You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our financial statements and related notes thereto included in our Form 10-K for the fiscal year endedJanuary 31, 2021 . In addition to historical financial information, the following discussion and analysis and information set forth elsewhere in this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated by these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those set forth under "Risk Factors" and "Special Note Regarding Forward-Looking Statements." Financial Highlights •Total revenue increased 45% to$48.3 million in the three months endedApril 30, 2021 , compared with$33.4 million in the three months endedApril 30, 2020 . •Net loss was$11.0 million in the three months endedApril 30, 2021 , compared to$6.1 million in the three months endedApril 30, 2020 . •Adjusted EBITDA was positive$0.1 million in the three months endedApril 30, 2021 , compared to positive$1.5 million in the three months endedApril 30, 2020 . •Cash used in operating activities was$5.5 million for the three months endedApril 30, 2021 , compared to cash provided by operating activities of$1.9 million for the three months endedApril 30, 2020 . •Free cash flow was negative$12.4 million for the three months endedApril 30, 2021 , compared to negative$1.2 million for the three months endedApril 30, 2020 . •Cash and cash equivalents as ofApril 30, 2021 was$450.7 million , an increase of$231.9 million compared toJanuary 31, 2021 , driven primarily by our follow-on offering of common stock, which generated net proceeds of$245.8 million . For a reconciliation of Adjusted EBITDA to net loss and a reconciliation of free cash flow to cash (used in) provided by operating activities, and for more information as to how we define and calculate such measures, see the section below titled "Non-GAAP financial measures." Overview We are a leading provider of comprehensive software solutions that transform the healthcare experience by engaging patients in their care and enabling healthcare provider organizations to optimize operational efficiency, improve profitability and enhance clinical care and safety. As evidenced in industry survey reports from KLAS, we have been recognized as a leader based on our integration capabilities with healthcare provider organizations, the broad adoption of our patient intake functionalities, our response to the COVID-19 pandemic and by overall client satisfaction. Through the SaaS-based Phreesia Platform, which we refer to as the Phreesia Platform or our Platform, we offer provider clients a robust suite of solutions to manage the patient intake process and an integrated payments solution for secure processing of patient payments. Our Platform also provides life sciences companies with an engagement channel for targeted and direct communication with patients. We serve an array of healthcare provider organizations of all sizes, ranging from single-specialty practices, which include internal and family medicine, urology, dermatology, and orthopedics, to large, multi-specialty groups and health systems. Our life sciences revenue is generated from clients in the pharmaceutical, biotechnology and medical device industries. We derive revenue from (i) subscription fees from healthcare provider organizations for access to the Phreesia Platform and related professional services fees, (ii) payment processing fees based on levels of patient payment volume processed through the Phreesia Platform and (iii) fees from life sciences companies to deliver marketing content to patients using the Phreesia Platform. We have strong visibility into our business as the majority of our revenue is derived from recurring subscription fees and re-occurring payment processing fees. We market and sell our products and services to provider clients throughoutthe United States using a direct sales organization. Our demand generation team develops content and identifies prospects that our sales development team researches and qualifies to generate high-grade, actionable sales programs. Our direct sales force executes on these qualified sales programs, partnering with client services to ensure prospects are educated on the breadth 27 -------------------------------------------------------------------------------- Table of Contents of our capabilities and demonstrable value proposition, with the goal of attracting and retaining clients and expanding their use of our Platform over time. Most of our Platform solutions are contracted pursuant to annual, auto-renewing agreements. Our sales typically involve competitive processes and sales cycles have, on average, varied in duration from three months to six months, depending on the size of the potential client. In addition, throughPhreesia University (Phreesia's in-house training program), events, client conferences and webinars, we help our provider clients optimize their businesses and, as a result, support client retention. We also sell products and services to pharmaceutical brands and advertising agencies through our direct sales and marketing teams. Since our inception, we have not marketed or sold our products internationally. Accordingly, all of our revenue from historical periods has come fromthe United States , and our current strategy is to continue to focus our sales efforts withinthe United States . Our revenue growth has been primarily organic and reflects our significant addition of new provider clients and increased revenue from existing clients. New provider clients are defined as clients that go live in the applicable period and existing provider clients are defined as clients that go live in any period before the applicable period. Recent developments COVID-19 The impact of the COVID-19 (a novel strain of coronavirus) pandemic has been widespread and rapidly evolving. Over the last six months, several vaccines for COVID-19 received FDA approval and are currently being administered across the country. To date, more than a third of Americans are fully vaccinated against the virus. Despite the promising vaccination rates and many states' reopening plans, we believe COVID-19 may continue to impact the normal operations of our clients, which are primarily healthcare providers. As more individuals are vaccinated, we expect these impacts to be diminished. Key Metrics We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs. Three months endedApril 30, 2021 2020 Key Metrics: Provider clients (average over period) 1,902
