscriptions revenue growth excluding amortization of the fair value adjustment to deferred revenue and was related to an increase in personnel costs of 0.6 million and depreciation expense of $0.9 million related to capital expenditures for the expansion of our data centers.
Cost of professional services revenue was $11.0 million for the three months ended August 31, 2021, a $0.6 million, or 6%, increase compared to $10.4 million for the three months ended August 31, 2020. This increase was mainly related to a $0.9 million increase in personnel costs such as incentive compensation and salaries offset by $0.4 million savings from the reallocation of resources into major strategic product development efforts.
Amortization of acquired intangible assets was $12.3 million for the three months ended August 31, 2021, a $7.4 million increase compared to $4.9 million for the three months ended August 31, 2020, driven primarily by the revaluation and change in the composition of the intangible assets as part of the Business Combination in February 2021.
Our subscriptions gross margin was 54% in the second quarter of fiscal 2022 as compared to 71% for the second quarter of fiscal 2021 mainly due to lower subscriptions revenue in the current period as a direct result of amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. Our professional services gross margin increased to 33% for second quarter of fiscal 2022 from 19% in the second quarter of fiscal 2021 primarily due to new subscription sales in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
32
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Research and development
|
|
$
|
16,208
|
|
|
|
$
|
14,356
|
|
|
$
|
1,852
|
|
|
|
13
|
%
|
Percentage of revenue
|
|
|
21
|
%
|
|
|
|
18
|
%
|
|
|
|
|
|
|
Research and development expenses were $16.2 million for the three months ended August 31, 2021, a $1.9 million, or 13%, increase compared to $14.4 million in the prior year. The increase was due to major strategic partnership initiatives around product development efforts offset by the capitalization of software development costs during fiscal year 2022 which resulted in net increased personnel costs of $0.3 million and consulting expenses of $0.7 million. Additionally, there was an increase to share-based compensation expense of $0.2 million and depreciation expense of $0.5 million related to capital expenditures for software.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Sales and marketing
|
|
$
|
11,174
|
|
|
|
$
|
11,992
|
|
|
$
|
(818
|
)
|
|
|
-7
|
%
|
Percentage of revenue
|
|
|
14
|
%
|
|
|
|
15
|
%
|
|
|
|
|
|
|
Sales and marketing expenses were $11.2 million for the three months ended August 31, 2021, a $0.8 million, or 7%, decrease compared to $12.0 million in the prior year. The variance is primarily driven by a $1.2 million decrease in deferred commissions amortization related to the revaluation of deferred commission as part of the Business Combination in February 2021 offset by an increase in share-based compensation of $0.3 million and travel and entertainment expenses of $0.1 million.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
General and administrative
|
|
$
|
13,401
|
|
|
|
$
|
9,861
|
|
|
$
|
3,540
|
|
|
|
36
|
%
|
Percentage of revenue
|
|
|
17
|
%
|
|
|
|
12
|
%
|
|
|
|
|
|
|
General and administrative expenses were $13.4 million for the three months ended August 31, 2021, a $3.5 million, or 36%, increase compared to $9.9 million in the prior year. The increase was primarily attributable to us becoming a public company and incurring incremental headcount, insurance, consulting and software expenses of $2.6 million in recurring expenses and non-recurring expenses of $1.0 million. Additionally, normal operational expenses in personnel, bad debt, bank fees and other increased by $0.6 million. These expenses were partially offset by reductions in costs related to operating leases, depreciation, share-based compensation and recruiting expenses totaling $0.7 million.
Other Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Acquisition and other related expenses
|
|
$
|
7,174
|
|
|
|
$
|
2,018
|
|
|
$
|
5,156
|
|
|
nm
|
|
Amortization of acquired intangible assets
|
|
|
3,543
|
|
|
|
|
8,447
|
|
|
|
(4,904
|
)
|
|
|
-58
|
%
|
Total other operating expenses
|
|
$
|
10,717
|
|
|
|
$
|
10,465
|
|
|
$
|
252
|
|
|
|
2
|
%
|
Acquisition and other related expenses were $7.2 million for the three months ended August 31, 2021, a $5.2 million increase compared to $2.0 million for the three months ended August 31, 2020. The increase was mainly related to legal and consulting expenses associated with the BluJay Acquisition in fiscal 2022.
33
Amortization of acquired intangible assets were $3.5 million for the three months ended August 31, 2021, a $4.9 million, or 58%, decrease, compared to $8.4 million for the three months ended August 31, 2020. The decrease was a result of the revaluation and change in the composition of the intangible assets associated with the Business Combination in February 2021.
Interest and Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Interest and other expense, net
|
|
$
|
(6,332
|
)
|
|
|
$
|
(16,308
|
)
|
|
$
|
9,976
|
|
|
|
-61
|
%
|
Interest expense was $6.3 million for the three months ended August 31, 2021, a $10.0 million, or 61%, decrease compared to $16.3 million in the prior year. The decrease was primarily driven by the reduction in outstanding debt, as well as the associated interest rate on the debt refinanced in the Business Combination in February 2021.
Change in Tax Receivable Agreement
During the three months ended August 31, 2021, we recorded a $0.6 million expense related to the change in the fair value of the tax receivable agreement liability, including interest. Pursuant to ASC 805, Business Combination and relevant tax law, we calculated the fair value of the tax receivable agreement payments and identified the timing of the utilization of the tax attributes. The tax receivable agreement liability, related to exchanges as of the Business Combination date, is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations in the period in which the event occurred. We did not have a tax receivable agreement prior to the Business Combination.
Gain from Change in Fair Value of Warrant Liability
We recorded a gain of $18.7 million during the three months ended August 31, 2021 for the change in fair value on the revaluation of our warrant liability associated with our public, private placement and forward purchase warrants. We are required to revalue the warrants at the end of each reporting period and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change occurred. We did not have outstanding warrants prior to the Business Combination.
