UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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at an exercise price of $11.50 |
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 8, 2024, E2open Parent Holdings, Inc. had
Table of Contents
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Item 1. |
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Notes to the Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. |
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Item 6. |
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2
Glossary of Terms
Abbreviation |
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Term |
ASC |
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Accounting Standards Codification |
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BluJay |
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BluJay TopCo Limited, a private limited liability company registered in England and Wales which owns BluJay Solutions, a cloud-based logistics execution platform company |
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Class A Common Stock |
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Class A common stock, par value $0.0001 per share |
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Class V Common Stock |
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Class V common stock, par value $0.0001 per share |
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Common Units |
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common units representing limited liability company interests of E2open Holdings, LLC, which are non-voting, economic interests in E2open Holdings, LLC. Every economic common unit is tied to one voting share of Class V Common Stock of E2open Parent Holdings, Inc. |
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Forward Purchase Agreement |
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agreement dated as of April 28, 2020, by and between CCNB1 and Neuberger Berman Opportunistic Capital Solutions Master Fund LP |
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Forward Purchase Warrants |
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5,000,000 redeemable warrants purchased pursuant to the Forward Purchase Agreement |
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LIBOR |
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London Interbank Offered Rate |
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Logistyx |
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Logistyx Technologies, LLC, a private limited liability company headquartered in Chicago, Illinois, which connects top retailers, manufacturers and logistics providers to more than 550 in-network carriers with strategic parcel shipping and omni-channel fulfillment technology. |
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nm |
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not meaningful |
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NYSE |
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New York Stock Exchange |
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RCU |
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restricted common units representing Series 2 of E2open Holdings, LLC |
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SCM |
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omni-channel and supply chain management |
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SEC |
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U.S. Securities and Exchange Commission |
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SOFR |
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Secured Overnight Financing Rate |
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SONIA |
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Sterling Overnight Index Average |
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U.S. GAAP |
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generally accepted accounting principles in the United States |
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VWAP |
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daily per share volume-weighted average price of the Class A Common Stock on the NYSE as displayed on the Bloomberg page under the heading Bloomberg VWAP |
3
Forward-Looking Statements
This Quarterly Report on Form 10-Q (Quarterly Report) contains "forward-looking statements" within the meaning of the federal securities law. These forward-looking statements give E2open Parent Holdings, Inc.'s (we, our, us, Company or E2open) current expectations and include projections of results of operations or financial condition or forecasts of future events. Words such as "may," "can," "should," "will," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" and similar expressions are used to identify forward-looking statements. Without limiting the generality of the forgoing, forward-looking statements contained in this document include our expectations regarding our future growth, operational and financial performance and business prospects and opportunities.
These forward-looking statements are based on information available as of the date of this Quarterly Report and management's current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside our control and our directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the SEC on April 29, 2024 (2024 Form 10-K).
4
PART I—Financial Information
Item 1. Financial Statements.
E2open Parent Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts) |
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May 31, 2024 |
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February 29, 2024 |
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(Unaudited) |
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Assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net of allowance of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Goodwill |
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Intangible assets, net |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities, Redeemable Share-Based Awards and Stockholders' Equity |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Channel client deposits payable |
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Deferred revenue |
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Current portion of notes payable |
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Current portion of operating lease obligations |
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Current portion of financing lease obligations |
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Income taxes payable |
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Total current liabilities |
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Long-term deferred revenue |
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Operating lease obligations |
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Financing lease obligations |
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Notes payable |
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Tax receivable agreement liability |
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Warrant liability |
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Contingent consideration |
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Deferred taxes |
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Other noncurrent liabilities |
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Total liabilities |
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Commitments and Contingencies (Note 22) |
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Redeemable share-based awards |
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— |
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Stockholders' Equity |
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Class A common stock; $ |
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Class V common stock; $ |
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Series B-1 common stock; $ |
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Series B-2 common stock; $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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( |
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Accumulated deficit |
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( |
) |
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( |
) |
Treasury stock, at cost: |
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( |
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( |
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Total E2open Parent Holdings, Inc. equity |
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Noncontrolling interest |
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Total stockholders' equity |
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Total liabilities, redeemable share-based awards and stockholders' equity |
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$ |
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$ |
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See notes to the unaudited condensed consolidated financial statements.
5
E2open Parent Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended May 31, |
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(In thousands, except per share amounts) |
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2024 |
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2023 |
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Revenue |
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Subscriptions |
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$ |
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$ |
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Professional services and other |
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Total revenue |
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Cost of Revenue |
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Subscriptions |
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Professional services and other |
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Amortization of acquired intangible assets |
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Total cost of revenue |
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Gross Profit |
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Operating Expenses |
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Research and development |
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Sales and marketing |
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General and administrative |
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Acquisition-related expenses |
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Amortization of acquired intangible assets |
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Goodwill impairment |
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— |
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Intangible asset impairment |
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— |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Other income (expense) |
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Interest and other expense, net |
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( |
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( |
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Loss from change in tax receivable agreement liability |
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( |
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( |
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Gain from change in fair value of warrant liability |
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(Loss) gain from change in fair value of contingent consideration |
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( |
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Total other expense |
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( |
) |
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( |
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Loss before income tax benefit |
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( |
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( |
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Income tax benefit |
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Net loss |
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( |
) |
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( |
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Less: Net loss attributable to noncontrolling interest |
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(3,926 |
) |
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( |
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Net loss attributable to E2open Parent Holdings, Inc. |
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$ |
( |
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$ |
( |
) |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Net loss attributable to E2open Parent Holdings, Inc. |
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Basic |
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$ |
( |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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See notes to the unaudited condensed consolidated financial statements.
6
E2open Parent Holdings, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
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Three Months Ended May 31, |
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(In thousands) |
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2024 |
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2023 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Other comprehensive (loss) income, net: |
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Net foreign currency translation gain, net of tax |
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Net deferred (losses) gains on foreign exchange forward contracts |
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( |
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Net deferred gains on interest rate collars |
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Total other comprehensive income, net |
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Comprehensive loss |
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( |
) |
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( |
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Less: Comprehensive loss attributable to noncontrolling interest |
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( |
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( |
) |
Comprehensive loss attributable to E2open Parent Holdings, Inc. |
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$ |
( |
) |
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$ |
( |
) |
See notes to the unaudited condensed consolidated financial statements.
7
E2open Parent Holdings, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands) |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Treasury Stock |
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Total |
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Noncontrolling |
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Total |
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Balance, February 28, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
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( |
) |
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( |
) |
Balance, May 31, 2023 |
|
$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
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$ |
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(In thousands) |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Treasury Stock |
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Total |
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Noncontrolling |
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Total |
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Balance, February 29, 2024 |
|
$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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— |
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Conversion of Common |
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— |
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— |
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— |
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— |
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( |
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— |
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Vesting of restricted stock |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Impact of Common Unit |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Issuance of common stock upon |
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— |
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— |
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— |
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— |
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— |
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Reclassification of stockholders' |
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— |
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( |
) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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|||
Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, May 31, 2024 |
|
$ |
|
|
$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
See notes to the unaudited condensed consolidated financial statements.
8
E2open Parent Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
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Three Months Ended May 31, |
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(In thousands) |
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2024 |
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2023 |
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||
Cash flows from operating activities |
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Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash from operating activities: |
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Depreciation and amortization |
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Amortization of deferred commissions |
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Provision for credit losses |
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Amortization of debt issuance costs |
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Amortization of operating lease right-of-use assets |
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Share-based compensation |
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Deferred income taxes |
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( |
) |
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( |
) |
Right-of-use assets impairment charge |
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Goodwill impairment charge |
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Indefinite-lived intangible asset impairment charge |
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Loss from change in tax receivable agreement liability |
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Gain from change in fair value of warrant liability |
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( |
) |
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( |
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Loss (gain) from change in fair value of contingent consideration |
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( |
) |
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Loss (gain) on disposal of property and equipment |
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( |
) |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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Prepaid expenses and other current assets |
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( |
) |
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( |
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Other noncurrent assets |
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( |
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( |
) |
Accounts payable and accrued liabilities |
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|
( |
) |
|
|
( |
) |
Channel client deposits payable |
|
|
|
|
|
|
||
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
Changes in other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Repayments of indebtedness |
|
|
( |
) |
|
|
( |
) |
Repayments of financing lease obligations |
|
|
( |
) |
|
|
( |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
||
Net increase in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Reconciliation of cash, cash equivalents and restricted cash: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
See notes to the unaudited condensed consolidated financial statements.
9
E2open Parent Holdings, Inc.
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Organization and Basis of Presentation
Organization and Description of Business
CC Neuberger Principal Holdings I (CCNB1) was a blank check company incorporated in the Cayman Islands on January 14, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. CCNB1's sponsor was CC Neuberger Principal Holdings I Sponsor LLC, a Delaware limited liability company (Sponsor). CCNB1 became a public company on April 28, 2020 through an initial public offering.