1,632
Average revenue per provider client$ 20,222
•Provider clients. We define provider clients as the average number of healthcare provider organizations that generate revenue each month during the applicable period. In cases where we act as a subcontractor providing white-label services to our partner's clients, we treat the contractual relationship as a single provider client. We believe growth in the number of provider clients is a key indicator of the performance of our business and depends, in part, on our ability to successfully develop and market our Platform to healthcare provider organizations that are not yet clients. While growth in the number of provider clients is an important indicator of expected revenue growth, it also informs our management of the areas of our business that will require further investment to support expected future provider client growth. For example, as the number of provider clients increases, we may need to add to our customer support team and invest to maintain effectiveness and performance of our Platform and software for our provider clients and their patients. •Average revenue per provider client. We define average revenue per provider client as the total subscription and related services and payment processing revenue generated from provider clients in a given period divided by the average number of provider clients that generate revenue each month during that same period. We are focused on continually delivering value to our provider clients and believe that our ability to increase average revenue per provider client is an indicator of the long-term value of thePhreesia platform. 28 --------------------------------------------------------------------------------
Table of Contents Additional Information Three months ended April 30, 2021 2020 Patient payment volume (in millions) $ 701$ 454 Payment facilitator volume percentage 78 %
84 %
•Patient payment volume. We believe that patient payment volume is an indicator of both the underlying health of our provider clients' businesses and the continuing shift of healthcare costs to patients. We measure patient payment volume as the total dollar volume of transactions between our provider clients and their patients utilizing our payment platform, including via credit and debit cards that we process as a payment facilitator as well as cash and check payments and credit and debit transactions for whichPhreesia acts as a gateway to other payment processors. •Payment facilitator volume percentage. We define payment facilitator volume percentage as the volume of credit and debit card patient payment volume that we process as a payment facilitator as a percentage of total patient payment volume. Payment facilitator volume is a major driver of our payment processing revenue. Components of statements of operations Revenue We generate revenue primarily from providing an integrated SaaS-based software and payment platform for the healthcare industry. We derive revenue from subscription fees and related services generated from our provider clients for access to the Phreesia Platform, payment processing fees based on the levels of patient payment volume processed through the Phreesia Platform, and from digital marketing revenue from life sciences companies to reach, educate and communicate with patients when they are most receptive and actively seeking care. Our total revenue consists of the following: •Subscription and related services. We primarily generate subscription fees from our provider clients based on the number of providers that subscribe to and utilize the Phreesia Platform. Our provider clients are typically billed monthly in arrears, though in some instances, provider clients may opt to be billed quarterly or annually in advance. Subscription fees are typically auto-debited from provider clients' accounts every month. As we target and add larger enterprise provider clients, these clients may choose to contract differently than our typical per provider subscription model. To the extent we charge in an alternative manner with larger enterprise provider clients, we expect that such a pricing model will recur and, combined with our per provider subscription fees, will increase as a percentage of our total revenue. •Payment processing fees. We generate revenue from payment processing fees based on the number of transactions and the levels of patient payment volume processed on credit and debit cards on the Phreesia Platform through our payment facilitator model. Payment processing fees are generally calculated as a percentage of the total transaction dollar value processed and/or a fee per transaction. Credit and debit patient payment volume processed through our payment facilitator model represented roughly 78% and 84% of our patient payment volume in the three months endedApril 30, 2021 and 2020, respectively. The remainder of our patient payment volume is composed of credit and debit transactions for whichPhreesia acts as a gateway to another payment processor, and cash and check transactions. •Life sciences. We generate revenue from the sale of digital marketing solutions to life sciences companies. As we expand our provider client base, we increase the number of new patients we can reach to deliver targeted marketing content on behalf of our life sciences