Loss from Change in Fair Value of Contingent Consideration
We recorded a loss of $16.8 million during the three months ended August 31, 2021 for the change in fair value on the revaluation of our contingent consideration associated with our restricted Series B-1 and B-2 common stock and Sponsor Side Letter. We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the contingent consideration in the period in which the change occurred. The Series B-1 common stock converted into Class A Common Stock on June 8, 2021. We did not have restricted Series B-1 and B-2 common stock prior to the Business Combination.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Loss before income taxes
|
|
$
|
(17,994
|
)
|
|
|
$
|
(11,322
|
)
|
|
$
|
(6,672
|
)
|
|
|
59
|
%
|
Income tax expense
|
|
|
(5,994
|
)
|
|
|
|
(6,218
|
)
|
|
|
224
|
|
|
|
-4
|
%
|
Loss before income taxes was $18.0 million for the three months ended August 31, 2021, a $6.7 million increase compared to $11.3 million for the three months ended August 31, 2020. This increase is primarily related to a loss of $16.8 million associated with the fair value adjustments for the contingent consideration liability related to the Sponsor Side Letter and restricted Series B-1 and B-2 common stock along with the $14.2 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. These expenses were partially offset by a gain of $18.7 million for the fair value adjustments for the warrant liability and $10.0 million of lower interest expense in the first quarter of fiscal 2022 compared to the same period of the prior year.
34
Income tax expense was $6.0 million for the three months ended August 31, 2021 compared to $6.2 million for the three months ended August 31, 2020. The effective tax rate was 33.3% for the three months ended August 31, 2021, compared to 54.9%, for the three months ended August 31, 2020. The overall change in the effective tax rate was primarily due to significant nondeductible mark-to-market losses associated with contingent liabilities and certain equity consideration liabilities related to the Business Combination as well as the impact of losses attributable to our noncontrolling interest in our affiliate.
Six Months Ended August 31, 2021 compared to Six Months Ended August 31, 2020
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
112,759
|
|
|
|
$
|
138,639
|
|
|
$
|
(25,880
|
)
|
|
|
-19
|
%
|
Professional services
|
|
|
31,647
|
|
|
|
|
26,302
|
|
|
|
5,345
|
|
|
|
20
|
%
|
Total revenue
|
|
$
|
144,406
|
|
|
|
$
|
164,941
|
|
|
$
|
(20,535
|
)
|
|
|
-12
|
%
|
Percentage of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
78
|
%
|
|
|
|
84
|
%
|
|
|
|
|
|
|
Professional services
|
|
|
22
|
%
|
|
|
|
16
|
%
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
|
100
|
%
|
|
|
|
|
|
|
Subscriptions revenue was $112.8 million for the six months ended August 31, 2021, a $25.9 million, or 19%, decrease compared to subscriptions revenue of $138.6 million for the six months ended August 31, 2020. The decrease in subscriptions revenue was primarily due to $36.7 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, partially offset by new organic subscription sales predominantly driven by increases in products utilized across our current customer portfolio.
Professional services revenue was $31.6 million for the six months ended August 31, 2021, a $5.3 million, or 20%, increase compared to $26.3 million for the six months ended August 31, 2020. The increase was primarily related to new subscription sales in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
Our subscriptions revenue as a percentage of total revenue decreased to 78% for the second quarter of fiscal year 2022 compared to 84% for the second quarter of fiscal 2021 driven primarily by amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, in addition to the increase in professional services revenue.
Cost of Revenue, Gross Profit and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
32,754
|
|
|
|
$
|
28,998
|
|
|
$
|
3,756
|
|
|
|
13
|
%
|
Professional services
|
|
|
21,107
|
|
|
|
|
21,445
|
|
|
|
(338
|
)
|
|
|
-2
|
%
|
Amortization of acquired intangible assets
|
|
|
23,849
|
|
|
|
|
10,508
|
|
|
|
13,341
|
|
|
nm
|
|
Total cost of revenue
|
|
$
|
77,710
|
|
|
|
$
|
60,951
|
|
|
$
|
16,759
|
|
|
|
27
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
$
|
56,156
|
|
|
|
$
|
99,132
|
|
|
$
|
(42,976
|
)
|
|
|
-43
|
%
|
Professional services
|
|
|
10,540
|
|
|
|
|
4,858
|
|
|
|
5,682
|
|
|
nm
|
|
Total gross profit
|
|
$
|
66,696
|
|
|
|
$
|
103,990
|
|
|
$
|
(37,294
|
)
|
|
|
-36
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriptions
|
|
|
50
|
%
|
|
|
|
72
|
%
|
|
|
|
|
|
|
Professional services
|
|
|
33
|
%
|
|
|
|
18
|
%
|
|
|
|
|
|
|
Total gross margin
|
|
|
46
|
%
|
|
|
|
63
|
%
|
|
|
|
|
|
|
35
Cost of subscriptions was $32.8 million for the six months ended August 31, 2021, a $3.8 million, or 13%, increase compared to $29.0 million for the six months ended August 31, 2020. The increase was attributable to our subscriptions revenue growth, excluding amortization of the fair value adjustment to deferred revenue, and was related to an increase in personnel costs of $1.4 million, hosting and software costs of $0.3 million and depreciation expense of $2.2 million related to capital expenditures for the expansion of our data centers.
Cost of professional services revenue was $21.1 million for the six months ended August 31, 2021, a $0.3 million, or 2%, decrease compared to $21.4 million for the six months ended August 31, 2020. This decrease mainly relates to a $0.2 million decline in travel and entertainment expenses and $0.8 million savings from the reallocation of resources into major strategic product development efforts. These decreases were offset by a $0.6 million increase in personnel costs such as incentive compensation and salaries.
Amortization of acquired intangible assets was $23.8 million for the six months ended August 31, 2021, a $13.3 million increase compared to $10.5 million for the six months ended August 31, 2020, driven primarily by the revaluation and change in the composition of the intangible assets as part of the Business Combination in February 2021.