On February 4, 2021 (Closing Date), CCNB1 and E2open Holdings, LLC and its operating subsidiaries (E2open Holdings) completed a business combination (Business Combination) contemplated by the definitive Business Combination Agreement entered into on October 14, 2020 (Business Combination Agreement). The Business Combination was accounted for as a business combination under ASC 805, Business Combination (ASC 805), and due to the change in control, was accounted for using the acquisition method with CCNB1 as the accounting acquirer and E2open Holdings as the accounting acquiree.
In connection with the finalization of the Business Combination, CCNB1 changed its name to "E2open Parent Holdings, Inc." and changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware (Domestication). Immediately following the Domestication, various entities merged with and into E2open, with E2open as the surviving company. Additionally, E2open Holdings became a subsidiary of E2open with the equity interests of E2open Holdings held by E2open and existing owners of E2open Holdings. The existing owners of E2open Holdings are considered noncontrolling interests in the condensed consolidated financial statements.
We are headquartered in Austin, Texas. We are a world class connected supply chain software platform that enables the largest companies to transform the way they make, move and sell goods and services. With the broadest cloud-native global platform purpose-built for the modern supply chains, we connect manufacturing, logistics, channel and distributing partners as one multi-enterprise network. Our software as a service (SaaS) platform anticipates disruptions and opportunities to help companies improve efficiency, reduce waste and operate sustainably.
Basis of Presentation
These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. 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 the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Investments in other companies are carried at cost. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. The unaudited operating results for interim periods reported are not necessarily indicative of the results for the entire fiscal year. For further information, refer to the consolidated financial statements and notes thereto included in our 2024 Form 10-K.
Fiscal Year
Our fiscal year ends on the last day of February each year.
Use of Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported results of operations during the reporting period. Such management estimates include allowance for credit losses, goodwill and other long-lived assets, estimates of standalone selling price of performance obligations for revenue contracts with multiple performance obligations, share-based compensation, valuation allowances for deferred tax assets and uncertain tax positions, tax receivable agreement liability, warrants, contingent consideration and contingencies. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management's estimates.
10
Seasonality
Our quarterly operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control, including seasonality in our business as a result of client budget cycles, with higher sales typically in the third and fourth fiscal quarters. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful.
2. Accounting Standards
Recent Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-07 on our disclosures.
In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated statements and related disclosures.
3. Accounts Receivable
Accounts receivable, net consisted of the following:
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Accounts receivable |
|
$ |
|
|
$ |
|
||
Unbilled receivables |
|
|
|
|
|
|
||
Less: Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
Accounts receivable, net |
|
$ |
|
|
$ |
|
||
Unbilled receivables represent revenue recognized for performance obligations that have been satisfied but for which amounts have not been billed, which we also refer to as contract assets.
Account balances are written off against the allowance for credit losses when we believe that it is probable that the receivable balance will not be recovered.
4. Prepaid and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Prepaid software and hardware license and maintenance fees |
|
$ |
|
|
$ |
|
||
Income and other taxes receivable |
|
|
|
|
|
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Deferred commissions |
|
|
|
|
|
|
||
Prepaid marketing |
|
|
|
|
|
|
||
Security deposits |
|
|
|
|
|
|
||
Certificates of deposits |
|
|
|
|
|
|
||
Other prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Amortization of software licenses held under financing leases is included in cost of revenue and operating expenses. Prepaid maintenance, services and insurance are expensed over the term of the underlying agreements.
11
5. Goodwill
We test goodwill for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of a reporting unit below its carrying value between annual impairment tests. As we have only
During the first and third quarters of fiscal 2024, the market price of our Class A Common Stock and market capitalization declined significantly. We also experienced slowing growth and lowered projections for net sales and net operating margins due to lower than anticipated new bookings, lower revenue from tiered contracts, higher than expected churn and macroeconomic impacts primarily in the technology, freight and transportation sectors. These factors resulted in us determining that triggering events occurred, and goodwill impairment assessments were performed.
The fair value of E2open was calculated using an equally weighted combination of three different methods: discounted cash flow method, guideline public company method and guideline transaction method. The discounted cash flow method was based on the present value of estimated future cash flows which were based on management's estimates of projected net sales, net operating income margins and terminal growth rates, taking into consideration market and industry conditions. The discount rate used was based on the weighted-average cost of capital adjusted for the risk, size premium and business-specific characteristics related to projected cash flows. Under the guideline public company method, the fair value was based on our current and forward-looking earnings multiples using management's estimates of projected net sales and adjusted EBITDA margins with consideration of market premiums. The unobservable inputs used to measure the fair value included projected net sales, forecasted adjusted EBITDA margins, weighted average cost of capital, normalized working capital level, capital expenditures assumptions, profitability projections, determination of appropriate market comparison companies and terminal growth rates. Under the guideline transaction method, the fair value was based on pricing multiples derived from recently sold companies with similar characteristics to E2open taking into consideration management's estimate of projected net sales and net operating income margins.
The three approaches generated similar results and indicated that the fair value of E2open's equity and goodwill was less than its carrying amounts. Therefore, during the fiscal year ended February 29, 2024, we recognized impairment charges of $
The following table presents the changes in goodwill:
($ in thousands) |
|
Amount |
|
|
Balance, February 28, 2023 |
|
$ |
|
|
Impairment charge |
|
|
( |
) |
Currency translation adjustment |
|
|
|
|
Balance, February 29, 2024 |
|
|
|
|
Currency translation adjustment |
|
|
|
|
Balance, May 31, 2024 |
|
$ |
|
|
6. Intangible Assets, Net
We test our indefinite-lived intangible asset for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. As we have only one reporting unit, any indefinite-lived intangible asset assessment is performed at the Company level.
During the first quarter of fiscal 2024, the market price of our Class A Common Stock and market capitalization declined significantly. We also lowered our projections for net sales and net operating margins due to lower than anticipated new bookings, lower revenue from tiered contracts, higher than expected churn and macroeconomic impacts primarily in the technology, freight and transportation sectors. These factors resulted in us determining that a triggering event occurred, and an interim indefinite-lived intangible asset impairment assessment was performed.
The fair value of the indefinite-lived intangible asset was calculated using the relief from royalty payments method which is based on management's estimates of projected net sales and terminal growth rates, taking into consideration market and industry conditions. The royalty rate used was based on royalty rates of companies with similar characteristics to E2open. The discount rate used was based on the weighted-average cost of capital adjusted for the risk, size premium and business-specific characteristics related to projected net sales.
12
The interim assessment indicated that the fair value of our indefinite-lived intangible asset was less than its carrying amount; therefore, during the three months ended May 31, 2023, we recognized an impairment charge of $
We did
Intangible assets, net consisted of the following:
|
|
May 31, 2024 |
|
|||||||||||
($ in thousands) |
|
Weighted Average |
|
Cost |
|
|
Accumulated |
|
|
Net |
|
|||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|||
Trademark / Trade name |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Definite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|||
Client relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Technology |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Content library |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trade name |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Backlog |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total definite-lived |
|
|
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
February 29, 2024 |
|
|||||||||||
($ in thousands) |
|
Weighted Average |
|
Cost |
|
|
Accumulated |
|
|
Net |
|
|||
Indefinite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|||
Trademark / Trade name |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Definite-lived: |
|
|
|
|
|
|
|
|
|
|
|
|||
Client relationships |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Technology |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Content library |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trade name |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Backlog |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total definite-lived |
|
|
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The e2open trade name and various trademarks are indefinite-lived. Acquired trade names are definite-lived as over time we rebrand acquired products and services as e2open.
Amortization of intangible assets is recorded in cost of revenue and operating expenses in the Condensed Consolidated Statements of Operations. We recorded amortization expense related to intangible assets of $
Future amortization of intangible assets is as follows as of May 31, 2024:
($ in thousands) |
|
Amount |
|
|
June 2024 - February 2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total future amortization |
|
$ |
|
|
13
7. Property and Equipment, Net
Property and equipment, net consisted of the following:
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Computer equipment |
|
$ |
|
|
$ |
|
||
Software |
|
|
|
|
|
|
||
Software development costs |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Gross property and equipment |
|
|
|
|
|
|
||
Less accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Computer equipment and software include assets held under financing leases. Amortization of assets held under financing leases is included in depreciation expense. See Note 22, Leases for additional information regarding our financing leases.
Depreciation expense was $
We recognized $
8. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following:
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Accrued compensation |
|
$ |
|
|
$ |
|
||
Trade accounts payable |
|
|
|
|
|
|
||
Accrued professional services |
|
|
|
|
|
|
||
Client deposits |
|
|
|
|
|
|
||
Accrued severance and retention |
|
|
|
|
|
|
||
Accrued litigation |
|
|
|
|
|
|
||
Tax receivable agreement liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
9. Tax Receivable Agreement
The Tax Receivable Agreement will continue until all such tax benefits have been utilized or expire unless E2open Holdings exercises its 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 accelerated events occur.
