E2OPEN PARENT HOLDINGS, INC. This item contains a discussion of our business, including a general overview of our business, results of operations, liquidity and capital resources and quantitative and qualitative disclosures about market risk.
The following discussion should be read in conjunction with Part II, Item 7., Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K and the unaudited condensed financial statements and related notes beginning on page 5. This Item 2 contains "forward looking" statements that involve risks and uncertainties. See Forward-Looking Statements at the beginning of this Quarterly Report.
Overview
We are a leading provider of cloud-based, end-to-end SCM software. Our software combines networks, data and applications to provide a deeply embedded, mission-critical platform that allows customers to optimize their supply chain by accelerating growth, reducing costs, increasing visibility and driving improved resiliency. Given the mission-critical nature of our solutions, we maintain deep, long-term relationships with our customers, which is reflected by our gross retention and customer tenure.
Recent Events
OnSeptember 1, 2021 , we completed the BluJay Acquisition with the issuance of 72,383,299 shares of Class A Common Stock to the BluJay Sellers and the payment of$774.2 million of cash which includes the repayment of BluJay's debt facility. The total purchase consideration for the BluJay Acquisition was$1.5 billion . In connection with the completion of the BluJay Acquisition, we secured$300 million in PIPE financing from institutional investors for the purchase of an aggregate of 28,909,022 shares of our Class A Common Stock. We also obtained a$380.0 million incremental term loan to our 2021 Term Loan and increased our 2021 Revolving Credit Facility by$80.0 million to$155.0 million . In addition, the letter of credit sublimit was increased from$15.0 million to$30.0 million upon completion of the BluJay Acquisition. Additionally, the Investor Rights Agreement was amended and restated to add certain of BluJay's existing stockholders as parties, including certain affiliates ofFrancisco Partners andTemasek as well as include a six month lock-up period fromSeptember 1, 2021 throughFebruary 28, 2022 for certain equity holders ofE2open and BluJay. The Investor Rights Agreement also providesFrancisco Partners andTemasek the right to nominate one member each to our board of directors. Mr.Deep Shah and Mr.Martin Fichtner became new directors onSeptember 1, 2021 . 33
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Results of Operations
The following table is our Condensed Consolidated Statements of Operations for the periods indicated:
Successor Predecessor Successor Predecessor
Three Months Nine Months
Ended Three Months Ended Ended Nine Months Ended
November 30, November
($ in thousands) 2021 November 30, 2020 30, 2021 November 30, 2020
Revenue $ 137,002 $ 84,081 $ 281,408 $ 249,022
Cost of revenue (72,786 ) (31,859 ) (150,496 ) (92,810 )
Total gross profit 64,216 52,222 130,912 156,212
Operating Expenses
Research and development 25,000 14,225 56,909 43,212
Sales and marketing 18,101 12,973 41,789 37,275
General and administrative 22,871 10,412 49,989 30,037
Acquisition-related expenses 33,216 5,968 50,168 11,354
Amortization of acquired intangible
assets 19,470 8,451 26,843 25,365
Total operating expenses 118,658 52,029 225,698 147,243
(Loss) income from operations (54,442 ) 193 (94,786 ) 8,969
Interest and other expense, net (10,769 ) (17,575 ) (22,004 ) (53,255 )
Change in tax receivable agreement
liability (1,470 ) - (4,606 ) -
Loss from change in fair value of
warrant
liability (7,232 ) - (48,448 ) -
Loss from change in fair value of
contingent
consideration (1,140 ) - (91,180 ) -
Total other expenses (20,611 ) (17,575 ) (166,238 ) (53,255 )
Loss before income taxes (75,053 ) (17,382 ) (261,024 ) (44,286 )
Income tax benefit (expense) 10,764 (9,685 ) 3,392 (24,073 )
Net loss (64,289 ) $ (27,067 ) (257,632 ) $ (68,359 )
Less: Net loss attributable to
noncontrolling
interest (5,072 ) (35,640 )
Net loss attributable to E2open Parent
Holdings, Inc.$ (59,217 ) $ (221,992 ) Net loss attributable to E2open Parent
stockholders per share - diluted$ (0.19 ) $ (0.98 ) Weighted-average common shares outstanding - diluted 308,132 227,186 Our integration strategy and methodology is unique in that we rapidly and completely integrate acquired businesses into our platform and go-to-market activity. As such, costs attributable to an acquisition become impractical to separate post-closing of a business combination. For example, we may elect to terminate a redundant position from either the target company, or our own company. Additionally, because of our unique technology with our E2Net application framework, we are able to rapidly deploy acquired products into our platform. With the acquisition of BluJay, we have restructured the entire go-to-market of both businesses into new sales teams, each focused on different customer groups. As such, we are unable to separate the costs of BluJay fromE2open . 34
-------------------------------------------------------------------------------- Three Months EndedNovember 30, 2021 compared to Three Months Balance atNovember 30, 2020 Revenue Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Revenue: Subscriptions$ 106,969 $ 70,374$ 36,595 52 % Professional services 30,033 13,707 16,326 nm Total revenue$ 137,002 $ 84,081$ 52,921 63 % Percentage of revenue: Subscriptions 78 % 84 % Professional services 22 % 16 % Total 100 % 100 % Subscriptions revenue was$107.0 million for the three months endedNovember 30, 2021 , a$36.6 million , or 52%, increase compared to subscriptions revenue of$70.4 million for the three months endedNovember 30, 2020 . The increase in subscriptions revenue was primarily due to the BluJay Acquisition and new organic subscription sales predominantly driven by increases in products utilized across our current customer portfolio. These increases were partially offset by the$10.4 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. With the early adoption of ASU 2021-08, a fair value adjustment to deferred revenue for the BluJay Acquisition was not recorded; therefore, amortization of the fair value adjustment to deferred revenue similar to the Business Combination adjustment will not occur for the BluJay Acquisition. Professional services revenue was$30.0 million for the three months endedNovember 30, 2021 , a$16.3 million increase compared to$13.7 million for the three months endedNovember 30, 2020 . The increase was primarily related to the BluJay Acquisition, new subscription sales and customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable year-over-year growth. Our subscriptions revenue as a percentage of total revenue decreased to 78% for the third quarter of fiscal year 2022 compared to 84% for the third quarter of fiscal 2021 driven primarily by amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, in addition to the increase in professional services revenue.