Our subscriptions gross margin was 50% in the second quarter of fiscal 2022 as compared to 72% for the second quarter of fiscal 2021 mainly due to lower subscriptions revenue in the current period as a direct result of amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. Our professional services gross margin increased to 33% for the first six months of fiscal 2022 from 18% in the first six months of fiscal 2021, primarily due to new subscription sales in addition to customer delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Research and development
|
|
$
|
31,909
|
|
|
|
$
|
28,987
|
|
|
$
|
2,922
|
|
|
|
10
|
%
|
Percentage of revenue
|
|
|
22
|
%
|
|
|
|
18
|
%
|
|
|
|
|
|
|
Research and development expenses were $31.9 million for the six months ended August 31, 2021, a $2.9 million, or 10%, increase compared to $29.0 million in the prior year. The increase was due to major strategic partnership initiatives around product development efforts offset by the capitalization of software development costs during fiscal year 2022 which resulted in net increase personnel costs of $0.8 million, consulting expenses of $1.1 million, depreciation expense of $1.1 million related to capital expenditures for software and share-based compensation of $0.4 million. These expense were partially offset by lower accelerated deferred compensation expense related to Amber Road.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Sales and marketing
|
|
$
|
23,688
|
|
|
|
$
|
24,302
|
|
|
$
|
(614
|
)
|
|
|
-3
|
%
|
Percentage of revenue
|
|
|
16
|
%
|
|
|
|
15
|
%
|
|
|
|
|
|
|
Sales and marketing expenses were $23.7 million for the six months ended August 31, 2021, a $0.6 million, or 3%, decrease compared to $24.3 million in the prior year. The variance is primarily driven by a $1.6 million decrease in deferred commission amortization related to the revaluation of deferred commissions as part of the Business Combination in February 2021. This decrease was partially offset by an increase in marketing expense of $0.5 million and share-based compensation of $0.4 million.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
General and administrative
|
|
$
|
27,118
|
|
|
|
$
|
19,625
|
|
|
$
|
7,493
|
|
|
|
38
|
%
|
Percentage of revenue
|
|
|
19
|
%
|
|
|
|
12
|
%
|
|
|
|
|
|
|
36
General and administrative expenses were $27.1 million for the six months ended August 31, 2021, a $7.5 million, or 38%, increase compared to $19.6 million in the prior year. The increase was primarily attributable to us becoming a public company and incurring incremental headcount, insurance, consulting and software expenses of $5.4 million in recurring expenses and non-recurring expenses of $2.4 million. Additionally, normal operational expenses in personnel, consulting, bad debt and bank fees increased by $0.8 million. These increases were partially offset by reductions in costs related to operating leases, depreciation and recruiting expense totaling $1.4 million.
Other Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Acquisition and other related expenses
|
|
$
|
16,952
|
|
|
|
$
|
5,386
|
|
|
$
|
11,566
|
|
|
nm
|
|
Amortization of acquired intangible assets
|
|
|
7,373
|
|
|
|
|
16,914
|
|
|
|
(9,541
|
)
|
|
|
-56
|
%
|
Total other operating expenses
|
|
$
|
24,325
|
|
|
|
$
|
22,300
|
|
|
$
|
2,025
|
|
|
|
9
|
%
|
Acquisition and other related expenses were $17.0 million for the six months ended August 31, 2021, a $11.6 million increase compared to $5.4 million for the six months ended August 31, 2020. The increase was mainly related to legal and consulting expenses associated with the acquisition of BluJay in fiscal 2022.
Amortization of acquired intangible assets were $7.4 million for the six months ended August 31, 2021, a $9.5 million, or 56%, decrease, compared to $16.9 million for the six months ended August 31, 2020. The decrease was a result of the revaluation and change in the composition of the intangible assets associated with the Business Combination in February 2021.
Interest and Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Interest and other expense, net
|
|
$
|
(11,235
|
)
|
|
|
$
|
(35,680
|
)
|
|
$
|
24,445
|
|
|
|
-69
|
%
|
Interest expense was $11.2 million for the three months ended August 31, 2021, a $24.4 million, or 69%, decrease compared to $35.7 million in the prior year. The decrease was primarily driven by the reduction in outstanding debt, as well as the associated interest rate on the debt refinanced in the Business Combination in February 2021.
Change in Tax Receivable Agreement
During the six months ended August 31, 2021, we recorded a $3.1 million expense related to the change in the fair value of the tax receivable agreement liability under ASC 805, including interest. We have calculated the fair value of the tax receivable agreement payments and identified the timing of the utilization of the tax attributes. The tax receivable agreement liability, related to exchanges as of the Business Combination date, is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations in the period in which the event occurred. We did not have a tax receivable agreement prior to the Business Combination.
In addition, under ASC 450, transactions with partnership unit holders after the acquisition date will result in additional Tax Receivable Agreement liabilities that are recorded on a gross undiscounted basis. The increase in the Tax Receivable Agreement liability under ASC 450 for the six months ended August 31, 2021 was $10.1 million.
Loss from Change in Fair Value of Warrant Liability
We recorded a loss of $41.2 million during the six months ended August 31, 2021 for the change in fair value on the revaluation of our warrant liability associated with our public, private placement and forward purchase warrants. We are required to revalue the warrants at the end of each reporting period and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change occurred. We did not have outstanding warrants prior to the Business Combination.
37
Loss from Change in Fair Value of Contingent Consideration
We recorded a loss of $90.0 million during the six months ended August 31, 2021 for the change in fair value on the revaluation of our contingent consideration associated with our restricted Series B-1 and B-2 common stock and Sponsor Side Letter. We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the contingent consideration in the period in which the change occurred. The Series B-1 common stock converted into Class A Common Stock on June 8, 2021. We did not have restricted Series B-1 and B-2 common stock prior to the Business Combination.