clients. Cost of revenue (excluding depreciation and amortization) Our cost of revenue primarily consists of personnel costs, including salaries, benefits, bonuses and stock-based compensation for implementation and technical support, and costs to verify insurance eligibility and benefits, infrastructure costs to operate our Platform such as hosting fees and fees paid to various third-party partners for access to their technology. Payment processing expense Payment processing expense consists primarily of interchange fees set by payment card networks and that are ultimately paid to the card-issuing financial institution, assessment fees paid to payment card networks, and fees 29 -------------------------------------------------------------------------------- Table of Contents paid to third-party payment processors and gateways. Payment processing expense may increase as a percentage of payment processing revenue if card networks raise pricing for interchange and assessment fees or if we reduce pricing to our clients. Sales and marketing Sales and marketing expense consists primarily of personnel costs, including salaries, benefits, bonuses, stock-based compensation and commission costs for our sales and marketing personnel. Sales and marketing expense also includes costs for advertising, promotional and other marketing activities, as well as certain fees paid to various third-party partners for sales and lead generation. Advertising is expensed as incurred. Research and development Research and development expense consists of costs to develop our products and services that do not meet the criteria for capitalization as internal-use software. These costs consist primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation for our development personnel. Research and development expense also includes product management, life sciences analytics costs, third-party partner fees and third-party consulting fees, offset by any internal-use software development cost capitalized during the same period. General and administrative General and administrative expense consists primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation for our executive, finance, legal, security, human resources, information technology and other administrative personnel. General and administrative expense also includes consulting, legal, security, accounting services and allocated overhead. We expect general and administrative expense to continue to increase in absolute dollars as we grow our operations and continue to operate as a public company, although we expect such expense to begin to decline as a percentage of total revenue over time. Depreciation Depreciation represents depreciation expense for PhreesiaPads and Arrivals Kiosks, data center and other computer hardware, purchased computer software, furniture and fixtures and leasehold improvements. Amortization Amortization primarily represents amortization of our capitalized internal-use software related to the Phreesia Platform as well as amortization of acquired intangible assets. Other income (expense), net Our other expense and income line items consist of the following: •Other income (expense), net. Other income (expense), net consists of foreign currency-related gains and losses, losses on extinguishment of debt and other miscellaneous income (expense). •Interest income. Interest income consists of interest earned on our cash and cash equivalent balances. Interest income has not been material to our operations to date. •Interest expense. Interest expense consists primarily of the interest incurred on our financing obligations as well as amortization of discounts and deferred financing costs. Provision for income taxes Based upon our cumulative pre-tax losses in recent years and available evidence, we have determined that it is more likely than not that certain deferred tax assets as ofApril 30, 2021 will not be realized in the near term. Consequently, we have established a valuation allowance against its deferred tax assets that are not more likely than not to be realized. In future periods, if we conclude we have future taxable income sufficient to recognize the deferred tax assets, we may reduce or eliminate the valuation allowance. 30
-------------------------------------------------------------------------------- Table of Contents Comparison of results of operations for the three months endedApril 30, 2021 and 2020 Revenue (in thousands) Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Subscription and related services$ 21,819 $ 15,599 $ 6,220 40 % Payment processing fees 16,644 11,707 4,937 42 % Life sciences 9,828 6,090 3,738 61 % Total revenue$ 48,291 $ 33,396 $ 14,895 45 % •Subscription and related services. Our subscription and related services revenue from healthcare organizations increased$6.2 million to$21.8 million for the three months endedApril 30, 2021 , as compared to$15.6 million for the three months endedApril 30, 2020 , primarily due to new provider clients added in fiscal 2021 as well as expansion of and cross-selling to existing provider clients. •Payment processing fees. Our revenue from patient payments processed through the Phreesia Platform increased$4.9 million to$16.6 million for the three months endedApril 30, 2021 , as compared to$11.7 million for the three months endedApril 30, 2020 . The increase was due to the addition of new provider clients, expansion of existing provider clients, as well as the reduced impact of COVID-19, which had decreased patient visits in the three months endedApril 30, 2020 . •Life sciences. Our revenue from life science clients for digital marketing increased$3.7 million to$9.8 million for the three months endedApril 30, 2021 , as compared to$6.1 million for the three months endedApril 30, 2020 , due to an increase in new digital marketing solutions programs and deeper patient outreach among the existing programs.