Cost of Revenue, Gross Profit and Gross Margin
Successor Predecessor
Three Months
Ended Three Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Cost of revenue:
Subscriptions $ 30,163 $ 15,568 $ 14,595 94 %
Professional services 17,587 11,346 6,241 55 %
Amortization of acquired
intangible assets 25,036 4,945 20,091 nm
Total cost of revenue $ 72,786 $ 31,859 $ 40,927 nm
Gross profit:
Subscriptions $ 51,771 $ 49,863 $ 1,908 4 %
Professional services 12,445 2,359 10,086 nm
Total gross profit $ 64,216 $ 52,222 $ 11,994 23 %
Gross margin:
Subscriptions 48 % 71 %
Professional services 41 % 17 %
Total gross margin 47 % 62 %
35
-------------------------------------------------------------------------------- Cost of subscriptions was$30.2 million for the three months endedNovember 30, 2021 , a$14.6 million , or 94%, increase compared to$15.6 million for the three months endedNovember 30, 2020 . This increase was driven by$13.6 million related to the BluJay Acquisition and an increase in personnel costs for items such as salaries and incentive compensation,$0.7 million was related to depreciation expense on capital expenditures for the expansion of our data centers and$0.2 million for share-based compensation. Cost of professional services revenue was$17.6 million for the three months endedNovember 30, 2021 , a$6.2 million , or 55%, increase compared to$11.3 million for the three months endedNovember 30, 2020 . The BluJay Acquisition in fiscal year 2022 and increases personnel costs such as salaries and incentive compensation accounted for$5.7 million of the increase in cost of professional services revenue. Amortization of acquired intangible assets was$25.0 million for the three months endedNovember 30, 2021 , a$20.1 million increase compared to$4.9 million for the three months endedNovember 30, 2020 , driven primarily by the revaluation and change in the composition of the intangible assets as part of the Business Combination inFebruary 2021 and the BluJay Acquisition inSeptember 2021 . Our subscriptions gross margin was 48% in the third quarter of fiscal 2022 as compared to 71% for the third quarter of fiscal 2021 due to the BluJay Acquisition and the amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. With the early adoption of ASU 2021-08, the BluJay deferred revenue was recorded under ASC 606 and not at fair value at the acquisition date; therefore, amortization of the fair value adjustment to deferred revenue similar to the Business Combination adjustment will not occur for the BluJay Acquisition. Our professional services gross margin increased to 41% for third quarter of fiscal 2022 from 17% in the third quarter of fiscal 2021 primarily due to the BluJay Acquisition in fiscal 2022 and new subscription sales, in addition to customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic, which resulted in favorable year-over-year growth. Research and Development Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Research and development$ 25,000 $ 14,225
$ 10,775 76 % Percentage of revenue 18 % 17 % Research and development expenses were$25.0 million for the three months endedNovember 30, 2021 , a$10.8 million , or 76%, increase compared to$14.2 million in the prior year. The increase was due to$9.8 million related to the BluJay Acquisition as well as major strategic partnership initiatives around product development efforts during fiscal year 2022, which resulted in net increased personnel costs such as salaries and incentive compensation and consulting expenses. Additionally, there was an increase to share-based compensation expense of$0.4 million and depreciation expense of$0.5 million related to capital expenditures for software. Sales and Marketing Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Sales and marketing$ 18,101 $ 12,973$ 5,128 40 % Percentage of revenue 13 % 15 % Sales and marketing expenses were$18.1 million for the three months endedNovember 30, 2021 , a$5.1 million , or 40%, increase compared to$13.0 million in the prior year. The increase was primarily driven by the BluJay Acquisition in fiscal 2022 as well as additional expenses associated with creating a new logo sales team and additional marketing resources. Furthermore, share-based compensation increased by$0.5 million and travel and entertainment expenses increased by$0.3 million . 36
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General and Administrative
Successor Predecessor
Three Months
Ended Three Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % ChangeGeneral and administrative$ 22,871 $ 10,412$ 12,459 nm Percentage of revenue 17 % 12 % General and administrative expenses were$22.9 million for the three months endedNovember 30, 2021 , an$12.5 million increase compared to$10.4 million in the prior year. The increase was primarily attributable to the BluJay acquisition and costs related to us becoming a public company that were not incurred in the prior year. Other Operating Expenses Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Acquisition and other related expenses$ 33,216 $ 5,968$ 27,248 nm Amortization of acquired intangible assets 19,470 8,451 11,019 nm Total other operating expenses$ 52,686 $ 14,419$ 38,267 nm Acquisition and other related expenses were$33.2 million for the three months endedNovember 30, 2021 , a$27.2 million increase compared to$6.0 million for the three months endedNovember 30, 2020 . The increase was mainly related to legal and consulting expenses associated with the BluJay Acquisition in fiscal 2022. Amortization of acquired intangible assets were$19.5 million for the three months endedNovember 30, 2021 , an$11.0 million increase, compared to$8.5 million for the three months endedNovember 30, 2020 . The increase was a result of the BluJay Acquisition inSeptember 2021 partially offset by the revaluation and change in the composition of the intangible assets associated with the Business Combination inFebruary 2021 .
Interest and Other Expense, Net
Successor Predecessor
Three Months
Ended Three Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Interest and other expense, net $ (10,769 ) $ (17,575 ) $ 6,806 -39 %
Interest and other expense, net was $10.8 million for the three months ended
November 30, 2021 , an $6.8 million , or 39%, decrease compared to $17.6 million
in the prior year. The decrease was primarily driven by the reduction in
outstanding debt, as well as the associated interest rate on the debt refinanced
in the Business Combination in February 2021 .
Change in Tax Receivable Agreement
During the three months endedNovember 30, 2021 , we recorded a$1.5 million expense related to the change in the fair value of the tax receivable agreement liability, including interest. Pursuant to ASC 805, Business Combination and relevant tax law, we calculated the fair value of the tax receivable agreement payments and identified the timing of the utilization of the tax attributes. The tax receivable agreement liability, related to exchanges as of the Business Combination date, is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations in the period in which the event occurred. We did not have a tax receivable agreement prior to the Business Combination. In addition, under ASC 450, transactions with partnership unit holders after the acquisition date will result in additional Tax Receivable Agreement liabilities that are recorded on a gross undiscounted basis. The increase in the Tax Receivable Agreement liability under ASC 450 for the three months endedNovember 30, 2021 was$3.1 million . 37
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Loss from Change in Fair Value of Warrant Liability
We recorded a loss of$7.2 million during the three months endedNovember 30, 2021 for the change in fair value on the revaluation of our warrant liability associated with our public, private placement and forward purchase warrants. We are required to revalue the warrants at the end of each reporting period and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change occurred. We did not have outstanding warrants prior to the Business Combination.