Quarterly tax distributions will be paid to the holders of Common Units on a pro rata basis based upon an agreed upon formula related to the taxable income of E2open Holdings allocable to holders of Common Units. Generally, these tax distributions will be computed based on the taxable income of E2open Holdings allocable to each holder of Common Units (based on certain assumptions), multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal, state and local income tax rate prescribed for a U.S. corporation organized under the laws of the State of Delaware, taking into account all jurisdictions in which we are required to file income tax returns together with the relevant apportionment information and the character of E2open Holdings' income, subject to various adjustments.
14
Significant inputs and assumptions were used to estimate the future expected payments including the timing of the realization of the tax benefits, a tax rate of
The Tax Receivable Agreement liability was $
The tax rate used in the calculation was
10. Notes Payable
Notes payable outstanding were as follows:
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
2021 Term Loan |
|
$ |
|
|
$ |
|
||
Other notes payable |
|
|
|
|
|
|
||
Total notes payable |
|
|
|
|
|
|
||
Less unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total notes payable, net |
|
|
|
|
|
|
||
Less current portion |
|
|
( |
) |
|
|
( |
) |
Notes payable, less current portion, net |
|
$ |
|
|
$ |
|
||
2021 Term Loan and Revolving Credit Facility
In February 2021, E2open, LLC, our subsidiary, entered into a credit agreement (Credit Agreement) that provided for $
The 2021 Revolving Credit Facility will mature on
15
The interest rates applicable to borrowings under the Credit Agreement are, at E2open, LLC’s option, either (1) a base rate, which is equal to the greater of (a) the Prime rate, (b) the Federal Reserve Bank of New York rate plus
The Credit Agreement is guaranteed by E2open Intermediate, LLC, our subsidiary, and certain wholly owned subsidiaries of E2open, LLC, as guarantors, and is supported by a security interest in substantially all of the guarantors' personal property and assets. The Credit Agreement contains certain customary events of default, representations and warranties as well as affirmative and negative covenants.
As of May 31, 2024 and February 29, 2024, there were $
We were in compliance with the First Lien Leverage Ratio for the Credit Agreement as of May 31, 2024 and February 29, 2024.
Beginning in March 2023, we entered into zero-cost interest rate collars in the notional amount of $
11. Contingent Consideration
Business Combination
The contingent consideration liability is due to the issuance of Series B-2 common stock and Series 2 RCUs of E2open Holdings as part of the Business Combination. These shares and units were issued on a proportional basis to each holder of Class A shares in CCNB1 and Common Units of E2open Holdings. These restricted shares and Common Units are treated as a contingent consideration liability under ASC 805 and valued at fair market value. The contingent consideration liability was recorded at fair value on the acquisition date and is remeasured at each reporting date and adjusted if necessary. Any gain or loss recognized from the remeasurement is recorded in gain (loss) from the change in fair value of contingent consideration on the Condensed Consolidated Statements of Operations as nonoperating income (expense) as the change in fair value is not part of our core operating activities.
The contingent consideration liability was $
There were
16
There were
Upon the conversion of an RCU, the holder of such RCU will be entitled to receive a payment equal to the amount of ordinary distributions paid on an E2open Holdings unit from the Closing Date through (but not including) the date such RCU converts into an E2open Holdings unit. If any of the RCUs do not vest on or before the
We have not paid any dividends to date and do not expect to in the future.
12. Fair Value Measurement
Our financial instruments include cash and cash equivalents; investments; accounts receivable, net; accounts payable; notes payable; and financing lease obligations. Accounts receivable, net and accounts payable are stated at their carrying value, which approximates fair value, due to their short maturity. We measure our cash equivalents and investments at fair value, based on an exchange or exit price which represents the amount that would be received for an asset sale or an exit price, or paid to transfer a liability in an orderly transaction between knowledgeable and willing market participants. Certificates of deposit are valued at original cost plus accrued interest, which approximates fair value. We estimate the fair value for notes payable and financing lease obligations by discounting the future cash flows of the related note and lease payments. As of May 31, 2024 and February 29, 2024, the fair value of the cash and cash equivalents, restricted cash, certificates of deposit, notes payable and financing lease obligations approximates their recorded values.
The following tables set forth details about our investments:
($ in thousands) |
|
Cost |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
May 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
February 29, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
The asset-backed securities are included in other noncurrent assets on the Condensed Consolidated Balance Sheets.
Observable inputs are based on market data obtained from independent sources. Unobservable inputs reflect our assessment of the assumptions market participants would use to value certain financial instruments. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
17
Our assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows:
|
|
May 31, 2024 |
|
|||||||||||||
($ in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total investments |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Interest rate collar agreements |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total other assets |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash-settled restricted stock units |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Tax receivable agreement liability |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Warrant liability |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
|
|
February 29, 2024 |
|
|||||||||||||
($ in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total investments |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forward currency contracts |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Interest rate collar agreements |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total other assets |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash-settled stock units |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Tax receivable agreement liability |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Warrant liability |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|||
Contingent consideration |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Cash-Settled Restricted Stock Units
Cash-settled restricted stock units (RSUs) form part of our compensation program. The fair value of these awards is determined using the closing stock price of our Class A Common Stock on the last day of each balance sheet date which is considered an observable quoted market price in active markets (Level 1).
Contingent Consideration
The following table provides a reconciliation of the beginning and ending balances of the contingent consideration using significant unobservable inputs (Level 3):
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
Loss (gain) from fair value of contingent consideration |
|
|
|
|
|
( |
) |
|
End of period |
|
$ |
|
|
$ |
|
||
18
The change in the fair value of the contingent consideration is recorded in gain (loss) from change in fair value of contingent consideration in the Condensed Consolidated Statements of Operations.
Tax Receivable Agreement
Our Tax Receivable Agreement liability is measured under both ASC 805 at fair value on a recurring basis using significant unobservable inputs (Level 3) and ASC 450 at book value.
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
Loss (gain) from fair value of tax receivable agreement liability |
|
|
|
|
|
( |
) |
|
End of period |
|
$ |
|
|
$ |
|
||
The change in the fair value of the Tax Receivable Agreement liability is recorded in gain (loss) from change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations.
Warrants
Our warrant liability is measured at fair value on a recurring basis using active market quoted prices (Level 1) and significant unobservable inputs (Level 3).
($ in thousands) |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Beginning of period |
|
$ |
|
|
$ |
|
||
Gain from fair value of warrant liability |
|
|
( |
) |
|
|
( |
) |
End of period |
|
$ |
|
|
$ |
|
||
The change in the fair value of the warrant liability is recorded in gain from change in fair value of warrant liability in the Condensed Consolidated Statements of Operations.
The fair values of our Level 1 financial instruments, which are traded in active markets, are based on quoted market prices for identical instruments. The fair values of our Level 2 financial instruments are based on daily market foreign currency rates, interest rate curves and quoted market prices for comparable instruments or model-driven valuations using observable market data or inputs corroborated by observable market data.
Our contingent consideration is valued using a Monte Carlo simulation model. The assumptions used in preparing this model include estimates such as volatility, contractual terms, discount rates, dividend yield and risk-free interest rates. This valuation model uses unobservable market input, and therefore the liability is classified as Level 3.
Our public warrants are valued using active market quoted prices, which are Level 1 inputs. The private placement warrants are valued using a binomial pricing model when the warrants are subject to the make-whole table, or otherwise are valued using a Black-Scholes pricing model. The
There were
13. Revenue
We primarily generate revenue from the sale of subscriptions and professional services. We recognize revenue when the client contract and associated performance obligations have been identified, transaction price has been determined and allocated to the performance obligations in the contract, and performance obligations have been satisfied. We recognize revenue net of any taxes collected from clients, which are subsequently remitted to governmental authorities. Other revenue is recognized when the service is delivered to the client.