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Loss before income taxes
|
|
$
|
(185,971
|
)
|
|
|
$
|
(26,904
|
)
|
|
$
|
(159,067
|
)
|
|
nm
|
|
Income tax expense
|
|
|
(7,372
|
)
|
|
|
|
(14,388
|
)
|
|
|
7,016
|
|
|
|
-49
|
%
|
Loss before income taxes was $186.0 million for the six months ended August 31, 2021, a $159.0 million increase compared to $26.9 million for the six months ended August 31, 2020. This increase is primarily related to a loss of $41.2 million for the fair value adjustments for the warrant liability and $90.0 million associated with the fair value adjustments for the contingent consideration liability related to the Sponsor Side Letter and restricted Series B-1 and B-2 common stock along with the $36.7 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. These expenses were partially offset by $24.4 million of lower interest expense in the first half of fiscal 2022 compared to the same period of the prior year.
Income tax expense was $7.4 million for the six months ended August 31, 2021 compared to $14.4 million for the six months ended August 31, 2020. The effective tax rate was 4.0% for the six months ended August 31, 2021, compared to 53.5%, for the six months ended August 31, 2020. The overall change in the effective tax rate was primarily due to significant nondeductible mark-to-market losses associated with contingent liabilities and certain equity consideration liabilities related to the Business Combination as well as the impact of losses attributable to our noncontrolling interest in our affiliate.
Non-GAAP Financial Measures
We have included below Non-GAAP revenue, Non-GAAP subscriptions revenue, Non-GAAP gross profit, Non-GAAP gross margin and Adjusted EBITDA, which are non-GAAP performance measures that we use to supplement our results presented in accordance with U.S. GAAP. We believe these non-GAAP measures are useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and are regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. These non-GAAP measures are not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We calculate and define Non-GAAP revenue and subscriptions revenue excluding amortization of the deferred revenue fair value adjustment related to the purchase price allocation in the Business Combination. We calculate and define Non-GAAP gross profit as gross profit excluding amortization of the deferred revenue fair value adjustment, depreciation and amortization, share-based compensation and certain other non-cash and non-recurring items. We define and calculate Adjusted EBITDA as net income or losses excluding interest income or expense, income tax expense, depreciation and amortization and further adjusted for the following items: amortization of the deferred revenue fair value adjustment, transaction-related costs, changes in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration, share-based compensation and certain other non-cash and non-recurring items as described in the reconciliation below. We also report Non-GAAP gross profit and Adjusted EBITDA as a percentage of Non-GAAP revenue as additional measures to evaluate financial performance.
38
We include these non-GAAP financial measures because they are used by management to evaluate our core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. These non-GAAP measures exclude certain expenses that are required in accordance with U.S. GAAP because they are non-recurring (for example, in the case of transaction-related costs and amortization of the deferred revenue fair value adjustment), non-cash (for example, in the case of depreciation, amortization, changes in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration, share-based compensation and amortization of the deferred revenue fair value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense). There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in the U.S. GAAP financial presentation. The items excluded from U.S. GAAP financial measures such as net income or loss to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. As a result, non-GAAP financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with U.S. GAAP.
The table below presents our Non-GAAP revenue reconciled to our reported revenue, the closest U.S. GAAP measure, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Total revenue
|
|
$
|
78,079
|
|
|
|
$
|
81,817
|
|
|
$
|
144,406
|
|
|
|
$
|
164,941
|
|
Business Combination adjustment (1)
|
|
|
14,203
|
|
|
|
|
—
|
|
|
|
36,705
|
|
|
|
|
—
|
|
Non-GAAP revenue
|
|
$
|
92,282
|
|
|
|
$
|
81,817
|
|
|
$
|
181,111
|
|
|
|
$
|
164,941
|
|
(1)
Amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
The table below presents our Non-GAAP subscriptions revenue reconciled to our reported subscriptions revenue, the closest U.S. GAAP measure, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Subscriptions revenue
|
|
$
|
61,725
|
|
|
|
$
|
69,035
|
|
|
$
|
112,759
|
|
|
|
$
|
138,639
|
|
Business Combination adjustment (1)
|
|
|
14,203
|
|
|
|
|
—
|
|
|
|
36,705
|
|
|
|
|
—
|
|
Non-GAAP subscriptions revenue
|
|
$
|
75,928
|
|
|
|
$
|
69,035
|
|
|
$
|
149,464
|
|
|
|
$
|
138,639
|
|
(1)
Amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
The table below presents our Non-GAAP gross profit reconciled to our reported gross profit, the closest U.S. GAAP measure, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Gross profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported gross profit
|
|
$
|
38,528
|
|
|
|
$
|
51,660
|
|
|
$
|
66,696
|
|
|
|
$
|
103,990
|
|
Business Combination adjustment (1)
|
|
|
14,203
|
|
|
|
|
—
|
|
|
|
36,705
|
|
|
|
|
—
|
|
Depreciation and amortization
|
|
|
14,943
|
|
|
|
|
6,628
|
|
|
|
29,052
|
|
|
|
|
13,379
|
|
Non-recurring/non-operating costs (2)
|
|
|
242
|
|
|
|
|
74
|
|
|
|
584
|
|
|
|
|
204
|
|
Share-based and unit-based compensation (3)
|
|
|
210
|
|
|
|
|
116
|
|
|
|
530
|
|
|
|
|
286
|
|
Non-GAAP gross profit
|
|
$
|
68,126
|
|
|
|
$
|
58,478
|
|
|
$
|
133,567
|
|
|
|
$
|
117,859
|
|
Gross margin
|
|
|
49.3
|
%
|
|
|
|
63.1
|
%
|
|
|
46.2
|
%
|
|
|
|
63.0
|
%
|
Non-GAAP gross margin
|
|
|
73.8
|
%
|
|
|
|
71.5
|
%
|
|
|
73.7
|
%
|
|
|
|
71.5
|
%
|
(1)
Amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
(2)
Primarily includes foreign currency exchange gain and losses and other non-recurring expenses such as systems integrations, legal entity simplification, advisory fees and expenses related to retention of key employees from acquisitions.
39
(3)
Reflects non-cash, long-term share-based and unit-based compensation expense, primarily related to senior management.