Cost of revenue (excluding depreciation and amortization)
Three months ended April
30,
(in thousands) 2021 2020 $ Change % Change Cost of revenue (excluding depreciation and amortization)$ 8,534 $ 4,734 $ 3,800 80 % Cost of revenue (excluding depreciation and amortization) increased$3.8 million to$8.5 million for the three months endedApril 30, 2021 , as compared to$4.7 million for the three months endedApril 30, 2020 . The increase resulted primarily from higher headcount and associated compensation cost as well as increased costs related to the expansion of our data centers, both driven by customer growth. The timing of investments in headcount and data center costs occur prior to the recognition of related revenue. Stock compensation expense included in cost of revenue was$0.4 million and$0.1 million for the three months endedApril 30, 2021 and 2020, respectively. Payment processing expense Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Payment processing expense$ 9,725 $ 6,848 $ 2,877 42 % Payment processing expense increased$2.9 million to$9.7 million for the three months endedApril 30, 2021 , as compared to$6.8 million for the three months endedApril 30, 2020 . The increase resulted primarily from an increase in patient payments processed through the Phreesia Platform driven by an increase in patient visits over the prior year. 31 --------------------------------------------------------------------------------
Table of Contents Sales and marketing Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Sales and marketing $ 15,012$ 9,434 $ 5,578 59 % Sales and marketing expense increased$5.6 million to$15.0 million for the three months endedApril 30, 2021 , as compared to$9.4 million for the three months endedApril 30, 2020 . The increase was primarily attributable to a$5.4 million increase in total compensation costs driven by the growth in sales and marketing headcount. Stock compensation expense included in sales and marketing expense was$1.6 million and$0.7 million for the three months endedApril 30, 2021 and 2020, respectively. Research and development Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Research and development$ 8,054 $ 5,005 $ 3,049 61 % Research and development expense increased$3.0 million to$8.1 million for the three months endedApril 30, 2021 , as compared to$5.0 million for the three months endedApril 30, 2020 . The increase resulted primarily from a$1.6 million increase in total compensation costs driven by an increase in headcount to support our product development efforts, as well as a$1.0 million increase in outside services costs. Stock compensation expense included in research and development expense was$0.8 million and$0.5 million for the three months endedApril 30, 2021 and 2020, respectively. General and administrative Three months ended April 30, (in thousands) 2021 2020 $ Change % Change General and administrative $ 12,671$ 8,720 $ 3,951 45 % General and administrative expense increased$4.0 million to$12.7 million for the three months endedApril 30, 2021 , as compared to$8.7 million for the three months endedApril 30, 2020 . The increase resulted primarily from a$3.4 million increase in total compensation costs driven by an increase in headcount to support our growth as a public company as well as higher software costs. Stock compensation expense included in general and administrative expense was$2.9 million and$1.6 million for the three months endedApril 30, 2021 and 2020, respectively. Depreciation Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Depreciation$ 3,297 $ 2,268 $ 1,029 45 % Depreciation expense increased$1.0 million to$3.3 million for the three months endedApril 30, 2021 as compared to$2.3 million for the three months endedApril 30, 2020 . The increase was primarily attributable to higher data center equipment depreciation. Amortization Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Amortization$ 1,651 $ 1,353 $ 298 22 % Amortization expense increased$0.3 million to$1.7 million for the three months endedApril 30, 2021 , as compared to$1.4 million for the three months endedApril 30, 2020 . The increase was primarily driven by increased 32 -------------------------------------------------------------------------------- Table of Contents amortization of capitalized internal-use software development costs, as well as higher amortization of acquired intangible assets. Other income (expense) Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Other income (expense), net $ 66$ (715) $ 781 (109) % Other income (expense), net changed by$0.8 million to income of less than$0.1 million for the three months endedApril 30, 2021 as compared to expense of$0.7 million for the three months endedApril 30, 2020 , driven by a decrease in foreign exchange losses. Interest income (expense) Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Interest (expense) income, net $ (238)$ (320) $ 82 (26) % Interest expense, net decreased$0.1 million to$0.2 million for the three months endedApril 30, 2021 , as compared to$0.3 million for the three months endedApril 30, 2020 . The decrease is primarily attributable to lower average debt balances due to repayment of debt with the proceeds of our equity offerings. Provision for income taxes Three months ended April 30, (in thousands) 2021 2020 $ Change % Change Provision for income taxes $ (149)$ (111) $ (38) 34 % Provision for income taxes remained consistent