19
Total Revenue by Geographic Locations
Revenue by geographic regions consisted of the following:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 (1) |
|
||
Americas |
|
$ |
|
|
$ |
|
||
Europe |
|
|
|
|
|
|
||
Asia Pacific |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
Revenues by geography are determined based on the region of our contracting entity, which may be different than the region of the client. Americas revenue attributed to the United States was
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the client is not committed. The client is not considered committed when they are able to terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a practical expedient of ASC 606, Revenue from Contracts with Customers, we have not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. As of May 31, 2024 and February 29, 2024, approximately $
Contract Assets and Liabilities
Contract assets primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets were $
Sales Commissions
With the adoption of ASC 606 and ASC 340-40, Contracts with Customers, in March 2019, we began deferring and amortizing sales commissions that are incremental and directly related to obtaining client contracts. Amortization expense of $
20
14. Warrants
As of May 31, 2024 and February 29, 2024, there were an aggregate of
15. Stockholders' Equity
Class A Common Stock
We are authorized to issue
Class V Common Stock
We are authorized to issue
The holders of Common Units participate in net income or loss allocations and distributions of E2open Holdings. They are also entitled to Class V Common Stock
The following table reflects the changes in our outstanding stock:
|
|
Class A |
|
|
Class V |
|
|
Series B-1 |
|
|
Series B-2 |
|
||||
Balance, February 29, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Conversion of Common Units (1) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
Issuance of common stock upon exercise of options |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Vesting of restricted awards, net of shares |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Balance, May 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
16. Noncontrolling Interest
Noncontrolling interest represents the portion of E2open Holdings that we control and consolidate but do not own. As of May 31, 2024 and February 29, 2024, the noncontrolling interest represents a
21
Generally, Common Units participate in net income or loss allocations and distributions and entitle their holder to the right, subject to the terms set forth in the Third Amended and Restated Limited Liability Company Agreement of E2open, LLC (Third Company Agreement), to require E2open Holdings to redeem all or a portion of the Common Units held by such participant. At our option, we may satisfy this redemption with cash or by exchanging Class V Common Stock for Class A Common Stock on a
During the three months ended May 31, 2024, there were
During the three months ended May 31, 2023, there were
As of May 31, 2024 and February 29, 2024, there were a total of
We follow the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, we have determined that the Common Units meet the requirements to be classified as permanent equity.
17. Other Comprehensive Loss
Accumulated other comprehensive loss in the equity section of our Condensed Consolidated Balance Sheets includes:
($ in thousands) |
|
Foreign Currency Translation Adjustment |
|
|
Unrealized Holding (Losses) Gains on Foreign Exchange Forward Contracts |
|
|
Unrealized Holding Gains on Interest Rate Collar Agreements |
|
|
Total |
|
||||
Balance, February 29, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other comprehensive gain (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Tax effects |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other comprehensive gain (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Balance, May 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||
There were
The effect of amounts reclassified out of unrealized holding losses on derivatives into net loss was as follows:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Reclassifications: |
|
|
|
|
|
|
||
Cost of revenue |
|
$ |
|
|
$ |
|
||
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
— |
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The effect of amounts reclassified out of unrealized gains for interest rate collars as an offset to interest expense was as follows:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Reclassifications: |
|
|
|
|
|
|
||
$ |
|
$ |
( |
) |
|
$ |
( |
) |
$ |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
( |
) |
|
$ |
( |
) |
Accumulated foreign currency translation adjustments are reclassified to net loss when realized upon sale or upon complete, or substantially complete, liquidation of the investment in the foreign entity.
22
See Note 12, Financial Instruments for additional information related to our derivative instruments.
18. Earnings Per Share
Basic earnings per share is calculated as net loss available to common stockholders divided by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings per share is computed by using the basic earnings per share plus any dilutive securities outstanding during the period using the if-converted method, except when the effect is anti-dilutive.
|
|
Three Months Ended May 31, |
|
|||||
(in thousands, except per share data) |
|
2024 |
|
|
2023 |
|
||
Net loss per share: |
|
|
|
|
|
|
||
Numerator - basic: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
( |
) |
|
|
(35,489 |
) |
Net loss attributable to E2open Parent Holdings, Inc. - basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Numerator - diluted: |
|
|
|
|
|
|
||
Net loss attributable to E2open Parent Holdings, Inc. - basic |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to E2open Parent Holdings, Inc. - diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Denominator - basic: |
|
|
|
|
|
|
||
Weighted average shares outstanding - basic |
|
|
|
|
|
|
||
Net loss per share - basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
||
Denominator - diluted: |
|
|
|
|
|
|
||
Weighted average shares outstanding - basic |
|
|
|
|
|
|
||
Weighted average shares outstanding - diluted |
|
|
|
|
|
|
||
Diluted net loss per common share |
|
$ |
( |
) |
|
$ |
( |
) |
Potential common shares are shares that would be issued upon exercise or conversion of shares under our share-based compensation plans and upon exercise of warrants that are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders.
The following table summarizes the potential common shares excluded from the calculation of diluted loss per common share as their effect would be anti-dilutive:
|
|
Three Months Ended May 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Series B-1 common stock |
|
|
|
|
|
|
||
Series B-2 common stock |
|
|
|
|
|
|
||
Restricted common units Series 2 |
|
|
|
|
|
|
||
Warrants |
|
|
|
|
|
|
||
Common Units |
|
|
|
|
|
|
||
Performance-based options |
|
|
|
|
|
|
||
Time-based options |
|
|
|
|
|
|
||
Performance-based restricted stock units |
|
|
|
|
|
|
||
Time-based restricted stock units |
|
|
|
|
|
|
||
Units/Shares excluded from the dilution computation |
|
|
|
|
|
|
||
23
19. Share-Based Compensation
2021 Incentive Plan
The E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan, as Amended and Restated (2021 Incentive Plan), allows us to make equity and equity-based incentive awards to officers, employees, directors and consultants. There were
The following table presents the awards granted for Class A Common Stock:
|
|
Three Months Ended May 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Awards granted |
|
|
|
|
|
|
||
Options |
|
|
|
|
|
|
||
RSUs |
|
|
|
|
|
|
||
Total awards granted |
|
|
|
|
|
|
||
Options
Options are either performance-based or time-based and granted to our executive officers and senior management. These awards are recorded as equity awards within the Condensed Consolidated Statements of Stockholders' Equity. When performance-based grants are awarded, the performance target is set at
During the three months ended May 31, 2024, we issued
As of May 31, 2024, there were
RSUs
The RSUs are either performance-based or time-based. These awards are recorded as equity awards within the Condensed Consolidated Statements of Stockholders' Equity. The fiscal 2024 performance-based RSUs were measured based on obtaining organic subscription revenue growth, constant currency adjusted EBITDA and net bookings target over a
The time-based RSUs for executive officers, senior management and employees granted during fiscal 2022 and 2023 vest ratably over a
As of May 31, 2024, there were
24
Redeemable Share-Based Awards
If there is a change in control, the award will immediately vest under the performance condition based upon the appropriate stock hurdle and automatically time-vest. The vested RSU will be paid in the form of cash and/or equity in a ratio substantially similar to the ratio received by the other shareholders in connection with the change in control. Additionally, the cash portion of the award will be equal to at least
Mr. Appel was also awarded time-based RSUs that vest one-third after the first year and vest ratably each quarter over the remaining two-years. If there is a change in control, the award will immediately vest and be paid in the form of cash and/or equity in a ratio substantially similar to the ratio received by the other shareholders in connection with the change in control. Additionally, the cash portion of the award will be equal to at least
The amount presented in the mezzanine as redeemable share-based awards will be the redemption amount as of the grant date, multiplied by the portion of the requisite service period that has elapsed. The redemption amount is based on the number of shares that would vest if a change in control occurred at the grant date multiplied by the grant date stock price. Once the RSUs have vested, the associated redemption value will be reclassified from the redeemable share-based award to additional paid-in capital on the Condensed Consolidated Balance Sheets.
Restricted Stock Awards
The restricted stock awards (RSAs) are time-based and granted to participants with the associated Class A Common Stock issued on the day of grant. The Class A Common Stock are issued subject to various restrictions, but carry voting rights. When the applicable vesting terms have been met, the restrictions are removed from the Class A Common Stock.
As part of Mr. Andrew Appel's compensation as interim Chief Executive Officer, he received an initial RSA grant valued at $
Mr. Appel's Chief of Staff, Mr. McIndoe, was awarded an RSA grant in November 2023 valued at $
As of May 31, 2024, all of the RSAs are fully vested.
As of May 31, 2024, there were
Liability Awards
For employees based in China, they are awarded cash-settled RSUs which vest ratably over a
With the departure of our Executive Vice President and General Counsel, a Separation and Release Agreement was entered into under which the General Counsel provided transition services through May 31, 2024. As a result of the General Counsel’s departure, a portion of her options, time-based RSUs and performance-based RSUs were accelerated to June 10, 2024 resulting in
25
The table below sets forth the functional classification in the Condensed Consolidated Statements of Operations of our equity-based compensation expense:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Cost of revenue |
|
$ |
|
|
$ |
|
||
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Total share-based compensation |
|
$ |
|
|
$ |
|
||
20. Leases
We account for leases in accordance with ASC 842, Leases, which requires lessees to recognize lease liabilities and right-of-use (ROU) assets on the balance sheet for most operating leases.
