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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended May 31, 2024

OR

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

For the transition period from to

Commission File Number: 001-39272

 

 

E2open Parent Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

86-1874570

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

9600 Great Hills Trail, Suite 300E

Austin, TX

78759

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (866) 432-6736

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A Common Stock, par value $0.0001 per share

 

ETWO

 

New York Stock Exchange

Warrants to purchase one share of Class A Common Stock

 at an exercise price of $11.50

 

ETWO-WT

 

New York Stock Exchange

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of July 8, 2024, E2open Parent Holdings, Inc. had 307,970,063 shares of Class A common stock outstanding.

 

 


 

Table of Contents

 

Page

Glossary

 

3

Forward-Looking Statements

4

PART I.

 

5

Item 1.

Financial Statements (Unaudited)

5

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Operations

6

Condensed Consolidated Statements of Comprehensive Loss

7

 

Condensed Consolidated Statements of Stockholders' Equity

8

Condensed Consolidated Statements of Cash Flows

9

Notes to the Unaudited Condensed Consolidated Financial Statements

10

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

39

PART II.

Other Information

39

Item 1.

Legal Proceedings

39

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

Item 5.

Other Information

40

Item 6.

Exhibits

40

Signatures

41

 

 

2


 

Glossary of Terms

 

Abbreviation

 

Term

ASC

 

Accounting Standards Codification

 

 

 

BluJay

 

BluJay TopCo Limited, a private limited liability company registered in England and Wales which owns BluJay Solutions, a cloud-based logistics execution platform company

 

 

 

Class A Common Stock

 

Class A common stock, par value $0.0001 per share

 

 

 

Class V Common Stock

 

Class V common stock, par value $0.0001 per share

 

 

 

Common Units

 

common units representing limited liability company interests of E2open Holdings, LLC, which are non-voting, economic interests in E2open Holdings, LLC. Every economic common unit is tied to one voting share of Class V Common Stock of E2open Parent Holdings, Inc.

 

 

 

Forward Purchase Agreement

 

agreement dated as of April 28, 2020, by and between CCNB1 and Neuberger Berman Opportunistic Capital Solutions Master Fund LP

 

 

 

Forward Purchase Warrants

 

5,000,000 redeemable warrants purchased pursuant to the Forward Purchase Agreement

 

 

 

LIBOR

 

London Interbank Offered Rate

 

 

 

Logistyx

 

Logistyx Technologies, LLC, a private limited liability company headquartered in Chicago, Illinois, which connects top retailers, manufacturers and logistics providers to more than 550 in-network carriers with strategic parcel shipping and omni-channel fulfillment technology.

 

 

 

nm

 

not meaningful

 

 

 

NYSE

 

New York Stock Exchange

 

 

 

RCU

 

restricted common units representing Series 2 of E2open Holdings, LLC

 

 

 

SCM

 

omni-channel and supply chain management

 

 

 

SEC

 

U.S. Securities and Exchange Commission

 

 

 

SOFR

 

Secured Overnight Financing Rate

 

 

 

SONIA

 

Sterling Overnight Index Average

 

 

 

U.S. GAAP

 

generally accepted accounting principles in the United States

 

 

 

VWAP

 

daily per share volume-weighted average price of the Class A Common Stock on the NYSE as displayed on the Bloomberg page under the heading Bloomberg VWAP

 

3


 

Forward-Looking Statements

This Quarterly Report on Form 10-Q (Quarterly Report) contains "forward-looking statements" within the meaning of the federal securities law. These forward-looking statements give E2open Parent Holdings, Inc.'s (we, our, us, Company or E2open) current expectations and include projections of results of operations or financial condition or forecasts of future events. Words such as "may," "can," "should," "will," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "target" and similar expressions are used to identify forward-looking statements. Without limiting the generality of the forgoing, forward-looking statements contained in this document include our expectations regarding our future growth, operational and financial performance and business prospects and opportunities.