at$0.1 million for the three months endedApril 30, 2021 , as compared$0.1 million for the three months endedApril 30, 2020 . Provision for income taxes relates primarily to utilization of Canadian net operating loss carryforwards and state income taxes. Non-GAAP financial measures Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our liquidity. We define Adjusted EBITDA as net income or loss before interest expense (income), net, provision for (benefit from) income taxes, depreciation and amortization, and before stock-based compensation expense, change in fair value of contingent consideration liabilities and other (income) expense, net. We have provided below a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP financial measure. We have presented Adjusted EBITDA in the Quarterly Report on Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget, and to develop short and long-term operational plans. In particular, we believe that the exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows: 33 -------------------------------------------------------------------------------- Table of Contents •Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; •Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) the potentially dilutive impact of non-cash stock-based compensation; (3) tax payments that may represent a reduction in cash available to us; or (4) interest expense (income), net; and •Other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA along with other GAAP-based financial performance measures, including various cash flow metrics, net loss, and our GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net loss for each of the periods indicated: Three months ended April 30, (in thousands, unaudited) 2021
2020
Net loss$ (10,974) $
(6,112)
Interest expense (income), net 238
320
Provision for income taxes 149
111
Depreciation and amortization 4,948
3,621
Stock-based compensation expense 5,774 2,872 Other (income) expense, net (66) 715 Adjusted EBITDA $ 69$ 1,527 We calculate free cash flow as net cash provided by (used in) operating activities less capitalized internal-use software development costs and purchases of property and equipment. Additionally, free cash flow is a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by our business that can be used for strategic opportunities, including investing in our business, making strategic investments, partnerships and acquisitions and strengthening our financial position. The following table presents a reconciliation of free cash flow from net cash (used in) provided by operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated: Three months ended April 30, (in thousands) 2021 2020 Net cash (used in) provided by operating activities $ (5,473)$ 1,903 Less: Capitalized internal-use software (2,916) (1,160) Purchases of property and equipment (3,983) (1,917) Free cash flow$ (12,372) $ (1,174) Liquidity and capital resources InApril 2021 , the Company completed a follow-on offering of its Common Stock. In connection with this offering, the Company issued and sold 5,175,000 shares of common stock at an issuance price of$50.00 per share resulting in net proceeds of$245.8 million , after deducting underwriting discounts and commissions. As ofApril 30, 2021 andJanuary 31, 2021 , we had cash and cash equivalents of$450.7 million and$218.8 million , respectively. Cash and cash equivalents consist of money market accounts and cash on deposit. We believe that our existing cash and cash equivalents, along with our available financial resources from our credit facility, will be sufficient to meet our needs for at least the next 12 months. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under "Risk factors." 34
-------------------------------------------------------------------------------- Table of Contents In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. If we are unable to raise additional capital when desired, our business, operating results and financial condition could be adversely affected.Silicon Valley Bank facility InFebruary 2019 , we entered into a loan and security agreement withSilicon Valley Bank ("SVB"), (the "First SVB Facility"), which provided for a secured term loan facility and a revolving credit facility. We borrowed$20.0 million as a term loan under the facility during fiscal 2020. OnMay 5, 2020 , the Company entered into a Second Amended and Restated Loan and Security Agreement with SVB (the "Second SVB Facility"), and transferred the outstanding balance on the First SVB Facility Term Loan into revolving credit borrowings under the Second SVB Facility. The Company repaid the outstanding balance on the Second SVB Facility inJanuary 2021 . As ofApril 30, 2021 , the Company has no outstanding balance on the facility and$50.0 million of available borrowings under the facility. Borrowings under the Second SVB Facility are payable onMay 5, 2025 (the "Maturity Date"). Borrowings under the Second SVB Facility bear interest, which is payable monthly, at a floating rate equal to the greater of the bank's prime rate or 4.5%. The interest rate will be reduced if the Company reaches certain defined Second SVB Facility Adjusted EBITDA levels. As ofApril 30, 2021 , the interest rate on the Second SVB Facility was 4.5%. In addition to principal and interest due under the Second SVB Facility, the Company is required to pay an annual commitment fee of$0.1 million per year. The first