Loss from Change in Fair Value of Contingent Consideration
We recorded a loss of$1.1 million during the three months endedNovember 30, 2021 for the change in fair value on the revaluation of our contingent consideration associated with our restricted B-2 common stock. We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the contingent consideration in the period in which the change occurred. We did not have restricted Series B-2 common stock prior to the Business Combination. Provision for Income Taxes Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Loss before income taxes$ (75,053 ) $ (17,382 )$ (57,671 ) nm Income tax benefit (expense) 10,764 (9,685 ) 20,449 nm Loss before income taxes was$75.1 million for the three months endedNovember 30, 2021 , a$57.7 million increase compared to$17.4 million for the three months endedNovember 30, 2020 . This increase is primarily related to the$27.2 million acquisition related expenses for the BluJay Acquisition, an$11.0 million increase in the amortization of the intangible assets, a loss of$7.2 million for the fair value adjustments for the warrant liability, a loss of$1.1 million associated with the fair value adjustments for the contingent consideration liability related to the restricted Series B-2 common stock along with the$10.4 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. These expenses were partially offset by$6.8 million of lower interest expense in the third quarter of fiscal 2022 compared to the same period of the prior year. Income tax benefit was$10.8 million for the three months endedNovember 30, 2021 compared to a$9.7 million expense for the three months endedNovember 30, 2020 . The change was primarily due to an increase in loss from continuing operations included in the tax provision forNovember 30, 2021 that s previously attributable to affiliates as ofNovember 30, 2020 . This benefit was partially offset by nondeductible mark-to-market losses associated with contingent liabilities and certain equity consideration liabilities and changes in certain jurisdictions within which we operate as well as the impact to fiscal 2022 of losses attributable to our noncontrolling interest in our affiliate. In accordance with ASC 740-20-45-11, we accounted for the tax effect of the step-up in income tax basis related to transactions with or among shareholders and recognized a deferred tax asset and corresponding increase in stockholders' equity of$36.8 million . Nine Months EndedNovember 30, 2021 compared to Nine Months EndedNovember 30, 2020 Revenue Successor Predecessor Nine Months Ended Nine Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Revenue: Subscriptions$ 219,728 $ 209,013$ 10,715 5 % Professional services 61,680 40,009 21,671 54 % Total revenue$ 281,408 $ 249,022$ 32,386 13 % Percentage of revenue: Subscriptions 78 % 84 % Professional services 22 % 16 % Total 100 % 100 % 38
-------------------------------------------------------------------------------- Subscriptions revenue was$219.7 million for the nine months endedNovember 30, 2021 , a$10.7 million , or 5%, increase compared to subscriptions revenue of$209.0 million for the nine months endedNovember 30, 2020 . The increase in subscriptions revenue was primarily due to the BluJay Acquisition in fiscal 2022 and new organic subscription sales predominantly driven by increases in products utilized across our current customer portfolio, partially offset by$47.1 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination. With the early adoption of ASU 2021-08, a fair value adjustment to deferred revenue for the BluJay Acquisition was not recorded; therefore, amortization of the fair value adjustment to deferred revenue similar to the Business Combination adjustment will not occur for the BluJay Acquisition. Professional services revenue was$61.7 million for the nine months endedNovember 30, 2021 , a$21.7 million , or 54%, increase compared to$40.0 million for the nine months endedNovember 30, 2020 . The increase was primarily related to the BluJay Acquisition, new subscription sale and customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic resulting in favorable growth year over year. Our subscriptions revenue as a percentage of total revenue decreased to 78% for the first nine months of fiscal year 2022 compared to 84% for fiscal 2021 driven primarily by the BluJay Acquisition and the amortizing the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, in addition to the increase in professional services revenue.
Cost of Revenue, Gross Profit and Gross Margin
Successor Predecessor
Nine Months
Ended Nine Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Cost of revenue:
Subscriptions $ 62,917 $ 44,566 $ 18,351 41 %
Professional services 38,694 32,791 5,903 18 %
Amortization of acquired
intangible assets 48,885 15,453 33,432 nm
Total cost of revenue $ 150,496 $ 92,810 $ 57,686 62 %
Gross profit:
Subscriptions $ 107,927 $ 148,995 $ (41,068 ) -28 %
Professional services 22,985 7,217 15,768 nm
Total gross profit $ 130,912 $ 156,212 $ (25,300 ) -16 %
Gross margin:
Subscriptions 49 % 71 %
Professional services 37 % 18 %
Total gross margin 47 % 63 %
Cost of subscriptions was $62.9 million for the nine months ended November 30,
2021 , a $18.4 million , or 41%, increase compared to $44.6 million for the nine
months ended November 30, 2020 . The BluJay Acquisition and increased personnel
costs for salaries and incentive compensation accounted for $14.6 million of
this increase. Additionally, depreciation expense increased by $2.9 million
related to capital expenditures for the expansion of our data centers.
Cost of professional services revenue was $38.7 million for the nine months
ended November 30, 2021 , a $5.9 million , or 18%, increase compared to $32.8
million for the nine months ended November 30, 2020 . The BluJay Acquisition in
fiscal year 2022 and an increase in personnel costs for salaries and incentive
compensation accounted for $5.5 million of this increase. There was also an
additional $0.2 million in increased consulting services.
Amortization of acquired intangible assets was $48.9 million for the nine months
ended November 30, 2021 , a $33.4 million increase compared to $15.5 million for
the nine months ended November 30, 2020 , driven primarily by the BluJay
Acquisition in September 2021 and revaluation and change in the composition of
the intangible assets as part of the Business Combination in February 2021 .
Our subscriptions gross margin was 49% for the first nine months of fiscal 2022
as compared to 71% for fiscal 2021 mainly due to the BluJay Acquisition and the
amortization of the fair value adjustment to deferred revenue related to the
purchase price allocation in the Business Combination. With the early adoption
of ASU 2021-08, the BluJay deferred revenue was recorded under ASC 606 and not
at fair value at the acquisition date; therefore, amortization of the fair value
adjustment to deferred revenue similar to the Business Combination adjustment
will not occur for the BluJay Acquisition.