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Net loss
|
|
$
|
(23,988
|
)
|
|
|
$
|
(17,540
|
)
|
|
$
|
(193,343
|
)
|
|
|
$
|
(41,292
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
6,043
|
|
|
|
|
17,222
|
|
|
|
12,180
|
|
|
|
|
36,025
|
|
Income tax expense
|
|
|
5,994
|
|
|
|
|
6,218
|
|
|
|
7,372
|
|
|
|
|
14,388
|
|
Depreciation and amortization
|
|
|
20,795
|
|
|
|
|
16,888
|
|
|
|
41,000
|
|
|
|
|
33,866
|
|
EBITDA
|
|
|
8,844
|
|
|
|
|
22,788
|
|
|
|
(132,791
|
)
|
|
|
|
42,987
|
|
EBITDA Margin
|
|
|
11.3
|
%
|
|
|
|
27.9
|
%
|
|
|
-92.0
|
%
|
|
|
|
26.1
|
%
|
Business Combination adjustment (1)
|
|
|
14,203
|
|
|
|
|
—
|
|
|
|
36,705
|
|
|
|
|
—
|
|
Acquisition-related adjustments (2)
|
|
|
7,174
|
|
|
|
|
2,018
|
|
|
|
16,952
|
|
|
|
|
5,386
|
|
Change in tax receivable agreement liability (3)
|
|
|
637
|
|
|
|
|
—
|
|
|
|
3,136
|
|
|
|
|
—
|
|
Loss from change in fair value of warrant
liability (4)
|
|
|
(18,727
|
)
|
|
|
|
—
|
|
|
|
41,216
|
|
|
|
|
—
|
|
Loss from change in fair value of contingent
consideration (5)
|
|
|
16,780
|
|
|
|
|
—
|
|
|
|
90,040
|
|
|
|
|
—
|
|
Non-recurring/non-operating costs (6)
|
|
|
2,052
|
|
|
|
|
(691
|
)
|
|
|
2,499
|
|
|
|
|
419
|
|
Share-based and unit-based compensation (7)
|
|
|
2,537
|
|
|
|
|
2,036
|
|
|
|
4,934
|
|
|
|
|
4,321
|
|
Adjusted EBITDA
|
|
$
|
33,500
|
|
|
|
$
|
26,151
|
|
|
$
|
62,691
|
|
|
|
$
|
53,113
|
|
Adjusted EBITDA Margin
|
|
|
36.3
|
%
|
|
|
|
32.0
|
%
|
|
|
34.6
|
%
|
|
|
|
32.2
|
%
|
(1)
Amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
(2)
Primarily includes advisory, consulting, accounting and legal expenses incurred in connection with mergers and acquisitions activities, including related valuation, negotiation and integration costs and capital-raising activities, including costs related to the acquisition of Amber Road, Inc., the Business Combination and the BluJay Acquisition.
(3)
Represents the expense related to the change in the fair value of the tax receivable agreement liability, including interest.
(4)
Represents the fair value adjustment at each balance sheet date of the warrant liability related to the public, private placement and forward purchase warrants.
(5)
Represents the fair value adjustment at each balance sheet date of the contingent consideration liability related to the restricted Series B-1 and B-2 common stock and Sponsor Side Letter.
(6)
Primarily includes foreign currency exchange gain and losses and other non-recurring expenses such as systems integrations, legal entity simplification and advisory fees.
(7)
Reflects non-cash, long-term share-based and unit-based compensation expense, primarily related to senior management.
Three Months Ended August 31, 2021 compared to Three Months Ended August 31, 2020
Non-GAAP Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Non-GAAP revenue
|
|
$
|
92,282
|
|
|
|
$
|
81,817
|
|
|
$
|
10,465
|
|
|
|
13
|
%
|
Non-GAAP revenue was $92.3 million for the three months ended August 31, 2021, a $10.5 million, or 13%, increase compared to $81.8 million for the three months ended August 31, 2020. The increase in Non-GAAP revenue was mainly due to the $6.9 million increase in our subscriptions revenue related to new organic sales driven by increases in products utilized across our current customer portfolio. Additionally, $3.6 million of the increase was due to an increase in our professional services revenue primarily related to new subscription sales in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
40
Non-GAAP Subscriptions Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Non-GAAP subscriptions revenue
|
|
$
|
75,928
|
|
|
|
$
|
69,035
|
|
|
$
|
6,893
|
|
|
|
10
|
%
|
Non-GAAP subscriptions revenue was $75.9 million for the three months ended August 31, 2021, a $6.9 million, or 10%, increase compared to $69.0 million for the three months ended August 31, 2020. The increase in Non-GAAP subscriptions revenue relates to new organic subscription sales predominately driven by increases in products utilized across our customer portfolio alongside strategic partnership initiatives.
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Gross profit
|
|
$
|
38,528
|
|
|
|
$
|
51,660
|
|
|
$
|
(13,132
|
)
|
|
|
-25
|
%
|
Gross margin
|
|
|
49.3
|
%
|
|
|
|
63.1
|
%
|
|
|
|
|
|
|
Gross profit was $38.5 million for the three months ended August 31, 2021, a $13.1 million, or 25%, decrease compared to $51.7 million for three months ended August 31, 2020. The decrease in gross profit was primarily due to the $14.2 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. Gross margin was 49% for the second quarter of fiscal 2022 compared to 63% for the second quarter of fiscal 2021.
Non-GAAP Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Non-GAAP gross profit
|
|
$
|
68,126
|
|
|
|
$
|
58,478
|
|
|
$
|
9,648
|
|
|
|
16
|
%
|
Non-GAAP gross margin
|
|
|
73.8
|
%
|
|
|
|
71.5
|
%
|
|
|
|
|
|
|
Non-GAAP gross profit was $68.1 million for the three months ended August 31, 2021, a $9.6 million, or 16%, increase compared to $58.5 million for the three months ended August 31, 2020. The increase in adjusted gross profit was due to increase in Non-GAAP subscriptions revenue and professional services revenue as discussed above in alignment with scaling costs. The Non-GAAP gross margin increased to 74% for the second quarter of fiscal 2022 from 72% for the second quarter of fiscal 2021.