These forward-looking statements are based on information available as of the date of this Quarterly Report and management's current expectations, forecasts and assumptions, and involve a number of judgments, known and unknown risks and uncertainties and other factors, many of which are outside our control and our directors, officers and affiliates. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We do not undertake any obligation to update, add or to otherwise correct any forward-looking statements contained herein to reflect events or circumstances after the date they were made, whether as a result of new information, future events, inaccuracies that become apparent after the date hereof or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

the effect of the volatile, negative or uncertain macro-economic and political conditions, inflation, fluctuations in foreign currency exchange rates and the potential effects of these factors on our business, our slowing growth rate, results of operations and financial condition as well as our clients' businesses and levels of business activity;
changes in market interest rates particularly on our variable rate debt, including the recent significant increases in market interest rates experienced in fiscal 2023 and 2024 and that may continue to increase in fiscal year 2025;
the inability to realize the value of the goodwill and intangible assets, which could result in the incurrence of material charges related to the impairment of those assets;
the inability to develop and market new product innovations and monetize our network;
the slowing of our growth rate due to lower than anticipated new bookings and higher than expected churn;
risks associated with our past acquisitions (including the BluJay and Logistyx acquisitions), including the failure to successfully integrate operations, personnel, systems and products of the acquired companies, adverse tax consequences of acquisitions, greater than expected liabilities of the acquired companies, charges to earnings from acquisitions, the ability of the combined company to grow and manage profitability, maintain relationships with clients and suppliers and retain its management and key employees and the ability to recognize the anticipated benefits of the acquisition;
the inability to develop and maintain effective internal controls over financial reporting;
the inability to attract new clients or upsell/cross sell existing clients or the failure to renew existing client subscriptions on terms favorable to us;
risks associated with our extensive and expanding international operations, including the risks created by geopolitical instability;
the failure of the market for cloud-based SCM solutions to develop as quickly as we expect or failure to compete successfully in a fragmented and competitive SCM market;
the diversion of management's attention and consumption of resources as a result of the strategic alternatives process;
the inability to adequately protect key intellectual property rights or proprietary technology;
failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows;
cyber-attacks and security vulnerabilities; and
certain other factors discussed elsewhere in this Quarterly Report.

For a further discussion of these and other factors that could impact our future results and performance, see Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the fiscal year ended February 29, 2024, filed with the SEC on April 29, 2024 (2024 Form 10-K).

 

4


 

PART I—Financial Information

Item 1. Financial Statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Balance Sheets

 

(In thousands, except share and per share amounts)

 

May 31, 2024

 

 

February 29, 2024

 

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,203

 

 

$

134,478

 

Restricted cash

 

 

15,737

 

 

 

14,560

 

Accounts receivable, net of allowance of $6,266 and $6,587 as of May 31, 2024
    and February 29, 2024, respectively

 

 

111,359

 

 

 

161,556

 

Prepaid expenses and other current assets

 

 

33,072

 

 

 

28,843

 

Total current assets

 

 

320,371

 

 

 

339,437

 

Goodwill

 

 

1,845,209

 

 

 

1,843,477

 

Intangible assets, net

 

 

796,551

 

 

 

841,031

 

Property and equipment, net

 

 

65,638

 

 

 

67,177

 

Operating lease right-of-use assets

 

 

19,629

 

 

 

21,299

 

Other noncurrent assets

 

 

29,669

 

 

 

29,234

 

Total assets

 

$

3,077,067

 

 

$

3,141,655

 

Liabilities, Redeemable Share-Based Awards and Stockholders' Equity

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

85,112

 

 

$

90,594

 

Channel client deposits payable

 

 

15,737

 

 

 

14,560

 

Deferred revenue

 

 

187,197

 

 

 

213,138

 

Current portion of notes payable

 

 

11,277

 

 

 

11,272

 

Current portion of operating lease obligations

 

 

6,996

 

 

 

7,378

 

Current portion of financing lease obligations

 

 

1,473

 

 

 

1,448

 

Income taxes payable

 

 

5,748

 

 

 

584

 