39
--------------------------------------------------------------------------------Our professional services gross margin increased to 37% for the first nine months of fiscal 2022 from 18% in the first nine months of fiscal 2021, primarily due to the BluJay Acquisition, new subscription sales and customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic, which resulted in favorable year-over-year growth.
Research and Development
Successor Predecessor
Nine Months
Ended Nine Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % ChangeResearch and development$ 56,909 $ 43,212$ 13,697 32 % Percentage of revenue 20 % 17 % Research and development expenses were$56.9 million for the nine months endedNovember 30, 2021 , a$13.7 million , or 32%, increase compared to$43.2 million in the prior year. The increase was due to the BluJay Acquisition in fiscal year 2022 and major strategic partnership initiatives around product development efforts which resulted in net increased personnel costs for salaries and incentive compensation of$11.3 million . Additionally, share-based compensation expense of$0.8 million and depreciation expense of$1.7 million related to capital expenditures for software contributed to the increase. Sales and Marketing Successor Predecessor Nine Months Ended Nine Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change
Sales and marketing$ 41,789 $ 37,275$ 4,514 12 % Percentage of revenue 15 % 15 % Sales and marketing expenses were$41.8 million for the nine months endedNovember 30, 2021 , a$4.5 million , or 12%, increase compared to$37.3 million in the prior year. The increase was primarily driven by the BluJay Acquisition in fiscal 2022 and the investment in our new logo sales and marketing resources resulting in additional expenses of$5.4 million . Additionally, share-based compensation increased by$0.9 million . These were offset by a reduction in commissions expenses associated with the revaluation of prepaid commissions as a result of the Business Combination inFebruary 2021 . General and Administrative Successor Predecessor Nine Months Ended Nine Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change General and administrative$ 49,989 $ 30,037
$ 19,952 66 % Percentage of revenue 18 % 12 % General and administrative expenses were$50.0 million for the nine months endedNovember 30, 2021 , a$20.0 million , or 66%, increase compared to$30.0 million in the prior year. The increase was primarily attributable to the BluJay acquisition and costs related to us becoming a public company that were not incurred in the prior year. Other Operating Expenses Successor Predecessor Nine Months Ended Nine Months Ended ($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change Acquisition and other related expenses $ 50,168 $ 11,354$ 38,814 nm Amortization of acquired intangible assets 26,843 25,365 1,478 6 % Total other operating expenses $ 77,011 $ 36,719$ 40,292 nm 40
-------------------------------------------------------------------------------- Acquisition and other related expenses were$50.2 million for the nine months endedNovember 30, 2021 , a$38.8 million increase compared to$11.4 million for the nine months endedNovember 30, 2020 . The increase was mainly related to legal and consulting expenses associated with the acquisition of BluJay in fiscal 2022. Amortization of acquired intangible assets was$26.8 million for the nine months endedNovember 30, 2021 , a$1.5 million , or 6%, increase, compared to$25.4 million for the nine months endedNovember 30, 2020 . The increase was a result of the BluJay Acquisition and the revaluation and change in the composition of the intangible assets associated with the Business Combination inFebruary 2021 .
Interest and Other Expense, Net
Successor Predecessor
Nine Months Ended Nine Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Interest and other expense, net $ (22,004 ) $ (53,255 ) $ 31,251 -59 %
Interest and other expense, net was $22.0 million for the nine months ended
November 30, 2021 , a $31.3 million , or 59%, decrease compared to $53.3 million
in the prior year. The decrease was primarily driven by the reduction in
outstanding debt, as well as the associated interest rate on the debt refinanced
in the Business Combination in February 2021 .
Change in Tax Receivable Agreement
During the nine months endedNovember 30, 2021 , we recorded a$4.6 million expense related to the change in the fair value of the tax receivable agreement liability under ASC 805, including interest. We have calculated the fair value of the tax receivable agreement payments and identified the timing of the utilization of the tax attributes. The tax receivable agreement liability, related to exchanges as of the Business Combination date, is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations in the period in which the event occurred. We did not have a tax receivable agreement prior to the Business Combination. In addition, under ASC 450, transactions with partnership unit holders after the acquisition date will result in additional Tax Receivable Agreement liabilities that are recorded on a gross undiscounted basis. The increase in the Tax Receivable Agreement liability under ASC 450 for the nine months endedNovember 30, 2021 was$13.2 million .
Loss from Change in Fair Value of Warrant Liability
We recorded a loss of$48.4 million during the nine months endedNovember 30, 2021 for the change in fair value on the revaluation of our warrant liability associated with our public, private placement and forward purchase warrants. We are required to revalue the warrants at the end of each reporting period and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the warrant liability in the period in which the change occurred. We did not have outstanding warrants prior to the Business Combination.
Loss from Change in Fair Value of Contingent Consideration
We recorded a loss of$91.2 million during the nine months endedNovember 30, 2021 for the change in fair value on the revaluation of our contingent consideration associated with our restricted Series B-1 and B-2 common stock and Sponsor Side Letter. We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the Condensed Consolidated Statements of Operations a gain or loss from the change in fair value of the contingent consideration in the period in which the change occurred. The Series B-1 common stock converted into Class A Common Stock onJune 8, 2021 . We did not have restricted Series B-1 and B-2 common stock prior to the Business Combination. 41 --------------------------------------------------------------------------------
Provision for Income Taxes
Successor Predecessor
Nine Months
Ended Nine Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Loss before income taxes $ (261,024 ) $ (44,286 ) $ (216,738 ) nm
Income tax benefit (expense) 3,392 (24,073 ) 27,465 nm
Loss before income taxes was $261.0 million for the nine months ended November
30, 2021 , a $216.7 million increase compared to $44.3 million for the nine
months ended November 30, 2020 . This increase is primarily related to the $33.7
million acquisition related expenses for the BluJay Acquisition, a loss of $48.4
million for the fair value adjustments for the warrant liability and $91.2
million associated with the fair value adjustments for the contingent
consideration liability related to the Sponsor Side Letter and restricted Series
B-1 and B-2 common stock along with the $47.1 million amortization of the fair
value adjustment to deferred revenue related to the purchase price allocation in
the Business Combination. These expenses were partially offset by $31.3 million
of lower interest expense in fiscal 2022 compared to fiscal 2021.