facility fee payment of$0.1 million was paid during the year endedJanuary 31, 2021 . In the event that the Company terminates the Second SVB Facility prior to the Maturity Date, the Company will be required to pay a termination fee equal to$0.2 million plus a percent of total borrowing capacity, both of which are reduced based on the amount of time elapsed before the termination.Any Company obligations under the Second SVB Facility are secured by a first priority security interest in substantially all of the Company's assets, other than intellectual property. The Second SVB Facility includes a financial covenant that requires the Company to achieve specified levels of Adjusted EBITDA, as defined in the Second SVB Facility. This financial covenant will not be effective if the Company maintains certain levels of liquidity as defined. The Company was in compliance with all covenants related to the Second SVB Facility as ofApril 30, 2021 . The following table summarizes our sources and uses of cash for the three months endedApril 30, 2021 and 2020: Three months ended April 30, (in thousands) 2021 2020 Cash (used in) provided by operating activities $ (5,473)$ 1,903 Cash used in investing activities (6,899) (3,077) Cash provided by financing activities 244,271 1,111 Net increase (decrease) in cash and cash equivalents $
231,899
Operating activities The primary source of cash from operating activities is cash received from our customers. The primary uses of cash for operating activities are for payroll, payments to suppliers and employees, payments for operating leases, as well as cash paid for interest on our borrowings and finance leases and cash paid for various sales, property and income taxes. During the three months endedApril 30, 2021 , cash used in operating activities was$5.5 million , as our cash paid to employees and suppliers exceeded our cash received from customers in connection with our normal operations. During the three months endedApril 30, 2020 , cash provided by operating activities was$1.9 million , as our cash received from customers exceeded cash paid to employees and suppliers in connection with our normal operations. Investing activities During the three months endedApril 30, 2021 , cash used in investing activities was$6.9 million , principally resulting from capital expenditures, the majority of which consisted of$4.0 million of purchases of property and equipment including hardware used by clients and the purchase of data center equipment, as well as capitalized internal-use software costs of$2.9 million . 35 -------------------------------------------------------------------------------- Table of Contents During the three months endedApril 30, 2020 , cash used in investing activities was$3.1 million , principally resulting from capital expenditures for purchases of property and equipment of$1.9 million and capitalized internal-use software of$1.2 million . Financing activities During the three months endedApril 30, 2021 , net cash provided by financing activities was$244.3 million , consisting of$245.8 million in proceeds from theApril 2021 offering of our common stock, net of underwriters' discounts and commissions, and$1.4 million in proceeds from the issuance of common stock upon the exercise of stock options, partially offset by$1.1 million used for treasury stock to satisfy tax withholdings on stock compensation awards,$1.1 million used for principal payments on finance leases and$0.7 million used for loan facility fee payments. During the three months endedApril 30, 2020 , net cash provided by financing activities was$1.1 million , consisting of$1.7 million in proceeds from the issuance of common stock upon the exercise of stock options, offset by$0.6 million in finance lease and loan facility fee payments. Contractual obligations and commitments Our principal commitments consist of finance lease and operating lease obligations, as well as debt obligations, interest on debt and purchase obligations. During the three months endedApril 30, 2021 , our finance lease obligations decreased by$0.8 million due to$1.1 million of principal payments offset by$0.2 million of new finance leases. Our debt obligations decreased due to$0.7 million of principal payments. Payments due by period Less than More than (in thousands) Total 1 year 1-3 years 4-5 years 5 years Finance lease obligations$ 9,328 $ 3,050 $ 5,792 $ 486 $ - Operating lease obligations 2,973 940 1,981 52 - Long-term debt obligations 781 506 275 - - Interest on long-term debt 59 45 14 - - Purchase obligations 440 440 - - - Total$ 13,581 $ 4,981 $ 8,062 $ 538 $ - 36
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Table of Contents Critical accounting policies and estimates Our unaudited consolidated financial statements are prepared in accordance with GAAP regarding interim financial reporting. The preparation of our unaudited consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes in our critical accounting policies and estimates during the three months endedApril 30, 2021 as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year endedJanuary 31, 2021 . Recent accounting pronouncements See Note 3 to our unaudited financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements. Off-balance sheet arrangements As ofApril 30, 2021 andJanuary 31, 2021 , we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
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