Total current liabilities

 

 

313,540

 

 

 

338,974

 

Long-term deferred revenue

 

 

1,615

 

 

 

2,077

 

Operating lease obligations

 

 

15,799

 

 

 

17,372

 

Financing lease obligations

 

 

3,248

 

 

 

3,626

 

Notes payable

 

 

1,036,007

 

 

 

1,037,623

 

Tax receivable agreement liability

 

 

72,394

 

 

 

67,927

 

Warrant liability

 

 

10,952

 

 

 

14,713

 

Contingent consideration

 

 

20,308

 

 

 

18,028

 

Deferred taxes

 

 

49,767

 

 

 

55,586

 

Other noncurrent liabilities

 

 

1,052

 

 

 

602

 

Total liabilities

 

 

1,524,682

 

 

 

1,556,528

 

Commitments and Contingencies (Note 22)

 

 

 

 

 

 

Redeemable share-based awards

 

 

930

 

 

 

 

Stockholders' Equity

 

 

 

 

 

 

Class A common stock; $0.0001 par value, 2,500,000,000 shares authorized;
    
307,692,652 and 306,237,585 issued and 307,515,998 and 306,060,931 outstanding as of
    May 31, 2024 and February 29, 2024, respectively

 

 

31

 

 

 

31

 

Class V common stock; $0.0001 par value; 42,747,890 shares authorized; 30,918,888
    and
31,225,604 shares issued and outstanding as of May 31, 2024 and
    February 29, 2024, respectively

 

 

 

 

 

 

Series B-1 common stock; $0.0001 par value; 9,000,000 shares authorized; 94 shares
    issued and outstanding as of May 31, 2024 and February 29, 2024

 

 

 

 

 

 

Series B-2 common stock; $0.0001 par value; 4,000,000 shares authorized; 3,372,184 shares
    issued and outstanding as of May 31, 2024 and February 29, 2024

 

 

 

 

 

 

Additional paid-in capital

 

 

3,415,627

 

 

 

3,407,694

 

Accumulated other comprehensive loss

 

 

(44,341

)

 

 

(46,835

)

Accumulated deficit

 

 

(1,912,565

)

 

 

(1,873,703

)

Treasury stock, at cost: 176,654 shares as of May 31, 2024 and February 29, 2024

 

 

(2,473

)

 

 

(2,473

)

Total E2open Parent Holdings, Inc. equity

 

 

1,456,279

 

 

 

1,484,714

 

Noncontrolling interest

 

 

95,176

 

 

 

100,413

 

Total stockholders' equity

 

 

1,551,455

 

 

 

1,585,127

 

Total liabilities, redeemable share-based awards and stockholders' equity

 

$

3,077,067

 

 

$

3,141,655

 

See notes to the unaudited condensed consolidated financial statements.

5


 

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended May 31,

 

(In thousands, except per share amounts)

 

2024

 

 

2023

 

Revenue

 

 

 

 

 

 

Subscriptions

 

$

131,404

 

 

$

134,903

 

Professional services and other

 

 

19,759

 

 

 

25,217

 

Total revenue

 

 

151,163

 

 

 

160,120

 

Cost of Revenue

 

 

 

 

 

 

Subscriptions

 

 

37,099

 

 

 

36,544

 

Professional services and other

 

 

16,752

 

 

 

19,528

 

Amortization of acquired intangible assets

 

 

24,652

 

 

 

24,630

 

Total cost of revenue

 

 

78,503

 

 

 

80,702

 

Gross Profit

 

 

72,660

 

 

 

79,418

 

Operating Expenses

 

 

 

 

 

 

Research and development

 

 

24,797

 

 

 

25,866

 

Sales and marketing

 

 

20,996

 

 

 

19,558

 

General and administrative

 

 

23,343

 

 

 

22,125

 

Acquisition-related expenses

 

 

283

 

 

 

389

 

Amortization of acquired intangible assets

 

 

20,086

 

 

 

20,128

 

Goodwill impairment

 