Income tax benefit was $3.4 million for the nine months ended November 30, 2021
compared to expense of $24.1 million for the nine months ended November 30,
2020 . The change was primarily due to an increase in loss from continuing
operations included in the tax provision for November 30, 2021 that was
previously attributable to affiliates as of November 30, 2020 . This benefit was
partially offset by nondeductible mark-to-market losses associated with
contingent liabilities and certain equity consideration liabilities and changes
in valuation allowances in certain jurisdictions within which we operate as well
as the impact to fiscal 2022 of losses attributable to our noncontrolling
interest in our affiliate. In accordance with ASC 740-20-45-11, we accounted for
the tax effect of the step-up in income tax basis related to transactions with
or among shareholders and recognized a deferred tax asset and corresponding
increase in stockholders' equity of $36.8 million .
Non-GAAP Financial Measures
We have included below Non-GAAP revenue, Non-GAAP subscriptions revenue, 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 withU.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 anyU.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. We calculate and define Non-GAAP revenue and subscriptions revenue excluding amortization of the deferred revenue fair value adjustment related to the purchase price allocation in the Business Combination. We calculate and define Non-GAAP gross profit as gross profit excluding amortization of the deferred revenue fair value adjustment, depreciation and amortization, share-based compensation and certain other non-cash and non-recurring items. We define and calculate 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: amortization of the deferred revenue fair value adjustment, transaction-related costs, changes in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration, share-based compensation and certain other non-cash and non-recurring items as described in the reconciliation below. We also report Non-GAAP gross profit and Adjusted EBITDA as a percentage of Non-GAAP revenue as additional measures to evaluate financial performance. 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 withU.S. GAAP because they are non-recurring (for example, in the case of transaction-related costs and amortization of the deferred revenue fair value adjustment), non-cash (for example, in the case of depreciation, amortization, changes in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration, share-based compensation and amortization of the deferred revenue fair value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense). There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in theU.S. GAAP financial presentation. The items excluded fromU.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 withU.S. GAAP. 42 --------------------------------------------------------------------------------
The table below presents our Non-GAAP revenue reconciled to our reported
revenue, the closest
Successor Predecessor Successor Predecessor
Three Months Ended Three MonthsEnded Nine Months Ended Nine Months Ended ($ in thousands)
November 30, 2021 November 30 ,
2020
$ 106,969 $ 70,374 $ 219,728 $ 209,013
Business Combination
adjustment (1) 10,394 - 47,099 -
Non-GAAP subscriptions
revenue 117,363 70,374 266,827 209,013
Professional services revenue 30,033 13,707 61,680 40,009
Non-GAAP revenue $ 147,396 $ 84,081 $ 328,507 $ 249,022
(1)Amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination.
The table below presents our Non-GAAP gross profit reconciled to our reported
gross profit, the closest
Successor Predecessor Successor Predecessor
Three Months Three Months Ended Nine Months Nine Months Ended
Ended Ended
November 30, November 30,
($ in thousands) 2021 November 30, 2020 2021 November 30, 2020
Gross profit
Reported gross profit $ 64,216 $ 52,222 $ 130,912 $ 156,212
Business Combination
adjustment (1) 10,394 - 47,099 -
Depreciation and amortization 27,771 6,994 56,823 20,373
Non-recurring/non-operating
costs (2) 506 263 1,090 467
Share-based and unit-based
compensation (3) 482 239 1,012 525
Non-GAAP gross profit $ 103,369 $ 59,718 $ 236,936 $ 177,577
Gross margin 46.9 % 62.1 % 46.5 % 62.7 %
Non-GAAP gross margin 70.1 % 71.0 % 72.1 % 71.3 %
(1)
Amortization of the fair value adjustment to deferred revenue related to the
purchase price allocation in the Business Combination.
(2)
Primarily includes foreign currency exchange gain and losses and other
non-recurring expenses such as systems integrations, legal entity
simplification, advisory fees and expenses related to retention of key employees
from acquisitions.
(3)
Reflects non-cash, long-term share-based and unit-based compensation expense,
primarily related to senior management.
43
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The table below presents our Adjusted EBITDA reconciled to our net loss, the
closest
Successor Predecessor Successor Predecessor
Three Months Three Months Ended Nine Months Nine Months Ended
Ended Ended
November 30, November
($ in thousands) 2021 November 30, 2020 30, 2021 November 30, 2020
Net loss $ (64,289 ) $ (27,067 ) $ (257,632 ) $ (68,359 )
Adjustments:
Interest expense, net 9,981 16,974 22,161 52,999
Income tax expense (10,764 ) 9,685 (3,392 ) 24,073
Depreciation and amortization 50,496 17,310 91,496 51,176
EBITDA (14,576 ) 16,902 (147,367 ) 59,889
EBITDA Margin -10.6 % 20.1 % -52.4 % 24.0 %
Business Combination
adjustment (1) 10,394 - 47,099 -
Acquisition-related
adjustments (2) 33,216 5,968 50,168 11,354
Change in tax receivable
agreement liability (3) 1,470 - 4,606 -
Loss from change in fair
value of warrant
liability (4) 7,232 - 48,448 -
Loss from change in fair
value of contingent
consideration (5) 1,140 - 91,180 -
Non-recurring/non-operating
costs (6) 2,987 2,982 5,486 3,401
Share-based and unit-based
compensation (7) 4,027 2,403 8,961 6,724
Adjusted EBITDA $ 45,890 $ 28,255 $ 108,581 $ 81,368
Adjusted EBITDA Margin 31.1 % 33.6 % 33.1 % 32.7 %
(1)
Amortization of the fair value adjustment to deferred revenue related to the
purchase price allocation in the Business Combination.
(2)
Primarily includes advisory, consulting, accounting and legal expenses incurred
in connection with mergers and acquisitions activities, including related
valuation, negotiation and integration costs and capital-raising activities,
including costs related to the acquisition of Amber Road, Inc. , the Business
Combination and the BluJay Acquisition.
(3)
Represents the expense related to the change in the fair value of the tax
receivable agreement liability, including interest.
(4)
Represents the fair value adjustment at each balance sheet date of the warrant
liability related to the public, private placement and forward purchase
warrants.
(5)
Represents the fair value adjustment at each balance sheet date of the
contingent consideration liability related to the restricted Series B-1 and B-2
common stock and Sponsor Side Letter.
(6)
Primarily includes foreign currency exchange gain and losses and other
non-recurring expenses such as systems integrations, legal entity simplification
and advisory fees.
(7)
Reflects non-cash, long-term share-based and unit-based compensation expense,
primarily related to senior management.