Real Estate Leases
We lease our primary office space under non-cancelable operating leases with various expiration dates through
Several of the operating lease agreements require us to provide security deposits. As of May 31, 2024 and February 29, 2024, lease deposits were $
During the three months ended May 31, 2023, we incurred a $
Vehicle Leases
We lease vehicles under non-cancelable operating lease arrangements which have various expiration dates through
Equipment Leases
We purchase certain equipment under non-cancelable financing lease arrangements related to software and computer equipment and which have various expiration dates through
Balance Sheet Presentation
The following tables present the amounts and classifications of our estimated ROU assets, net and lease liabilities:
($ in thousands) |
|
Balance Sheet Location |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Operating lease right-of-use assets |
|
Operating lease right-of-use assets |
|
$ |
|
|
$ |
|
||
Finance lease right-of-use asset |
|
Property and equipment, net |
|
|
|
|
|
|
||
Total right-of-use assets |
|
|
|
$ |
|
|
$ |
|
||
($ in thousands) |
|
Balance Sheet Location |
|
May 31, 2024 |
|
|
February 29, 2024 |
|
||
Operating lease liability - current |
|
Current portion of operating lease obligations |
|
$ |
|
|
$ |
|
||
Operating lease liability |
|
Operating lease obligations |
|
|
|
|
|
|
||
Finance lease liability - current |
|
Current portion of finance lease obligations |
|
|
|
|
|
|
||
Finance lease liability |
|
Finance lease obligations |
|
|
|
|
|
|
||
Total lease liabilities |
|
|
|
$ |
|
|
$ |
|
||
26
Lease Cost and Cash Flows
The following table summarizes our total lease cost:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Finance lease cost: |
|
|
|
|
|
|
||
Amortization of right-of-use asset |
|
$ |
|
|
$ |
|
||
Interest on lease liability |
|
|
|
|
|
|
||
Finance lease cost |
|
|
|
|
|
|
||
Operating lease cost: |
|
|
|
|
|
|
||
Operating lease cost |
|
|
|
|
|
|
||
Variable lease cost |
|
|
|
|
|
|
||
Sublease income |
|
|
( |
) |
|
|
( |
) |
Operating net lease cost |
|
|
|
|
|
|
||
Total net lease cost |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information related to leases was as follows:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash outflows from operating leases |
|
$ |
|
|
$ |
|
||
The following table presents the weighted-average remaining lease terms and discount rates of our leases:
|
|
Three Months Ended May 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Weighted-average remaining lease term (in years): |
|
|
|
|
|
|
||
Finance lease |
|
|
|
|
|
|
||
Operating lease |
|
|
|
|
|
|
||
Weighted-average discount rate: |
|
|
|
|
|
|
||
Finance lease |
|
|
% |
|
|
% |
||
Operating lease |
|
|
% |
|
|
% |
||
Lease Liability Maturity Analysis
The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities as of May 31, 2024:
($ in thousands) |
|
Operating Leases |
|
|
Finance Leases |
|
||
June 2024 - February 2025 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
2029 |
|
|
|
|
|
|
||
2030 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less: Present value discount |
|
|
( |
) |
|
|
( |
) |
Lease liabilities |
|
$ |
|
|
$ |
|
||
21. Income Taxes
We calculate the provision for income taxes during interim periods by applying an estimate of the forecasted annual effective tax rate for the full fiscal year to ordinary income or loss (pretax income or loss excluding discrete items) for the reporting period. Our provision for income taxes was a benefit of $
27
The loss before income taxes of $
As of May 31, 2024 and February 29, 2024, total gross unrecognized tax benefits were $
22. Commitments and Contingencies
From time to time, we have exposure and are subject to contingencies that arise in the ordinary course of business for a variety of claims. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any other such contingencies will have a material adverse effect upon our Condensed Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.
23. Supplemental Cash Flow Information
Supplemental cash flow information and non-cash investing and financing activities are as follows:
|
|
Three Months Ended May 31, |
|
|||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||
Supplemental cash flow information - Cash paid for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes |
|
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Capital expenditures included in accounts payable and accrued liabilities |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for operating lease obligations |
|
|
|
|
|
|
||
Shares withheld for taxes on vesting of restricted stock |
|
|
|
|
|
|
||
Conversion of Common Units to Class A Common Stock |
|
|
|
|
|
— |
|
|
Redeemable share-based awards |
|
|
|
|
|
— |
|
|
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 as well as 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 2024 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 world class end-to-end supply chain software platform that enables the world's largest companies to transform the way they make, move and sell goods and services. Our SaaS platform spans many key strategic and operational areas including channel, planning, global trade, logistics and supply. With the broadest cloud-native global SaaS platform purpose-built for modern supply chains, we connect manufacturing, logistics, channel and distributing partners as one multi-enterprise network. Our SaaS platform anticipates disruptions and opportunities to help companies improve efficiency, reduce waste and operate sustainably. In aggregate, we serve clients in all major countries in the world across a wide range of end-markets, including consumer goods, food and beverage, manufacturing, retail, industrial and automotive, aerospace and defense, technology and transportation, among others.
28
We operate in what we believe is an attractive industry with strong secular tailwinds and a total addressable market which includes significant whitespace within our current client base. This upsell opportunity within our existing client base is largely driven by their current technology solution which is often a combination of legacy point solutions and home-grown applications which could be a combination of manual processes and spreadsheets. As manufacturing continues to evolve, supply chains have grown more complex creating the need for a modern cloud-based solution. We believe our cloud-based, end-to-end software platform offers a differentiated and more connected solution for clients that provides all the mechanisms needed to run a fully integrated supply chain solution with visibility at every point. If our clients initially purchase portions of our software, they can add on additional modules as the need arises.
Results of Operations
The following table is our Unaudited Condensed Consolidated Statements of Operations for the periods indicated:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands, except per share amounts) |
|
2024 |
|
|
2023 |
|
||
Revenue |
|
$ |
151,163 |
|
|
$ |
160,120 |
|
Cost of revenue |
|
|
(78,503 |
) |
|
|
(80,702 |
) |
Total gross profit |
|
|
72,660 |
|
|
|
79,418 |
|
|
|
|
|
|
|
|
||
Operating Expenses |
|
|
|
|
|
|
||
Research and development |
|
|
24,797 |
|
|
|
25,866 |
|
Sales and marketing |
|
|
20,996 |
|
|
|
19,558 |
|
General and administrative |
|
|
23,343 |
|
|
|
22,125 |
|
Acquisition-related expenses |
|
|
283 |
|
|
|
389 |
|
Amortization of acquired intangible assets |
|
|
20,086 |
|
|
|
20,128 |
|
Goodwill impairment |
|
|
— |
|
|
|
410,041 |
|
Intangible asset impairment |
|
|
— |
|
|
|
4,000 |
|
Total operating expenses |
|
|
89,505 |
|
|
|
502,107 |
|
Loss from operations |
|
|
(16,845 |
) |
|
|
(422,689 |
) |
Interest and other expense, net |
|
|
(25,373 |
) |
|
|
(25,726 |
) |
Loss from change in tax receivable agreement liability |
|
|
(3,974 |
) |
|
|
(2,460 |
) |
Gain from change in fair value of warrant liability |
|
|
3,761 |
|
|
|
14,680 |
|
(Loss) gain from change in fair value of contingent consideration |
|
|
(2,280 |
) |
|
|
9,000 |
|
Total other expense |
|
|
(27,866 |
) |
|
|
(4,506 |
) |
Loss before income tax benefit |
|
|
(44,711 |
) |
|
|
(427,195 |
) |
Income tax benefit |
|
|
1,923 |
|
|
|
66,311 |
|
Net loss |
|
|
(42,788 |
) |
|
|
(360,884 |
) |
Less: Net loss attributable to noncontrolling interest |
|
|
(3,926 |
) |
|
|
(35,489 |
) |
Net loss attributable to E2open Parent Holdings, Inc. |
|
$ |
(38,862 |
) |
|
$ |
(325,395 |
) |
Net loss attributable to E2open Parent Holdings, Inc. |
|
|
|
|
|
|
||
Basic |
|
$ |
(0.13 |
) |
|
$ |
(1.08 |
) |
Diluted |
|
$ |
(0.13 |
) |
|
$ |
(1.08 |
) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
||
Basic |
|
|
306,732 |
|
|
|
302,502 |
|
Diluted |
|
|
306,732 |
|
|
|
302,502 |
|
29
Three Months Ended May 31, 2024 compared to Three Months Ended May 31, 2023
Revenue
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscriptions |
|
$ |
131,404 |
|
|
$ |
134,903 |
|
|
$ |
(3,499 |
) |
|
|
-3 |
% |
Professional services and other |
|
|
19,759 |
|
|
|
25,217 |
|
|
|
(5,458 |
) |
|
|
-22 |
% |
Total revenue |
|
$ |
151,163 |
|
|
$ |
160,120 |
|
|
$ |
(8,957 |
) |
|
|
-6 |
% |
Percentage of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscriptions |
|
|
87 |
% |
|
|
84 |
% |
|
|
|
|
|
|
||
Professional services and other |
|
|
13 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
||
Subscriptions revenue was $131.4 million for the three months ended May 31, 2024, a $3.5 million, or 3%, decrease compared to subscriptions revenue of $134.9 million for the three months ended May 31, 2023. The decrease in subscriptions revenue was primarily due to lower new bookings, higher churn and lower revenue from tiered contracts.