 

 

 

 

410,041

 

Intangible asset impairment

 

 

 

 

 

4,000

 

Total operating expenses

 

 

89,505

 

 

 

502,107

 

Loss from operations

 

 

(16,845

)

 

 

(422,689

)

Other income (expense)

 

 

 

 

 

 

Interest and other expense, net

 

 

(25,373

)

 

 

(25,726

)

Loss from change in tax receivable agreement liability

 

 

(3,974

)

 

 

(2,460

)

Gain from change in fair value of warrant liability

 

 

3,761

 

 

 

14,680

 

(Loss) gain from change in fair value of contingent consideration

 

 

(2,280

)

 

 

9,000

 

Total other expense

 

 

(27,866

)

 

 

(4,506

)

Loss before income tax benefit

 

 

(44,711

)

 

 

(427,195

)

Income tax benefit

 

 

1,923

 

 

 

66,311

 

Net loss

 

 

(42,788

)

 

 

(360,884

)

Less: Net loss attributable to noncontrolling interest

 

 

(3,926

)

 

 

(35,489

)

Net loss attributable to E2open Parent Holdings, Inc.

 

$

(38,862

)

 

$

(325,395

)

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

306,732

 

 

 

302,502

 

Diluted

 

 

306,732

 

 

 

302,502

 

Net loss attributable to E2open Parent Holdings, Inc.
    common shareholders per share:

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

$

(1.08

)

Diluted

 

$

(0.13

)

 

$

(1.08

)

 

See notes to the unaudited condensed consolidated financial statements.

6


 

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

 

 

 

Three Months Ended May 31,

 

(In thousands)

 

2024

 

 

2023

 

Net loss

 

$

(42,788

)

 

$

(360,884

)

Other comprehensive (loss) income, net:

 

 

 

 

 

 

Net foreign currency translation gain, net of tax

 

 

2,065

 

 

 

6,535

 

Net deferred (losses) gains on foreign exchange forward contracts

 

 

(27

)

 

 

474

 

Net deferred gains on interest rate collars

 

 

456

 

 

 

1,161

 

Total other comprehensive income, net

 

 

2,494

 

 

 

8,170

 

Comprehensive loss

 

 

(40,294

)

 

 

(352,714

)

Less: Comprehensive loss attributable to noncontrolling interest

 

 

(3,697

)

 

 

(34,686

)

Comprehensive loss attributable to E2open Parent Holdings, Inc.

 

$

(36,597

)

 

$

(318,028

)

 

See notes to the unaudited condensed consolidated financial statements.

 

7


 

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

 

(In thousands)

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Other
Comprehensive
(Loss) Income

 

 

Accumulated
Deficit

 

 

Treasury Stock

 

 

Total
E2open
Equity

 

 

Noncontrolling
Interest

 

 

Total
Equity

 

Balance, February 28, 2023

 

$

30

 

 

$

3,378,633

 

 

$

(68,603

)

 

$

(803,679

)

 

$

(2,473

)

 

$

2,503,908

 

 

$

223,012

 

 

$

2,726,920

 

Share-based compensation

 

 

 

 

 

4,441

 

 

 

 

 

 

 

 

 

 

 

 

4,441

 

 

 

 

 

 

4,441

 

Vesting of restricted stock
    awards, net of shares
    withheld for taxes

 

 

 

 

 

(1,830

)

 

 

 

 

 

 

 

 

 

 

 

(1,830

)

 

 

 

 

 

(1,830

)

Other comprehensive income

 

 

 

 

 

 

 

 

8,170

 

 

 

 

 

 

 

 

 

8,170

 

 

 

 

 

 

8,170

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(325,395

)

 

 

 

 

 

(325,395

)

 

 

(35,489

)

 

 

(360,884

)

Balance, May 31, 2023

 

$

30

 

 

$

3,381,244

 

 

$

(60,433

)

 

$

(1,129,074

)

 

$

(2,473

)

 

$

2,189,294

 

 

$

187,523

 

 