Three Months Ended
Non-GAAP Subscriptions Revenue
Successor Predecessor
Three Months Ended Three Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Non-GAAP subscriptions revenue $ 117,363 $ 70,374 $ 46,989 67 %
Non-GAAP subscriptions revenue was $117.4 million for the three months ended
November 30, 2021 , a $47.0 million , or 67%, increase compared to $70.4 million
for the three months ended November 30, 2020 . The increase in Non-GAAP
subscriptions revenue relates to the BluJay Acquisition and new organic
subscription sales predominately driven by increases in products utilized across
our customer portfolio alongside strategic partnership initiatives.
44
--------------------------------------------------------------------------------
Non-GAAP Revenue
Successor Predecessor
Three Months Ended Three Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Non-GAAP revenue $ 147,396 $ 84,081 $ 63,315 75 %
Non-GAAP revenue was $147.4 million for the three months ended November 30,
2021 , a $63.3 million , or 75%, increase compared to $84.1 million for the three
months ended November 30, 2020 . The increase in Non-GAAP revenue was mainly due
to the $47.0 million increase in our subscriptions revenue related to the BluJay
Acquisition and new organic sales driven by increases in products utilized
across our current customer portfolio. Additionally, $16.3 million of the
increase was due to an increase in our professional services revenue primarily
related to the BluJay Acquisition, new subscription sales and customers delaying
projects in fiscal year 2021 due to the COVID-19 pandemic, which resulted in
favorable year-over-year growth.
Gross Profit
Successor Predecessor
Three Months Ended Three Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Gross profit $ 64,216 $ 52,222 $ 11,994 23 %
Gross margin 46.9 % 62.1 %
Gross profit was $64.2 million for the three months ended November 30, 2021 , a
$12.0 million , or 23%, increase compared to $52.2 million for three months ended
November 30, 2020 . The increase in gross profit was primarily due to the BluJay
Acquisition partially offset by the $10.4 million amortization of the fair value
adjustment to deferred revenue related to the purchase price allocation in the
Business Combination. Gross margin was 47% for the third quarter of fiscal 2022
compared to 62% for the third quarter of fiscal 2021.
Non-GAAP Gross Profit
Successor Predecessor
Three Months Three Months Ended
Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % ChangeNon-GAAP gross profit$ 103,369 $ 59,718$ 43,651 73 % Non-GAAP gross margin 70.1 % 71.0 % Non-GAAP gross profit was$103.4 million for the three months endedNovember 30, 2021 , a$43.7 million , or 73%, increase compared to$59.7 million for the three months endedNovember 30, 2020 . The increase in adjusted gross profit was due to increase in Non-GAAP subscriptions revenue and professional services revenue as discussed above. The Non-GAAP gross margin was slightly down in the third quarter of fiscal 2022 at 70% compared to 71% in the third quarter of fiscal 2021. EBITDA Successor Predecessor Three Months Ended Three Months Ended ($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change EBITDA $ (14,576 ) $ 16,902$ (31,478 ) nm EBITDA margin -10.6 % 20.1 % 45
-------------------------------------------------------------------------------- EBITDA was a loss of$14.6 million for the three months endedNovember 30, 2021 , a$31.5 million decrease compared to$16.9 million for three months endedNovember 30, 2020 . EBITDA margins decreased to a negative 11% for the third quarter of fiscal 2022 compared to 20% in the prior year. The decrease in EBITDA and EBITDA margin was primarily related to the$10.4 million amortization of the fair value adjustment to deferred revenue related to the purchase price allocation in the Business Combination, the loss of$7.2 million for the fair value adjustment for the warrant liability and loss of$1.1 million associated with the fair value adjustment for the contingent consideration liability related to the restricted Series B-2 common stock and the additional$27.2 million of acquisition related expenses incurred during the third quarter of fiscal 2022 mainly related to the BluJay Acquisition, partially offset by higher revenues in fiscal 2022. Adjusted EBITDA Successor Predecessor Three Months Ended Three Months Ended November 30, ($ in thousands) 2021 November 30, 2020 $ Change % Change Adjusted EBITDA$ 45,890 $ 28,255$ 17,635 62 %
Adjusted EBITDA margin 31.1 % 33.6 % Adjusted EBITDA was$45.9 million for the three months endedNovember 30, 2021 , a$17.6 million , or 62%, increase compared to$28.3 million for the three months endedNovember 30, 2020 . Adjusted EBITDA margin was lower at 31% for the third quarter of fiscal 2022 compared to 34% for the third quarter of fiscal 2021. The Adjusted EBITDA decline was primarily due to public company costs and the BluJay Acquisition for which synergy savings are not fully realized.
Nine Months Ended
Non-GAAP Subscriptions Revenue
Successor Predecessor
Nine Months Ended Nine Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Non-GAAP subscriptions revenue $ 266,827 $ 209,013 $ 57,814 28 %
Non-GAAP subscriptions revenue was $266.8 million for the nine months ended
November 30, 2021 , a $57.8 million , or 28%, increase compared to $209.0 million
for the nine months ended November 30, 2020 . The increase in Non-GAAP
subscriptions revenue relates to the BluJay Acquisition and new organic
subscription sales predominately driven by increases in products utilized across
our customer portfolio alongside strategic partnership initiatives.
Non-GAAP Revenue
Successor Predecessor
Nine Months Ended Nine Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Non-GAAP revenue $ 328,507 $ 249,022 $ 79,485 32 %
Non-GAAP revenue was $328.5 million for the nine months ended November 30, 2021 ,
a $79.5 million , or 32%, increase compared to $249.0 million for the nine months
ended November 30, 2020 . The increase in Non-GAAP revenue was mainly due to the
$57.8 million increase in our subscriptions revenue related to the BluJay
Acquisition and new organic sales driven by increases in products utilized
across our current customer portfolio. Additionally, $21.7 million of the
increase was due to an increase in our professional services revenue primarily
related to the BluJay Acquisition, new subscription sales and customers delaying
projects in fiscal year 2021 due to the COVID-19 pandemic, which resulted in
favorable year-over-year.
46
--------------------------------------------------------------------------------
Gross Profit
Successor Predecessor
Nine Months Ended Nine Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
Gross profit $ 130,912 $ 156,212 $ (25,300 ) -16 %
Gross margin 46.5 % 62.7 %
Gross profit was $131.0 million for the nine months ended November 30, 2021 , a
$25.3 million , or 16%, decrease compared to $156.2 million for nine months ended
November 30, 2020 . The decrease in gross profit was primarily due to the $47.1
million amortization of the fair value adjustment to deferred revenue related to
the purchase price allocation in the Business Combination. Gross margin was 47%
for the first nine months of fiscal 2022 compared to 63% for the first nine
months of fiscal 2021.