Professional services and other revenue were $19.8 million for the three months ended May 31, 2024, a $5.5 million, or 22%, decrease compared to $25.2 million for the three months ended May 31, 2023. The decrease in professional services and other revenue was due to lower billable hours and delayed conversion of existing backlog primarily driven by higher focus of internal resources on churn and customer satisfaction.
Our subscriptions revenue as a percentage of total revenue increased to 87% for the first quarter of fiscal 2025 compared to 84% for the first quarter of fiscal 2024. This increase is primarily due to a decline in professional services revenue. Our professional services and other revenue as a percentage of total revenue decreased to 13% for the first quarter of fiscal 2025 compared to 16% for the first quarter of fiscal 2024 as professional services and other revenue declined.
Cost of Revenue, Gross Profit and Gross Margin
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscriptions |
|
$ |
37,099 |
|
|
$ |
36,544 |
|
|
$ |
555 |
|
|
|
2 |
% |
Professional services and other |
|
|
16,752 |
|
|
|
19,528 |
|
|
|
(2,776 |
) |
|
|
-14 |
% |
Amortization of acquired intangible assets |
|
|
24,652 |
|
|
|
24,630 |
|
|
|
22 |
|
|
|
0 |
% |
Total cost of revenue |
|
$ |
78,503 |
|
|
$ |
80,702 |
|
|
$ |
(2,199 |
) |
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscriptions |
|
$ |
69,653 |
|
|
$ |
73,728 |
|
|
$ |
(4,075 |
) |
|
|
-6 |
% |
Professional services and other |
|
|
3,007 |
|
|
|
5,690 |
|
|
|
(2,683 |
) |
|
|
-47 |
% |
Total gross profit |
|
$ |
72,660 |
|
|
$ |
79,418 |
|
|
$ |
(6,758 |
) |
|
|
-9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Subscriptions |
|
|
53 |
% |
|
|
55 |
% |
|
|
|
|
|
|
||
Professional services and other |
|
|
15 |
% |
|
|
23 |
% |
|
|
|
|
|
|
||
Total gross margin |
|
|
48 |
% |
|
|
50 |
% |
|
|
|
|
|
|
||
Cost of subscriptions was $37.1 million for the three months ended May 31, 2024, a $0.6 million, or 2%, increase compared to $36.5 million for the three months ended May 31, 2023. This increase was primarily driven by a $2.1 million increase in software and hosting costs partially offset by a $1.7 million decrease in personnel costs when compared to the prior year.
Cost of professional services and other revenue was $16.8 million for the three months ended May 31, 2024, a $2.8 million, or 14%, decrease compared to $19.5 million for the three months ended May 31, 2023. The decrease was mainly due to a $1.9 million decrease in personnel costs when compared to the prior year.
Amortization of acquired intangible assets was $24.7 million for the three months ended May 31, 2024 compared to $24.6 million for the three months ended May 31, 2023.
30
Our subscriptions gross margin decreased to 53% in the first quarter of fiscal 2025 compared to 55% in the first quarter of fiscal 2024.
Our professional services gross margin decreased in the first quarter of fiscal 2025 to 15% compared to 23% in the first quarter of fiscal 2024 primarily driven by our lower revenue in the first quarter of fiscal 2025.
Research and Development
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Research and development |
|
$ |
24,797 |
|
|
$ |
25,866 |
|
|
$ |
(1,069 |
) |
|
|
-4 |
% |
Percentage of revenue |
|
|
16 |
% |
|
|
16 |
% |
|
|
|
|
|
|
||
Research and development expenses were $24.8 million for the three months ended May 31, 2024, a $1.1 million, or 4%, decrease compared to $25.9 million for the three months ended May 31, 2023. The decrease was mainly due to $2.5 million decrease in personnel costs due to higher research and development software capitalization and increase in offshore resources partially offset by a $1.0 million increase in share-based compensation expense as compared to the prior year period.
Sales and Marketing
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Sales and marketing |
|
$ |
20,996 |
|
|
$ |
19,558 |
|
|
$ |
1,438 |
|
|
|
7 |
% |
Percentage of revenue |
|
|
14 |
% |
|
|
12 |
% |
|
|
|
|
|
|
||
Sales and marketing expenses were $21.0 million for the three months ended May 31, 2024, a $1.4 million, or 7%, increase compared to $19.6 million in the prior year. The increase was driven by $1.5 million in personnel costs and $1.1 million of share-based compensation expenses when compared to the prior year. This increase was partially offset by $1.0 million in reduced marketing expenses.
General and Administrative
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
General and administrative |
|
$ |
23,343 |
|
|
$ |
22,125 |
|
|
$ |
1,218 |
|
|
|
6 |
% |
Percentage of revenue |
|
|
15 |
% |
|
|
14 |
% |
|
|
|
|
|
|
||
General and administrative expenses were $23.3 million for the three months ended May 31, 2024, a $1.2 million, or 6%, increase compared to $22.1 million in the prior year. The increase was mainly a result of $4.7 million of higher share-based compensation expense with the majority of the increase related to awards for onboarding our new Chief Executive Officer. This increase was partially offset by lower spend for consulting of $0.8 million and facilities of $1.0 million for such items as rent and building maintenance.
Other Operating Expenses
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Acquisition and other related expenses |
|
$ |
283 |
|
|
$ |
389 |
|
|
$ |
(106 |
) |
|
|
-27 |
% |
Amortization of acquired intangible assets |
|
|
20,086 |
|
|
|
20,128 |
|
|
|
(42 |
) |
|
|
0 |
% |
Total other operating expenses |
|
$ |
20,369 |
|
|
$ |
20,517 |
|
|
$ |
(148 |
) |
|
|
-1 |
% |
Acquisition and other related expenses were $0.3 million and $0.4 million for the three months ended May 31, 2024 and 2023, respectively.
Amortization of acquired intangible assets was $20.1 million for the first quarter of fiscal 2025 and 2024.
31
Goodwill Impairment
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Goodwill impairment |
|
$ |
— |
|
|
$ |
410,041 |
|
|
$ |
(410,041 |
) |
|
|
-100 |
% |
During the first quarter of fiscal 2024, the market price of our Class A Common Stock and market capitalization declined significantly. This decline resulted in us determining that a triggering event occurred, and an interim goodwill impairment assessment was performed. The result of the impairment assessment was the realization of a $410.0 million impairment charge. We did not have an impairment charge in the first quarter of fiscal 2025.
Intangible Asset Impairment
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Intangible asset impairment |
|
$ |
— |
|
|
$ |
4,000 |
|
|
$ |
(4,000 |
) |
|
|
-100 |
% |
The decline in our stock price and market capitalization during the first quarter of fiscal 2024 was also a triggering event which resulted in an interim indefinite-lived intangible asset impairment assessment. The result of the impairment assessment was the realization of a $4.0 million impairment charge. We did not have an impairment charge in the first quarter of fiscal 2025.
Interest and Other Expense, Net
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Interest and other expense, net |
|
$ |
(25,373 |
) |
|
$ |
(25,726 |
) |
|
$ |
353 |
|
|
|
-1 |
% |
Interest and other expense, net was $25.4 million for the three months ended May 31, 2024, a $0.4 million, or 1%, decrease compared to $25.7 million in the prior year. The decrease was driven by lower realized exchange losses and additional interest income from money market funds partially offset by higher interest expense on our debt due to higher interest rates in fiscal 2025 compared to fiscal 2024.
Loss from Change in Tax Receivable Agreement
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Loss from change in tax receivable agreement |
|
$ |
(3,974 |
) |
|
$ |
(2,460 |
) |
|
$ |
(1,514 |
) |
|
|
62 |
% |
During the three months ended May 31, 2024, we recorded a loss of $4.0 million related to the change in the fair value of the tax receivable agreement liability, including interest, compared to $2.5 million during the three months ended May 31, 2023. 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 gain (loss) from change in tax receivable agreement liability in the Unaudited Condensed Consolidated Statements of Operations in the period in which the change occurred.
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. During the three months ended May 31, 2024 and 2023, the Tax Receivable Agreement applicable to this guidance increased by $0.5 million and a negligible amount, respectively.
Gain from Change in Fair Value of Warrant Liability
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Gain from change in fair value of warrant |
|
$ |
3,761 |
|
|
$ |
14,680 |
|
|
$ |
(10,919 |
) |
|
|
-74 |
% |
32
We recorded a gain of $3.8 million during the three months ended May 31, 2024, a $10.9 million decrease compared to a gain of $14.7 million in the prior year for the change in fair value on the revaluation of our warrant liability associated with our warrants. We are required to revalue the warrants at the end of each reporting period and reflect in the Unaudited Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change occurred.