$

2,376,817

 

 

 

(In thousands)

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Other
Comprehensive
(Loss) Income

 

 

Accumulated
Deficit

 

 

Treasury Stock

 

 

Total
E2open
Equity

 

 

Noncontrolling
Interest

 

 

Total
Equity

 

Balance, February 29, 2024

 

$

31

 

 

$

3,407,694

 

 

$

(46,835

)

 

$

(1,873,703

)

 

$

(2,473

)

 

$

1,484,714

 

 

$

100,413

 

 

$

1,585,127

 

Share-based compensation

 

 

 

 

 

11,768

 

 

 

 

 

 

 

 

 

 

 

 

11,768

 

 

 

 

 

 

11,768

 

Conversion of Common
    Units to common stock

 

 

 

 

 

1,311

 

 

 

 

 

 

 

 

 

 

 

 

1,311

 

 

 

(1,311

)

 

 

 

Vesting of restricted stock
    awards, net of shares
    withheld for taxes

 

 

 

 

 

(3,873

)

 

 

 

 

 

 

 

 

 

 

 

(3,873

)

 

 

 

 

 

(3,873

)

Impact of Common Unit
    conversions on Tax
    Receivable Agreement,
    net of tax

 

 

 

 

 

(493

)

 

 

 

 

 

 

 

 

 

 

 

(493

)

 

 

 

 

 

(493

)

Issuance of common stock upon
    exercise of stock options

 

 

 

 

 

150

 

 

 

 

 

 

 

 

 

 

 

 

150

 

 

 

 

 

 

150

 

Reclassification of stockholders'
    equity to redeemable
    share-based awards

 

 

 

 

 

(930

)

 

 

 

 

 

 

 

 

 

 

 

(930

)

 

 

 

 

 

(930

)

Other comprehensive income

 

 

 

 

 

 

 

 

2,494

 

 

 

 

 

 

 

 

 

2,494

 

 

 

 

 

 

2,494

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(38,862

)

 

 

 

 

 

(38,862

)

 

 

(3,926

)

 

 

(42,788

)

Balance, May 31, 2024

 

$

31

 

 

$

3,415,627

 

 

$

(44,341

)

 

$

(1,912,565

)

 

$

(2,473

)

 

$

1,456,279

 

 

$

95,176

 

 

$

1,551,455

 

See notes to the unaudited condensed consolidated financial statements.

8


 

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended May 31,

 

(In thousands)

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(42,788

)

 

$

(360,884

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

53,605

 

 

 

53,319

 

Amortization of deferred commissions

 

 

2,109

 

 

 

1,344

 

Provision for credit losses

 

 

151

 

 

 

69

 

Amortization of debt issuance costs

 

 

1,320

 

 

 

1,320

 

Amortization of operating lease right-of-use assets

 

 

1,722

 

 

 

1,946

 

Share-based compensation

 

 

11,787

 

 

 

4,445

 

Deferred income taxes

 

 

(5,972

)

 

 

(67,833

)

Right-of-use assets impairment charge

 

 

 

 

 

362

 

Goodwill impairment charge

 

 

 

 

 

410,041

 

Indefinite-lived intangible asset impairment charge

 

 

 

 

 

4,000

 

Loss from change in tax receivable agreement liability

 

 

3,974

 

 

 

2,460

 

Gain from change in fair value of warrant liability

 

 

(3,761

)

 

 

(14,680

)

Loss (gain) from change in fair value of contingent consideration

 

 

2,280

 

 

 

(9,000

)

Loss (gain) on disposal of property and equipment

 

 

79

 

 

 

(154

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

50,047

 

 

 

48,176

 

Prepaid expenses and other current assets

 

 

(3,905

)

 

 

(1,304

)

Other noncurrent assets

 

 

(2,544

)

 

 

(1,772

)

Accounts payable and accrued liabilities

 

 

(10,702

)

 

 

(12,228

)

Channel client deposits payable

 

 

1,177

 

 

 

2,539

 

Deferred revenue

 