Non-GAAP Gross Profit
Successor Predecessor
Nine Months Nine Months Ended
Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Non-GAAP gross profit $ 236,936 $ 177,577 $ 59,359 33 %
Non-GAAP gross margin 72.1 % 71.3 %
Non-GAAP gross profit was $236.9 million for the nine months ended November 30,
2021 , a $59.4 million , or 33%, increase compared to $177.6 million for the nine
months ended November 30, 2020 . The increase in adjusted gross profit was due to
increase in Non-GAAP subscriptions revenue and professional services revenue as
discussed above. The Non-GAAP gross margin increased to 72% for the first nine
months of fiscal 2022 from 71% for the first nine months of fiscal 2021.
EBITDA
Successor Predecessor
Nine Months Ended Nine Months Ended
($ in thousands) November 30, 2021 November 30, 2020 $ Change % Change
EBITDA $ (147,367 ) $ 59,889 $ (207,256 ) nm
EBITDA margin -52.4 % 24.0 %
EBITDA was a loss of $147.4 million for the nine months ended November 30, 2021 ,
a $207.3 million decrease compared to $59.9 million for the nine months ended
November 30, 2020 . EBITDA margins decreased to a negative 52% for the first nine
months of fiscal 2022 compared to 24% in the prior year. The decrease in EBITDA
and EBITDA margin was primarily related to the $47.1 million amortization of the
fair value adjustment to deferred revenue related to the purchase price
allocation in the Business Combination, a loss of $48.4 million for the fair
value adjustment for the warrant liability and a loss of $91.2 million
associated with the fair value adjustment for the contingent consideration
liability related to the Sponsor Side Letter and restricted Series B-1 and B-2
common stock and the additional $33.7 million of acquisition related expenses
incurred during fiscal 2022 related to the BluJay Acquisition, partially offset
by higher revenues in fiscal 2022.
Adjusted EBITDA
Successor Predecessor
Nine Months
Ended Nine Months Ended
November 30,
($ in thousands) 2021 November 30, 2020 $ Change % Change
Adjusted EBITDA $ 108,581 $ 81,368 $ 27,213 33 %
Adjusted EBITDA margin 33.1 % 32.7 %
47
-------------------------------------------------------------------------------- Adjusted EBITDA was$108.6 million for the nine months endedNovember 30, 2021 , a$27.2 million , or 33%, increase compared to$81.4 million for the nine months endedNovember 30, 2020 . Adjusted EBITDA margins were consistent at 33% for the first nine months of fiscal 2022 and 2021.
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$56.5 million in cash and cash equivalents and$155.0 million of unused borrowing capacity under our 2021 Revolving Credit Facility as ofNovember 30, 2021 . 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
On
The 2021 Term Loan will mature onFebruary 4, 2028 , while the 2021 Revolving Credit Facility will mature onFebruary 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. The Credit Agreement was payable in quarterly installments of$1.3 million beginning inAugust 2021 ; however, the payments were increased to$2.3 million with the addition of the incremental term loan beginning inNovember 2021 . The Credit Agreement is payable in full onFebruary 4, 2028 . The 2021 Term Loan has a variable interest rate which was 4.00% and 3.69% as ofNovember 30, 2021 andFebruary 28, 2021 , respectively. Principal payments of$1.3 million are due on the last day of each February, May, August and November commencingAugust 2021 . As ofNovember 30, 2021 andFebruary 28, 2021 , the 2021 Term Loan had a principal balance outstanding of$901.4 million and$525.0 million , respectively, and there were no amounts drawn on the 2021 Revolving Credit Facility. Cash Flows The following table presents net cash from operating, investing and financing activities: Successor Predecessor Nine Months Ended Nine Months Ended November 30, ($ in thousands) 2021 November 30, 2020 Net cash provided by operating activities$ 28,182 $ 30,054 Net cash used in investing activities (798,859 ) (12,048 )
Net cash provided by (used in) financing activities 632,987
(8,078 )
Effect of exchange rate changes on cash and cash
equivalents 1,657 101
Net (decrease) increase in cash, cash equivalents
and restricted cash (136,033 ) 10,029
Cash, cash equivalents and restricted cash at
beginning of period 207,542 48,428
Cash, cash equivalents and restricted cash at end of
period $ 71,509 $ 58,457
48
--------------------------------------------------------------------------------
Nine Months Ended
As ofNovember 30, 2021 , our consolidated cash, cash equivalents and restricted cash was$71.5 million , a$136.0 million decrease from our balance of$207.5 million as ofFebruary 28, 2021 . Net cash provided by operating activities for the nine months endedNovember 30, 2021 was$28.2 million compared to$30.1 million for the nine months endedNovember 30, 2020 . The$1.9 million decrease in cash was primarily driven by expenses related to the BluJay Acquisition offset by additional revenue from BluJay, organic growth and customers delaying projects in fiscal year 2021 due to the COVID-19 pandemic. Net cash used in investing activities was$798.9 million and$12.0 million for the nine months endedNovember 30, 2021 and 2020, respectively. During fiscal year 2022,$774.2 million was used for the BluJay Acquisition. During the nine months of fiscal year 2022 and 2021,$24.6 million and$12.0 million were used for the acquisition of property and software related to our data centers, respectively. Net cash provided by financing activities for the nine months endedNovember 30, 2021 was$633.0 million compared to net cash used of$8.1 million for nine months endedNovember 30, 2020 . The increase in cash provided by financing activities was mainly due to the$300.0 million in PIPE investment proceeds, additional borrowings of$380.0 million for the BluJay Acquisition and$15.0 million under the 2021 Revolving Credit Facility in fiscal 2022. We only borrowed$15.6 million during the first nine months of fiscal 2021. During the first nine months of fiscal 2021 we received$3.4 million of proceeds from the sale of membership units. We repaid$3.0 million more in debt in fiscal 2021 than in fiscal 2022. The repayment of financing lease obligations was$1.3 million higher in fiscal 2022 than in fiscal 2021. Additionally, we paid$2.5 million for the repurchase of common stock to pay withholding taxes,$16.8 million for the repurchase of Common Units upon conversion,$7.1 million of offering costs associated with the PIPE investment financing and$10.4 million in debt issuance costs related to the additional borrowings in fiscal 2022.