Gain from Change in Fair Value of Contingent Consideration
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|||
(Loss) gain from change in fair value of |
|
$ |
(2,280 |
) |
|
$ |
9,000 |
|
|
$ |
(11,280 |
) |
|
nm |
We recorded a loss of $2.3 million during the three months ended May 31, 2024, an $11.3 million decrease compared to a gain of $9.0 million in the prior year for the change in fair value on the revaluation of our contingent consideration associated with our restricted B-2 common stock and Series 2 RCUs. We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the Unaudited Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the contingent consideration in the period in which the change occurred.
Income Tax Benefit
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Loss before income taxes |
|
$ |
(44,711 |
) |
|
$ |
(427,195 |
) |
|
$ |
382,484 |
|
|
|
-90 |
% |
Income tax benefit |
|
|
1,923 |
|
|
|
66,311 |
|
|
|
(64,388 |
) |
|
|
-97 |
% |
Income tax benefit was $1.9 million, or 4.3%, for the three months ended May 31, 2024 compared to $66.3 million, or 15.5%, for the three months ended May 31, 2023. The change in the income tax benefit between periods was primarily due to the goodwill and indefinite-lived intangible impairment charges in the first quarter of fiscal 2024.
Non-GAAP Financial Measures
This document includes Non-GAAP gross profit, Non-GAAP gross margin, EBITDA 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 gross profit as gross profit excluding depreciation and amortization, share-based compensation and certain other non-cash and non-recurring items. We define and calculate EBITDA as net income or losses excluding interest income or expense, income tax expense or benefit, depreciation and amortization and Adjusted EBITDA as further adjusted for the following items: goodwill impairment charge, indefinite-lived intangible asset impairment charge, right-of-use assets impairment charge, transaction-related costs, gain (loss) from change 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.
33
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, litigation settlements, goodwill impairment charge, indefinite-lived intangible asset impairment charge and right-of-use assets impairment charge), non-cash (for example, in the case of depreciation, amortization, gain (loss) from change in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration and share-based compensation) 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 gross profit reconciled to our reported gross profit, the closest U.S. GAAP measure, for the periods indicated:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Gross profit |
|
|
|
|
|
|
||
Reported gross profit |
|
$ |
72,660 |
|
|
$ |
79,418 |
|
Depreciation and amortization |
|
|
28,484 |
|
|
|
28,621 |
|
Non-recurring/non-operating costs (1) |
|
|
204 |
|
|
|
1,742 |
|
Share-based compensation (2) |
|
|
1,205 |
|
|
|
625 |
|
Non-GAAP gross profit |
|
$ |
102,553 |
|
|
$ |
110,406 |
|
Gross margin |
|
|
48.1 |
% |
|
|
49.6 |
% |
Non-GAAP gross margin |
|
|
67.8 |
% |
|
|
69.0 |
% |
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Net loss |
|
$ |
(42,788 |
) |
|
$ |
(360,884 |
) |
Adjustments: |
|
|
|
|
|
|
||
Interest expense, net |
|
|
24,711 |
|
|
|
24,279 |
|
Income tax benefit |
|
|
(1,923 |
) |
|
|
(66,311 |
) |
Depreciation and amortization |
|
|
53,605 |
|
|
|
53,319 |
|
EBITDA |
|
|
33,605 |
|
|
|
(349,597 |
) |
EBITDA Margin |
|
|
22.2 |
% |
|
|
-218.3 |
% |
Goodwill impairment charge (1) |
|
|
— |
|
|
|
410,041 |
|
Intangible asset impairment charge (2) |
|
|
— |
|
|
|
4,000 |
|
Right-of-use assets impairment charge (3) |
|
|
— |
|
|
|
362 |
|
Acquisition-related adjustments (4) |
|
|
283 |
|
|
|
389 |
|
Loss from change in tax receivable agreement liability (5) |
|
|
3,974 |
|
|
|
2,460 |
|
Gain from change in fair value of warrant liability (6) |
|
|
(3,761 |
) |
|
|
(14,680 |
) |
Loss (gain) from change in fair value of contingent consideration (7) |
|
|
2,280 |
|
|
|
(9,000 |
) |
Non-recurring/non-operating costs (8) |
|
|
2,557 |
|
|
|
5,326 |
|
Share-based compensation (9) |
|
|
11,787 |
|
|
|
4,460 |
|
Adjusted EBITDA |
|
$ |
50,725 |
|
|
$ |
53,761 |
|
Adjusted EBITDA Margin |
|
|
33.6 |
% |
|
|
33.6 |
% |
34
Three Months Ended May 31, 2024 compared to Three Months Ended May 31, 2023
Gross Profit
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Gross profit |
|
$ |
72,660 |
|
|
$ |
79,418 |
|
|
$ |
(6,758 |
) |
|
|
-9 |
% |
Gross margin |
|
|
48.1 |
% |
|
|
49.6 |
% |
|
|
|
|
|
|
||
Gross profit was $72.7 million for the three months ended May 31, 2024, a $6.8 million, or 9%, decrease compared to $79.4 million for three months ended May 31, 2023. Subscriptions gross profit was down 6% while professional services and other gross profit was down 47%. Gross margin was 48% for the first quarter of fiscal 2025 compared to 50% for the first quarter of fiscal 2024.
Non-GAAP Gross Profit
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Non-GAAP gross profit |
|
$ |
102,553 |
|
|
$ |
110,406 |
|
|
$ |
(7,853 |
) |
|
|
-7 |
% |
Non-GAAP gross margin |
|
|
67.8 |
% |
|
|
69.0 |
% |
|
|
|
|
|
|
||
Non-GAAP gross profit was $102.6 million for the three months ended May 31, 2024, an $7.9 million, or 7%, decrease compared to $110.4 million for the three months ended May 31, 2023. The decrease in Non-GAAP gross profit was primarily due to a decrease in total revenue and $1.9 million in higher software and hosting costs in subscription costs of revenue partially offset by $3.1 million in lower personnel costs. The Non-GAAP gross margin decreased in the first quarter of fiscal 2025 to 68% compared to 69% in the first quarter of fiscal 2024.
EBITDA
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|||
EBITDA |
|
$ |
33,605 |
|
|
$ |
(349,597 |
) |
|
$ |
383,202 |
|
|
nm |
EBITDA margin |
|
|
22.2 |
% |
|
|
-218.3 |
% |
|
|
|
|
|
|
EBITDA was $33.6 million for the three months ended May 31, 2024, a $383.2 million increase compared to a negative $349.6 million EBITDA for three months ended May 31, 2023. EBITDA margin was 22% for the first quarter of fiscal 2025 compared to a negative 218% in the prior year. The increase in EBITDA and EBITDA margin was primarily related to the $410.0 million impairment on goodwill and $4.0 million indefinite-lived intangible asset charge taken in fiscal 2024. These increases were partially offset by the $10.9 million decrease in the gain for the fair value adjustment for the warrant liability and a $11.3 million decrease in the gain associated with the fair value adjustment for the contingent consideration liability related to the restricted Series B-2 common stock as compared to prior periods.
35
Adjusted EBITDA
|
|
Three Months Ended May 31, |
|
|
|
|
|
|
|
|||||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
Adjusted EBITDA |
|
$ |
50,725 |
|
|
$ |
53,761 |
|
|
$ |
(3,036 |
) |
|
|
-6 |
% |
Adjusted EBITDA margin |
|
|
33.6 |
% |
|
|
33.6 |
% |
|
|
|
|
|
|
||
Adjusted EBITDA was $50.7 million for the three months ended May 31, 2024, a $3.0 million, or 6%, decrease compared to $53.8 million for the three months ended May 31, 2023. Adjusted EBITDA margin was 34% for the first quarter of fiscal 2025 and 2024. The decrease in Adjusted EBITDA was primarily a result of lower revenue and gross profit, partially offset by lower operating expenses compared to prior periods.
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.
We had $160.2 million in cash and cash equivalents and $155.0 million of unused borrowing capacity under our 2021 Revolving Credit Facility as of May 31, 2024. See Note 10, 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.
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
In February 2021, E2open, LLC, our subsidiary, entered into the Credit Agreement which provided for the 2021 Term Loan in the amount of $525.0 million and the 2021 Revolving Credit Facility for $75.0 million. In September 2021, the Credit Agreement was amended to include a $380.0 million incremental term loan, an increase in the letter of credit sublimit from $15.0 million to $30.0 million and an increase in the 2021 Revolving Credit Facility from $75.0 million to $155.0 million. In April 2022, the Credit Agreement was amended to include a $190.0 million incremental term loan bringing our total borrowing under the term loans to $1,095.0 million.