 

(26,403

)

 

 

(23,401

)

Changes in other liabilities

 

 

3,740

 

 

 

(2,306

)

Net cash provided by operating activities

 

 

35,916

 

 

 

36,459

 

Cash flows from investing activities

 

 

 

 

 

 

Capital expenditures

 

 

(6,084

)

 

 

(6,552

)

Net cash used in investing activities

 

 

(6,084

)

 

 

(6,552

)

Cash flows from financing activities

 

 

 

 

 

 

Repayments of indebtedness

 

 

(2,808

)

 

 

(2,741

)

Repayments of financing lease obligations

 

 

(353

)

 

 

(223

)

Proceeds from exercise of stock options

 

 

155

 

 

 

 

Net cash used in financing activities

 

 

(3,006

)

 

 

(2,964

)

Effect of exchange rate changes on cash and cash equivalents

 

 

76

 

 

 

2,105

 

Net increase in cash, cash equivalents and restricted cash

 

 

26,902

 

 

 

29,048

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

149,038

 

 

 

104,342

 

Cash, cash equivalents and restricted cash at end of period

 

$

175,940

 

 

$

133,390

 

 

 

 

 

 

 

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

 

 

 

 

Cash and cash equivalents

 

$

160,203

 

 

$

119,541

 

Restricted cash

 

 

15,737

 

 

 

13,849

 

Total cash, cash equivalents and restricted cash

 

$

175,940

 

 

$

133,390

 

See notes to the unaudited condensed consolidated financial statements.

9


 

E2open Parent Holdings, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

1. Organization and Basis of Presentation

Organization and Description of Business

CC Neuberger Principal Holdings I (CCNB1) was a blank check company incorporated in the Cayman Islands on January 14, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. CCNB1's sponsor was CC Neuberger Principal Holdings I Sponsor LLC, a Delaware limited liability company (Sponsor). CCNB1 became a public company on April 28, 2020 through an initial public offering.

On February 4, 2021 (Closing Date), CCNB1 and E2open Holdings, LLC and its operating subsidiaries (E2open Holdings) completed a business combination (Business Combination) contemplated by the definitive Business Combination Agreement entered into on October 14, 2020 (Business Combination Agreement). The Business Combination was accounted for as a business combination under ASC 805, Business Combination (ASC 805), and due to the change in control, was accounted for using the acquisition method with CCNB1 as the accounting acquirer and E2open Holdings as the accounting acquiree.

In connection with the finalization of the Business Combination, CCNB1 changed its name to "E2open Parent Holdings, Inc." and changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware (Domestication). Immediately following the Domestication, various entities merged with and into E2open, with E2open as the surviving company. Additionally, E2open Holdings became a subsidiary of E2open with the equity interests of E2open Holdings held by E2open and existing owners of E2open Holdings. The existing owners of E2open Holdings are considered noncontrolling interests in the condensed consolidated financial statements.

We are headquartered in Austin, Texas. We are a world class connected supply chain software platform that enables the largest companies to transform the way they make, move and sell goods and services. With the broadest cloud-native global platform purpose-built for the modern supply chains, we connect manufacturing, logistics, channel and distributing partners as one multi-enterprise network. Our software as a service (SaaS) platform anticipates disruptions and opportunities to help companies improve efficiency, reduce waste and operate sustainably.

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Investments in other companies are carried at cost. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring accruals), considered necessary for a fair presentation have been included. The unaudited operating results for interim periods reported are not necessarily indicative of the results for the entire fiscal year. For further information, refer to the consolidated financial statements and notes thereto included in our 2024 Form 10-K.

Fiscal Year

Our fiscal year ends on the last day of February each year.

Use of Estimates

The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported results of operations during the reporting period. Such management estimates include allowance for credit losses, goodwill and other long-lived assets, estimates of standalone selling price of performance obligations for revenue contracts with multiple performance obligations, share-based compensation, valuation allowances for deferred tax assets and uncertain tax positions, tax receivable agreement liability, warrants, contingent consideration and contingencies. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management's estimates.