Tax Receivable Agreement
Concurrently with the completion of the Business Combination, we entered into the Tax Receivable Agreement with certain selling equity holders ofE2open Holdings . Pursuant to the Tax Receivable Agreement, we will pay certain sellers, as applicable, 85% of the tax savings that we realize from increases in the tax basis inE2open Holdings' assets as a result of the sale ofE2open Holdings' equity interests, the future exchange of the Common Units for shares of Class A Common Stock (or cash), certain pre-existing tax attributes of certain sellers and certain other tax benefits related to entering into the Tax Receivable Agreement including tax benefits attributable to payments under the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur. We will retain the benefit of the remaining 15% of these cash savings. Amounts payable under the Tax Receivable Agreement will be contingent upon, among other things, our generation of taxable income over the term of the Tax Receivable Agreement. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits subject to the Tax Receivable Agreement, we would not be required to make the related payments under the Tax Receivable Agreement. Although the amount of any payments required to be made under the Tax Receivable Agreement may be significant, the timing of these payments will vary and will generally be limited to one payment per member per year. The amount of such payments is also generally limited to the extent we are unable to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement in a given period. The liability related to the Tax Receivable Agreement was$67.9 million as ofNovember 30, 2021 , consisting of Tax Receivable liabilities recorded under ASC 805 of$54.7 million and$13.2 million under ASC 450, assuming (1) a constant corporate tax rate of 24.1%, (2) no dispositions of corporate subsidiaries, (3) no material changes in tax law and (4) we do not elect an early termination of the Tax Receivable Agreement. However, due to the uncertainty of various factors, including: (a) the timing and value of future exchanges, (b) the amount and timing of our future taxable income, (c) changes in our tax rate, (d) no future dispositions of any corporate stock and (e) changes in the tax law, the likely tax savings we will realize and the resulting amounts we are likely to pay to the E2open Sellers pursuant to the Tax Receivable Agreement are uncertain. Additionally, interest will accrue on the portion of the Tax Receivable Agreement liability recorded under ASC 805 at a rate of LIBOR plus 100 basis points. The portion of the Tax Receivable Agreement liability under ASC 450 is recorded on a gross undiscounted basis. The liability recorded on the balance sheet does not include an estimate of the amount of payments to be made if certain sellers exchanged their remaining interests inE2open Holdings for our common stock, as this amount is not readily determinable and is dependent on several future variables, including timing of future exchanges, stock price at date of exchange, tax attributes of the individual parties to the exchange and changes in future applicable federal and state tax rates. 49
-------------------------------------------------------------------------------- In addition, if we exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur, we are required to make immediate cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made significantly in advance of the actual realization, if any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that we have sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein. The payments that we would be required to make will generally reduce the amount of the overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related tax benefits will exceed the amount of any required payments. We are entitled to receive quarterly tax distributions fromE2open Holdings , subject to limitations imposed by applicable law and contractual restrictions. The cash received from such tax distributions will first be used to satisfy any tax liability and then make any payments required under the Tax Receivable Agreement. We expect that such tax distributions will be sufficient to fund both our tax liability and the required payments under the Tax Receivable Agreement.
Conversion of Contingent Consideration
The contingent consideration liability was$67.0 million and$150.8 million as ofNovember 30, 2021 andFebruary 28, 2021 , respectively. The fair value remeasurements resulted in a loss of$1.1 million and$91.2 million for the three and nine months endedNovember 30, 2021 , respectively. There was no gain or loss for the three and nine months endedNovember 30, 2020 as the contingent consideration liability was not recorded untilFebruary 4, 2021 . The contingent liability represents the Series B-1 common stock, Series B-2 common stock, Series 1 RCUs and Series 2 RCUs. As ofJune 8, 2021 , the Series B-1 common stock and Series 1 RCUs were no longer reflected as a contingent consideration liability as the 5-day VWAP of our Class A Common Stock exceeded$13.50 per share. This triggering event resulted in the 8,120,273 Series B-1 common stock converting into Class A Common Stock and 4,379,557 Series 1 RCUs becoming 4,379,557 Common Units ofE2open Holdings along with entitling the holders of the newly vested common units to 4,379,557 shares of Class V Common Stock.
Leases
EffectiveMarch 1, 2021 , we began accounting for leases in accordance with ASC 842, Leases, which requires lessees to recognize lease liabilities and ROU assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for periods of greater than 12 months. Upon adoption of ASC 842, we recognized an operating lease liability of$23.0 million , a ROU operating asset of$22.4 million and no change to retained earnings. Our non-cancelable operating leases for our office spaces have various expiration dates throughAugust 2029 . Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as ofNovember 30, 2021 were:$2.7 million forDecember 1, 2021 throughFebruary 28, 2022 ,$8.2 million for fiscal 2023,$6.9 million for fiscal 2024,$4.9 million for fiscal 2025,$3.0 million for fiscal 2026 and$4.1 million thereafter. These numbers include interest of$2.5 million . Our non-cancelable financing lease arrangements relate to software and computer equipment as well as vehicles and have various expiration dates throughJune 2025 . We have the right to purchase the software and computer equipment anytime during the lease or upon lease completion. We do not have the right to purchase the vehicles. Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as ofNovember 30, 2021 were:$0.4 million forDecember 1, 2021 throughFebruary 28, 2022 ,$2.3 million for fiscal 2023 and$2.1 million for fiscal 2024. These numbers include interest of$0.3 million .
Off-Balance Sheet Arrangements
We are responsible for reimbursement of outstanding obligations related to any letters of credit issued under our$30.0 million available letters of credit accessible under our$155.0 million 2021 Revolving Credit Facility. We do not have any other material off-balance sheet arrangements or contingent commitments. There were no outstanding letters of credit or borrowings under the 2021 Revolving Credit Facility as ofNovember 30, 2021 andFebruary 28, 2021 . 50 --------------------------------------------------------------------------------
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements have been prepared in accordance withU.S. GAAP. Preparation of the financial statements requires management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements in our 2021 Form 10-K. There have been no changes to our critical accounting policies and estimates during the three and nine months endedNovember 30, 2021 from those previously disclosed in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report.
Recent Accounting Pronouncements
For information related to recent accounting pronouncement and our anticipated impact, see Note 2, Accounting Standards to the Notes to the Condensed Consolidated Financial Statements.
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