The 2021 Revolving Credit Facility will mature on February 4, 2026. E2open, LLC can request increases in the revolving commitments and additional term loan facilities, in minimum amounts of $2.0 million for each facility. Principal payments are due on the Credit Agreement the last day of February, May, August and November commencing August 2021. The Credit Agreement is payable in quarterly installments of $2.7 million. The Credit Agreement is payable in full on February 4, 2028.
The 2021 Term Loan has a variable interest rate resulting in an interest rate of 8.94% and 8.95% as of May 31, 2024 and February 29, 2024, respectively, which was based on SOFR plus 350 basis points, respectively. As of May 31, 2024 and February 29, 2024, the 2021 Term Loan had a principal balance outstanding of $1,064.5 million and $1,067.2 million, respectively. There were no outstanding borrowings, no letters of credit and $155.0 million available borrowing capacity under the 2021 Revolving Credit Facility as of May 31, 2024 and February 29, 2024.
Beginning in March 2023, we entered into zero-cost interest rate collars to reduce our exposure to the variability of our interest rate associated with our outstanding debt. By keeping interest rates within the executed bands, or caps and floors, of the collars, we are able to reduce exposure to the interest rate risk. Effective March 31, 2023, we entered into an interest rate collar with a notional amount of $200.0 million and a maturity date of March 31, 2026. The executed cap was 4.75% and the floor was 2.57%. Effective April 6, 2023, an additional interest rate collar was executed with a notional amount of $100.0 million and a maturity date of March 31, 2026. The executed cap was 4.50% and the floor was 2.56%.
36
Cash Flows
The following table presents net cash from operating, investing and financing activities:
|
|
Three Months Ended May 31, |
|
|||||
($ in thousands) |
|
2024 |
|
|
2023 |
|
||
Net cash provided by operating activities |
|
$ |
35,916 |
|
|
$ |
36,459 |
|
Net cash used in investing activities |
|
|
(6,084 |
) |
|
|
(6,552 |
) |
Net cash used in financing activities |
|
|
(3,006 |
) |
|
|
(2,964 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
76 |
|
|
|
2,105 |
|
Net increase in cash, cash equivalents and restricted cash |
|
|
26,902 |
|
|
|
29,048 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
|
149,038 |
|
|
|
104,342 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
175,940 |
|
|
$ |
133,390 |
|
Three Months Ended May 31, 2024 compared to Three Months Ended May 31, 2023
As of May 31, 2024, our consolidated cash, cash equivalents and restricted cash was $175.9 million, a $26.9 million increase from our balance of $149.0 million as of February 29, 2024.
Net cash provided by operating activities for the three months ended May 31, 2024 was $35.9 million compared to $36.5 million for the three months ended May 31, 2023. The $0.5 million decrease in cash was primarily driven by less cash provided by working capital items in fiscal 2025.
Net cash used in investing activities was $6.1 million and $6.6 million for the three months ended May 31, 2024 and 2023, respectively, which represented cash used for the acquisition of software and property related to our data centers.
Net cash used in financing activities was $3.0 million for the three months ended May 31, 2024 and 2023, which was mainly the result of the repayments under the 2021 Term Loan.
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. The Tax Receivable Agreement provides for the payment by the Company of 85% of certain tax benefits that are realized or deemed realized as a result of increases in tax, utilization of pre-existing tax attributes of certain sellers and realization of additional 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. We have not made any Tax Receivable Agreement payments to any Tax Receivable Agreement holders of E2open Holdings as of May 31, 2024.
The liability related to the Tax Receivable Agreement was $74.2 million and $69.7 million as of May 31, 2024 and February 29, 2024, respectively, assuming (1) a corporate tax rate of 23.7% as of May 31, 2024 and February 29, 2024, (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, (e) changes in the tax law and (f) changes in the discount rate, the likely tax savings we will realize and the resulting amounts we are likely to pay to the selling equity holders of E2open Holdings pursuant to the Tax Receivable Agreement are uncertain. Interest accrued on the portion of the Tax Receivable Agreement liability recorded under ASC 805 at a rate of LIBOR plus 100 basis points through June 30, 2023. Beginning July 1, 2023, interest will accrue at SOFR plus the applicable spread for the quarter. The portion of the Tax Receivable Agreement liability under ASC 450 is recorded on a gross undiscounted basis. These transactions, such as a conversion of Common Units to Class A Common Stock, result in a change in the Tax Receivable Agreement liability and a charge to equity.
37
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 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 will be 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.
As of May 31, 2024 and February 29, 2024, we had a current Tax Receivable Agreement liability of $1.8 million which was recorded in accounts payable and accrued liabilities on the Condensed Consolidated Balance Sheets. The determination of current and long-term is based on management's estimate of taxable income for the fiscal year and the determination that a Tax Receivable Agreement liability payment is due and payable within the next twelve months. To the extent the estimate differs from actual results, a reclass may be required for portions of the Tax Receivable Agreement liability between current and long-term.
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.
Warrant Liability
As of May 31, 2024 and February 29, 2024, there were an aggregate of 29,079,872 warrants outstanding. Each warrant entitles its holder to purchase one share of our Class A Common Stock at an exercise price of $11.50 per share. The warrants are recorded as a liability in warrant liability on the Condensed Consolidated Balance Sheets with a balance of $11.0 million and $14.7 million as of May 31, 2024 and February 29, 2024, respectively. During the three months ended May 31, 2024 and 2023, a gain of $3.8 million and $14.7 million was recognized in gain (loss) from change in fair value of the warrant liability in the Unaudited Condensed Consolidated Statements of Operations, respectively.
Contingent Consideration
The contingent consideration liability was $20.3 million and $18.0 million as of May 31, 2024 and February 29, 2024, respectively. The fair value remeasurements resulted in a loss of $2.3 million and a gain of $9.0 million for the three months ended May 31, 2024 and 2023, respectively. The contingent liability represents the Series B-2 common stock and Series 2 RCUs.
Leases
We account 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.
Our non-cancelable operating leases for our office spaces and vehicles have various expiration dates through September 2031. Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as of May 31, 2024 were: $6.5 million for June 1, 2024 through February 28, 2025, $7.1 million for fiscal 2026, $5.9 million for fiscal 2027, $3.6 million for fiscal 2028, $1.6 million for fiscal 2029 and $1.5 million thereafter. These numbers include interest of $3.2 million.
Our non-cancelable financing lease arrangements relate to software and computer equipment and have various expiration dates through November 2028. 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 May 31, 2024 were: $1.3 million for June 1, 2024 through February 28, 2025, $1.7 million for fiscal 2026, $1.1 million for fiscal 2027, $0.7 million for fiscal 2028 and $0.6 million for fiscal 2029. These numbers include interest of $0.7 million.
38
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 condensed 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 2024 Form 10-K.
There have been no changes to our critical accounting policies and estimates during the three months ended May 31, 2024 from those previously disclosed in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Form 10-K.
Recent Accounting Pronouncements
Recently issued and adopted accounting pronouncements are described in Note 2, Accounting Standards to the Notes to the Unaudited Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the market risks during the three months ended May 31, 2024 from those previously disclosed in Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk of our 2024 Form 10-K.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We have disclosure controls and procedures in place to ensure that information required to be disclosed in our reports filed or submitted under the Securities and Exchange Act of 1934, as amended (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These controls and procedures are accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by the Quarterly Report. In designing and evaluating these disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal controls over financial reporting during the quarter ended May 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We review our disclosure controls and procedures, which may include internal controls over financial reporting, on an ongoing basis. From time to time, management makes changes to enhance the effectiveness of these controls and ensure that they continue to meet the needs of our business over time.
PART II—Other Information
Item 1. Legal Proceedings.
From time to time, we have exposure and are subject to contingencies that arise in the ordinary course of business for a variety of claims. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any other such contingencies will have a material adverse effect upon our Unaudited Condensed Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.
39
Item 1A. Risk Factors.
There have been no material changes in our risk factors during the three months ended May 31, 2024 from those previously disclosed in Part I, Item 1A, Risk Factors of our 2024 Form 10-K. You should carefully consider the risk factors discussed in our 2024 Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 5. Other Information
None.
Item 6. Exhibits.
Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
4.1 |
|
CCBN1’s Form S-1/A (File No. 333-236974), filed with the SEC on April 17, 2020). |
4.2 |
|
Warrant Agreement, dated April 28, 2020, between Continental Stock Transfer & Trust Company and CC |
4.3 |
|
reference to Exhibit 4.3 to Form 10-K, filed with the SEC on May 1, 2023). |
31.1* |
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
|
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* |
|
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
Inline XBRL Instance Document |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) |
40
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.
|
|
E2open Parent Holdings, Inc. |
|
|
|
|
|
Date: July 10, 2024 |
|
By: |
/s/ Andrew M. Appel |
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Andrew M. Appel |
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Chief Executive Officer |
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Date: July 10, 2024 |
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By: |
/s/ Marje Armstrong |
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Marje Armstrong |
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|
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Chief Financial Officer |
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