10


 

Seasonality

Our quarterly operating results have fluctuated in the past and are expected to fluctuate in the future due to a variety of factors, many of which are outside of our control, including seasonality in our business as a result of client budget cycles, with higher sales typically in the third and fourth fiscal quarters. As a result, our past results may not be indicative of our future performance and comparing our operating results on a period-to-period basis may not be meaningful.

2. Accounting Standards

Recent Accounting Standards Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning after December 15, 2024, and should be applied on a retrospective basis to all periods presented. Early adoption is permitted. We are currently evaluating the effect of adopting ASU 2023-07 on our disclosures.

In December 2023, the FASB issued 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this standard on our consolidated statements and related disclosures.

3. Accounts Receivable

Accounts receivable, net consisted of the following:

 

($ in thousands)

 

May 31, 2024

 

 

February 29, 2024

 

Accounts receivable

 

$

96,492

 

 

$

144,253

 

Unbilled receivables

 

 

21,133

 

 

 

23,890

 

Less: Allowance for credit losses

 

 

(6,266

)

 

 

(6,587

)

Accounts receivable, net

 

$

111,359

 

 

$

161,556

 

 

Unbilled receivables represent revenue recognized for performance obligations that have been satisfied but for which amounts have not been billed, which we also refer to as contract assets.

Account balances are written off against the allowance for credit losses when we believe that it is probable that the receivable balance will not be recovered.

4. Prepaid and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

($ in thousands)

 

May 31, 2024

 

 

February 29, 2024

 

Prepaid software and hardware license and maintenance fees

 

$

6,584

 

 

$

9,599

 

Income and other taxes receivable

 

 

8,037

 

 

 

4,759

 

Prepaid insurance

 

 

2,938

 

 

 

1,667

 

Deferred commissions

 

 

7,969

 

 

 

7,421

 

Prepaid marketing

 

 

1,728

 

 

 

1,073

 

Security deposits

 

 

1,261

 

 

 

1,251

 

Certificates of deposits

 

 

504

 

 

 

501

 

Other prepaid expenses and other current assets

 

 

4,051

 

 

 

2,572

 

Total prepaid expenses and other current assets

 

$

33,072

 

 

$

28,843

 

 

Amortization of software licenses held under financing leases is included in cost of revenue and operating expenses. Prepaid maintenance, services and insurance are expensed over the term of the underlying agreements.

11


 

5. Goodwill

We test goodwill for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of a reporting unit below its carrying value between annual impairment tests. As we have only one reporting unit, any goodwill impairment assessment is performed at the Company level.

During the first and third quarters of fiscal 2024, the market price of our Class A Common Stock and market capitalization declined significantly. We also experienced slowing growth and lowered projections for net sales and net operating margins due to lower than anticipated new bookings, lower revenue from tiered contracts, higher than expected churn and macroeconomic impacts primarily in the technology, freight and transportation sectors. These factors resulted in us determining that triggering events occurred, and goodwill impairment assessments were performed.

The fair value of E2open was calculated using an equally weighted combination of three different methods: discounted cash flow method, guideline public company method and guideline transaction method. The discounted cash flow method was based on the present value of estimated future cash flows which were based on management's estimates of projected net sales, net operating income margins and terminal growth rates, taking into consideration market and industry conditions. The discount rate used was based on the weighted-average cost of capital adjusted for the risk, size premium and business-specific characteristics related to projected cash flows. Under the guideline public company method, the fair value was based on our current and forward-looking earnings multiples using management's estimates of projected net sales and adjusted EBITDA margins with consideration of market premiums. The unobservable inputs used to measure the fair value included projected net sales, forecasted adjusted EBITDA margins, weighted average cost of capital, normalized working capital level, capital expenditures assumptions, profitability projections, determination of appropriate market comparison companies and terminal growth rates. Under the guideline transaction method, the fair value was based on pricing multiples derived from recently sold companies with similar characteristics to E2open taking into consideration management's estimate of projected net sales and net operating income margins.