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
EBITDA
|
|
$
|
8,844
|
|
|
|
$
|
22,788
|
|
|
$
|
(13,944
|
)
|
|
|
-61
|
%
|
EBITDA margin
|
|
|
11.3
|
%
|
|
|
|
27.9
|
%
|
|
|
|
|
|
|
EBITDA was $8.8 million for the three months ended August 31, 2021, a $13.9 million decrease compared to $22.8 million for three months ended August 31, 2020. EBITDA margins decreased to 11% for the second quarter of fiscal 2022 compared to 28% in the prior year. The decrease in EBITDA and EBITDA margin was primarily related to the $14.2 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination and loss of $16.8 million associated with the fair value adjustment for the contingent consideration liability related to the Sponsor Side Letter and restricted Series B-1 and B-2 common stock, partially offset by the gain of $18.7 million for the fair value adjustment for the warrant liability.
41
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Adjusted EBITDA
|
|
$
|
33,500
|
|
|
|
$
|
26,151
|
|
|
$
|
7,349
|
|
|
|
28
|
%
|
Adjusted EBITDA margin
|
|
|
36.3
|
%
|
|
|
|
32.0
|
%
|
|
|
|
|
|
|
Adjusted EBITDA was $33.5 million for the three months ended August 31, 2021, a $7.3 million, or 28%, increase compared to $26.2 million for the three months ended August 31, 2020. Adjusted EBITDA margin increased to 36% for the second quarter of fiscal 2022 compared to 32% for the second quarter of fiscal 2021. The increase in Adjusted EBITDA and Adjusted EBITDA margins were primarily due to organic revenue growth and additional cost scaling.
Six Months Ended August 31, 2021 compared to Six Months Ended August 31, 2020
Non-GAAP Revenue
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
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|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Non-GAAP revenue
|
|
$
|
181,111
|
|
|
|
$
|
164,941
|
|
|
$
|
16,170
|
|
|
|
10
|
%
|
Non-GAAP revenue was $181.1 million for the six months ended August 31, 2021, a $16.2 million, or 10%, increase compared to $164.9 million for the six months ended August 31, 2020. The increase in Non-GAAP revenue was mainly due to the $10.8 million increase in our subscriptions revenue related to new organic sales driven by increases in products utilized across our current customer portfolio. Additionally, $5.3 million of the increase was due to an increase in our professional services revenue primarily related to new subscription sales in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year.
Non-GAAP Subscriptions Revenue
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Successor
|
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Predecessor
|
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|
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|
Six Months Ended
|
|
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|
Six Months Ended
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|
|
|
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|
($ in thousands)
|
|
August 31, 2021
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|
|
|
August 31, 2020
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|
|
$ Change
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|
|
% Change
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|
Non-GAAP subscriptions revenue
|
|
$
|
149,464
|
|
|
|
$
|
138,639
|
|
|
$
|
10,825
|
|
|
|
8
|
%
|
Non-GAAP subscriptions revenue was $149.5 million for the six months ended August 31, 2021, a $10.8 million, or 8%, increase compared to $138.6 million for the six months ended August 31, 2020. The increase in Non-GAAP subscriptions revenue relates to new organic subscription sales predominately driven by increases in products utilized across our customer portfolio alongside strategic partnership initiatives.
Gross Profit
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Successor
|
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Predecessor
|
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Six Months Ended
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|
Six Months Ended
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|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
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|
|
% Change
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|
Gross profit
|
|
$
|
66,696
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|
|
|
$
|
103,990
|
|
|
$
|
(37,294
|
)
|
|
|
-36
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%
|
Gross margin
|
|
|
46.2
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%
|
|
|
|
63.0
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%
|
|
|
|
|
|
|
Gross profit was $66.7 million for the six months ended August 31, 2021, a $37.3 million, or 36%, decrease compared to $104.0 million for six months ended August 31, 2020. The decrease in gross profit was primarily due to the $36.7 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. Gross margin was 46% for the first six months of fiscal 2022 compared to 63% for the first six months of fiscal 2021.
42
Non-GAAP Gross Profit
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|
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Successor
|
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Predecessor
|
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|
|
Six Months Ended
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|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Non-GAAP gross profit
|
|
$
|
133,567
|
|
|
|
$
|
117,859
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|
|
$
|
15,708
|
|
|
|
13
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%
|
Non-GAAP gross margin
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|
|
73.7
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%
|
|
|
|
71.5
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%
|
|
|
|
|
|
|
Non-GAAP gross profit was $133.6 million for the six months ended August 31, 2021, a $15.7 million, or 13%, increase compared to $117.9 million for the six months ended August 31, 2020. The increase in adjusted gross profit was due to increase in Non-GAAP subscriptions revenue and professional services revenue as discussed above in alignment with scaling costs. The Non-GAAP gross margin increased to 74% for the first six months of fiscal 2022 from 72% for the first six months of fiscal 2021.
EBITDA
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|
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Successor
|
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|
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Predecessor
|
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|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
EBITDA
|
|
$
|
(132,791
|
)
|
|
|
$
|
42,987
|
|
|
$
|
(175,778
|
)
|
|
nm
|
EBITDA margin
|
|
|
-92.0
|
%
|
|
|
|
26.1
|
%
|
|
|
|
|
|
EBITDA was a loss of $132.8 million for the six months ended August 31, 2021, a $175.8 million decrease compared to $43.0 million for the six months ended August 31, 2020. EBITDA margins decreased to a negative 92% for the first six months of fiscal 2022 compared to 26% in the prior year. The decrease in EBITDA and EBITDA margin was primarily related to the $36.7 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, a loss of $41.2 million for the fair value adjustment for the warrant liability and a loss of $90.0 million associated with the fair value adjustment for the contingent consideration liability related to the Sponsor Side Letter and restricted Series B-1 and B-2 common stock.
Adjusted EBITDA
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|
|
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|
|
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|
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Successor
|
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|
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Predecessor
|
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|
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|
|
|
Six Months Ended
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|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
|
$ Change
|
|
|
% Change
|
|
Adjusted EBITDA
|
|
$
|
62,691
|
|
|
|
$
|
53,113
|
|
|
$
|
9,578
|
|
|
|
18
|
%
|
Adjusted EBITDA margin
|
|
|
34.6
|
%
|
|
|
|
32.2
|
%
|
|
|
|
|
|
|
Adjusted EBITDA was $62.7 million for the six months ended August 31, 2021, a $9.6 million, or 18%, increase compared to $53.1 million for the six months ended August 31, 2020. Adjusted EBITDA margin increased to 35% for the first six months of fiscal 2022 compared to 32% for the first six months of fiscal 2021. The increase in Adjusted EBITDA and Adjusted EBITDA margins were primarily due to organic revenue growth and additional cost scaling.
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital, capital expenditure needs, contractual obligations and other commitments, with cash flows from operations and other sources of funding. Current working capital needs relate mainly to employee compensation and benefits as well as interest and debt. Our ability to expand and grow our business will depend on many factors, including working capital needs and the evolution of our operating cash flows.
43
We had $473.1 million in cash and cash equivalents, including $280.0 million of PIPE financing proceeds for the BluJay Acquisition, and $75.0 million of unused borrowing capacity under our 2021 Revolving Credit Facility as of August 31, 2021. See Note 9, Notes Payable to the Notes to the Unaudited Condensed Consolidated Financial Statements. We believe our existing cash and cash equivalents, cash provided by operating activities and, if necessary, the borrowing capacity under our 2021 Revolving Credit Facility will be sufficient to meet our working capital, debt repayment and capital expenditure requirements for at least the next twelve months. See Note 3, BluJay Acquisition to the Notes to the Unaudited Condensed Consolidated Financial Statements for the additional equity and debt financing related to the purchase of BluJay, which included increasing the 2021 Revolving Credit Facility by $80.0 million to a total of $155.0 million on September 1, 2021.
In the future, we may enter into arrangements to acquire or invest in complementary businesses. To facilitate these acquisitions or investments, we may seek additional equity or debt financing.
Debt
2021 Term Loan and Revolving Credit Facility
On February 4, 2021, as part of the Business Combination, E2open, LLC entered into the 2021 Term Loan for $525.0 million and the 2021 Revolving Credit Facility for $75.0 million. The 2021 Term Loan will mature on February 4, 2028, while the revolver will mature on February 4, 2026. The 2021 Term Loan has a variable interest rate which was 3.75% and 3.69% as of August 31, 2021 and February 28, 2021, respectively. Principal payments of $1.3 million are due on the last day of each February, May, August and November commencing August 2021. As of August 31, 2021 and February 28, 2021, the 2021 Term Loan had a principal balance outstanding of $523.7 million and $525.0 million, respectively, and there were no amounts drawn on the revolver.
On September 1, 2021 as part of the BluJay Acquisition, the 2021 Term Loan was increased by $380.0 million and the 2021 Revolving Credit Facility was increased by $80.0 million to $155.0 million. On September 29, 2021, we borrowed $15.0 million under the 2021 Revolving Credit Facility for daily operating activities. There were no amounts drawn on the revolver prior to September 29, 2021.
Cash Flows
The following table presents net cash from operating, investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
Predecessor
|
|
|
|
Six Months Ended
|
|
|
|
Six Months Ended
|
|
($ in thousands)
|
|
August 31, 2021
|
|
|
|
August 31, 2020
|
|
Net cash provided by operating activities
|
|
$
|
41,484
|
|
|
|
$
|
41,986
|
|
Net cash used in investing activities
|
|
|
(17,372
|
)
|
|
|
|
(7,762
|
)
|
Net cash used in financing activities
|
|
|
253,276
|
|
|
|
|
(20,332
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(1,244
|
)
|
|
|
|
(448
|
)
|
Net increase in cash, cash equivalents and restricted cash
|
|
|
276,144
|
|
|
|
|
13,444
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
|
207,542
|
|
|
|
|
48,428
|
|
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
483,686
|
|
|
|
$
|
61,872
|
|
Six Months Ended August 31, 2021 compared to Six Months Ended August 31, 2020
As of August 31, 2021, our consolidated cash, cash equivalents and restricted cash was $473.1 million, a $278.4 million increase from our balance of $194.7 million as of February 28, 2021.
Net cash provided by operating activities for the six months ended August 31, 2021 was $41.5 million compared to $42.0 million for the six months ended August 31, 2020. The $0.5 million decrease in cash was primarily driven by expenses related to the BluJay Acquisition offset by $8.4 million additional cash provided by working capital during the first six months of fiscal 2022 compared to the first six months of fiscal 2021.
Net cash used in investing activities was $17.4 million and $7.8 million for the six months ended August 31, 2021 and 2020, respectively. The use of cash for both periods was primarily driven by the acquisition of property and software related to our data centers.
44
Net cash provided by financing activities for the six months ended August 31, 2021 was $253.3 million compared to net cash used of $20.3 million for six months ended August 31, 2020. The increase in cash provided by financing activities was mainly due to the PIPE investment proceeds received in advance of the BluJay Acquisition of $280.0 million. During the first six months of fiscal 2021 we received $1.8 million of proceeds from the sale of membership units . There were no sales of units or stock during the first six months of fiscal 2022. The net repayment of debt was $19.7 million in fiscal 2021 compared to $1.6 million in fiscal 2022. The repayment of financing lease obligations was $3.5 million higher in fiscal 2022 than in fiscal 2021. Additionally, we paid $2.5 million for the repurchase of common stock to pay withholding taxes and $16.8 million for the repurchase of Common Units upon conversion in fiscal year 2022.