The three approaches generated similar results and indicated that the fair value of E2open's equity and goodwill was less than its carrying amounts. Therefore, during the fiscal year ended February 29, 2024, we recognized impairment charges of $1,097.7 million. As part of these impairments, we recognized an impairment charge of $410.0 million during the three months ended May 31, 2023. We did not recognize an impairment charge during the three months ended May 31, 2024.

The following table presents the changes in goodwill:

 

($ in thousands)

 

Amount

 

Balance, February 28, 2023

 

$

2,927,807

 

Impairment charge

 

 

(1,097,741

)

Currency translation adjustment

 

 

13,411

 

Balance, February 29, 2024

 

 

1,843,477

 

Currency translation adjustment

 

 

1,732

 

Balance, May 31, 2024

 

$

1,845,209

 

 

6. Intangible Assets, Net

We test our indefinite-lived intangible asset for impairment on an annual basis or whenever events or changes occur that would more-likely-than not reduce the fair value of the indefinite-lived intangible asset below its carrying value between annual impairment tests. As we have only one reporting unit, any indefinite-lived intangible asset assessment is performed at the Company level.

During the first quarter of fiscal 2024, the market price of our Class A Common Stock and market capitalization declined significantly. We also lowered our projections for net sales and net operating margins due to lower than anticipated new bookings, lower revenue from tiered contracts, higher than expected churn and macroeconomic impacts primarily in the technology, freight and transportation sectors. These factors resulted in us determining that a triggering event occurred, and an interim indefinite-lived intangible asset impairment assessment was performed.

The fair value of the indefinite-lived intangible asset was calculated using the relief from royalty payments method which is based on management's estimates of projected net sales and terminal growth rates, taking into consideration market and industry conditions. The royalty rate used was based on royalty rates of companies with similar characteristics to E2open. The discount rate used was based on the weighted-average cost of capital adjusted for the risk, size premium and business-specific characteristics related to projected net sales.

12


 

The interim assessment indicated that the fair value of our indefinite-lived intangible asset was less than its carrying amount; therefore, during the three months ended May 31, 2023, we recognized an impairment charge of $4.0 million to intangible assets, net for the indefinite-lived trademark / trade name.

We did not record an indefinite-lived intangible asset impairment charge for the three months ended May 31, 2024.

Intangible assets, net consisted of the following:

 

 

May 31, 2024

 

($ in thousands)

 

Weighted Average
Useful Life

 

Cost

 

 

Accumulated
Amortization

 

 

Net

 

Indefinite-lived:

 

 

 

 

 

 

 

 

 

 

Trademark / Trade name

 

Indefinite

 

$

76,000

 

 

$

 

 

$

76,000

 

Definite-lived:

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

13.7

 

 

502,987

 

 

 

(212,866

)

 

 

290,121

 

Technology

 

7.3

 

 

692,012

 

 

 

(295,040

)

 

 

396,972

 

Content library

 

10.0

 

 

50,000

 

 

 

(16,622

)

 

 

33,378

 

Trade name

 

1.0

 

 

4,015

 

 

 

(4,015

)

 

 

 

Backlog

 

2.5

 

 

800

 

 

 

(720

)

 

 

80

 

Total definite-lived

 

 

 

 

1,249,814

 

 

 

(529,263

)

 

 

720,551

 

Total intangible assets

 

 

 

$

1,325,814

 

 

$

(529,263

)

 

$

796,551

 

 

 

 

February 29, 2024

 

($ in thousands)

 

Weighted Average
Useful Life

 

Cost

 

 

Accumulated
Amortization

 

 

Net

 

Indefinite-lived:

 

 

 

 

 

 

 

 

 

 

 

Trademark / Trade name

 

Indefinite

 

$

76,000

 

 

$

 

 

$

76,000

 

Definite-lived:

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

13.7

 

 

502,722

 

 

 

(194,001

)

 

 

308,721

 

Technology

 

7.3