Tax Receivable Agreement
Concurrently with the completion of the Business Combination, we entered into the Tax Receivable Agreement with certain selling equity holders of E2open Holdings. Pursuant to the Tax Receivable Agreement, we will pay certain sellers, as applicable, 85% of the tax savings that we realize from increases in the tax basis in E2open Holdings’ assets as a result of the sale of E2open Holdings’ equity interests, the future exchange of the Common Units for shares of Class A Common Stock (or cash), certain pre-existing tax attributes of certain sellers and certain other tax benefits related to entering into the Tax Receivable Agreement including tax benefits attributable to payments under the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur. We will retain the benefit of the remaining 15% of these cash savings.
Amounts payable under the Tax Receivable Agreement will be contingent upon, among other things, our generation of taxable income over the term of the Tax Receivable Agreement. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits subject to the Tax Receivable Agreement, we would not be required to make the related payments under the Tax Receivable Agreement. Although the amount of any payments required to be made under the Tax Receivable Agreement may be significant, the timing of these payments will vary and will generally be limited to one payment per member per year. The amount of such payments is also generally limited to the extent we are unable to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement in a given period.
The liability related to the Tax Receivable Agreement was $63.3 million as of August 31, 2021, consisting of Tax Receivable liabilities recorded under ASC 805 of $53.2 million and $10.1 million under ASC 450, assuming (1) a constant corporate tax rate of 24.1%, (2) no dispositions of corporate subsidiaries, (3) no material changes in tax law and (4) we do not elect an early termination of the Tax Receivable Agreement. However, due to the uncertainty of various factors, including: (a) the timing and value of future exchanges, (b) the amount and timing of our future taxable income, (c) changes in our tax rate, (d) no future dispositions of any corporate stock and (e) changes in the tax law, the likely tax savings we will realize and the resulting amounts we are likely to pay to the E2open Sellers pursuant to the Tax Receivable Agreement are uncertain. Additionally, interest will accrue on the portion of the Tax Receivable Agreement liability recorded under ASC 805 at a rate of LIBOR plus 100 basis points. The portion of the Tax Receivable Agreement liability under ASC 450 is recorded on a gross undiscounted basis.
The liability recorded on the balance sheet does not include an estimate of the amount of payments to be made if certain sellers exchanged their remaining interests in E2open Holdings for our common stock, as this amount is not readily determinable and is dependent on several future variables, including timing of future exchanges, stock price at date of exchange, tax attributes of the individual parties to the exchange and changes in future applicable federal and state tax rates.
In addition, if we exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur, we are required to make immediate cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made significantly in advance of the actual realization, if any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that we have sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein. The payments that we would be required to make will generally reduce the amount of the overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related tax benefits will exceed the amount of any required payments.
45
We are entitled to receive quarterly tax distributions from E2open Holdings, subject to limitations imposed by applicable law and contractual restrictions. The cash received from such tax distributions will first be used to satisfy any tax liability and then make any payments required under the Tax Receivable Agreement. We expect that such tax distributions will be sufficient to fund both our tax liability and the required payments under the Tax Receivable Agreement.
Conversion of Contingent Consideration
The contingent consideration liability was $65.8 million and $150.8 million as of August 31, 2021 and February 28, 2021, respectively. The fair value remeasurements resulted in a gain of $18.7 million and a loss of $41.2 million for the three and six months ended August 31, 2021, respectively. There was no gain or loss for the three and six months ended August 31, 2020 as the contingent consideration liability was not recorded until February 4, 2021. The contingent liability represents the Series B-1 common stock, Series B-2 common stock, Series 1 RCUs and Series 2 RCUs.
As of June 8, 2021, the Series B-1 common stock and Series 1 RCUs were no longer reflected as a contingent consideration liability as the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share. This triggering event resulted in the 8,120,273 Series B-1 common stock converting into Class A Common Stock and 4,379,557 Series 1 RCUs becoming 4,379,557 Common Units of E2open Holdings along with entitling the holders of the newly vested common units to 4,379,557 shares of Class V Common Stock.
Leases
Effective March 1, 2021, we began accounting for leases in accordance with ASC 842, Leases, which requires lessees to recognize lease liabilities and ROU assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for periods of greater than 12 months. Upon adoption of ASC 842, we recognized an operating lease liability of $23.0 million, a ROU operating asset of $22.4 million and no change to retained earnings.
Our non-cancelable operating leases for our office spaces have various expiration dates through August 2029. Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as of August 31, 2021 were: $2.8 million for September 1, 2021 through February 28, 2022, $5.0 million for fiscal 2023, $4.2 million for fiscal 2024, $3.1 million for fiscal 2025, $2.4 million for fiscal 2026 and $4.6 million thereafter. These numbers include interest of $2.4 million.
Our non-cancelable financing lease arrangements relate to software and computer equipment and have various expiration dates through August 2024. We have the right to purchase the software and computer equipment anytime during the lease or upon lease completion. Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as of August 31, 2021 were: $0.6 million for September 1, 2021 through February 28, 2022, $2.3 million for fiscal 2023 and $2.1 million for fiscal 2024. These numbers include interest of $0.4 million.
Off-Balance Sheet Arrangements
We are responsible for reimbursement of outstanding obligations related to any letters of credit issued under our $15.0 million available letters of credit accessible under our $75.0 million 2021 Revolving Credit Facility. We do not have any other material off-balance sheet arrangements or contingent commitments. There were no outstanding letters of credit or borrowings under the 2021 Revolving Credit Facility as of August 31, 2021 and February 28, 2021.
On September 1, 2021, the 2021 Revolving Credit Facility was increased by $80.0 million to $155.0 million and the letter of credit sublimit was increased from $15.0 million to $30.0 million upon completion of the BluJay Acquisition. On September 29, 2021, we borrowed $15.0 million under the 2021 Revolving Credit Facility for daily operating activities.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Preparation of the financial statements requires management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements in our 2021 Form 10-K.
There have been no changes to our critical accounting policies and estimates during the three and six months ended August 31, 2021 from those previously disclosed in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report.
46