E2open Parent Holdings, Inc. - Quarter Report: 2021 November (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 November 30, 2021


☐	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.

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 ☒

There were 301,359,967 shares of common stock, $0.0001 par value per share, issued and outstanding as of January 10, 2022.

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 Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 4.	Controls and Procedures	51
PART II.	OTHER INFORMATION	52
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 6.	Exhibits	54
Signatures		55

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

BluJay Sellers		BluJay and its subsidiaries

CC Capital		CC NB Sponsor 1 Holdings LLC

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

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

Insight Partners		entities affiliated with Insight Venture Management, LLC, including funds under management; controlling unitholder of E2open Holdings, LLC

Investor Rights Agreement		agreement amended and restated on September 1, 2021 providing Insight Partners, CC Capital, Francisco Partners and Temasek the right to nominate members to the board of directors, requires parties to vote in favor of director nominees recommended by the board of directors, requires the registration of securities within 30 days of September 1, 2021 and limits the transfer of beneficially owned shares of common stock prior to the termination of the Lock-up Period.

LIBOR		London Interbank Offered Rate

Lock-up Period		period commencing on September 1, 2021 and ending on February 28, 2022

nm		not meaningful

NYSE		New York Stock Exchange

PIPE		private investment in public equity; financing from institutional investors

Purchase Agreement		Share Purchase Deed entered into on May 27, 2021 with BluJay

RCU		restricted common units representing Series 1 and Series 2 of E2open Holdings, LLC

SCM		supply chain management

SEC		U.S. Securities and Exchange Commission

Temasek		Temasek Holdings

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

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:



cyber-attacks and security vulnerabilities;



the outcome of any legal proceedings that may be instituted against us or others following the completion of the BluJay acquisition and any definitive agreements with respect thereto;



the ability to recognize the anticipated benefits of the BluJay acquisition, which may be affected by, among other things, competition, the ability of the combined company to grow and manage growth profitability, maintain relationships with customers and suppliers and retain its management and key employees;



costs related to the BluJay acquisition;



the integration of BluJay and E2open may be more difficult, time-consuming or expensive than anticipated;



the inability to develop and maintain effective internal controls;



the COVID-19 pandemic;



the inability to attract new customers or upsell/cross sell existing customers or the failure to renew existing customer subscriptions on term favorable to us;



failure to renew existing customer subscriptions on terms favorable to us;



risks associated with our extensive and expanding international operations;



the inability to develop and market new and enhanced solutions;



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;



inaccuracies in information sourced for our knowledge databases;



the inability to adequately protect key intellectual property rights or proprietary technology;



the diversion of management’s attention and consumption of resources as a result of potential acquisitions of other companies;



risks associated with our past and prospective acquisitions (including the BluJay acquisition), including the failure to successfully integrate operations, personnel, systems, technologies and products of the acquired companies, adverse tax consequences of acquisitions, greater than expected liabilities of the acquired companies and charges to earnings from acquisitions;



failure to maintain adequate operational and financial resources or raise additional capital or generate sufficient cash flows; 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 28, 2021, filed with the SEC on May 20, 2021 (2021 Form 10-K).

PART I—Financial Information

Item 1. Financial Statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Balance Sheets


	Successor
(In thousands, except share amounts)	November 30, 2021			February 28, 2021
	(unaudited)
Assets
Cash and cash equivalents	$	56,462		$	194,717
Restricted cash		15,047			12,825
Accounts receivable - net of allowance of $3,224 and $908, respectively		104,643			112,657
Prepaid expenses and other current assets		28,992			12,643
Total current assets		205,144			332,842
Long-term investments		210			224
Goodwill		3,760,136			2,628,646
Intangible assets, net		1,226,512			824,851
Property and equipment, net		55,778			44,198
Operating lease right-of-use assets		26,553			—
Other noncurrent assets		14,845			7,416
Total assets	$	5,289,178		$	3,838,177
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities	$	112,298		$	70,233
Incentive program payable		15,047			12,825
Deferred revenue		147,535			89,691
Acquisition-related obligations		2,700			2,000
Current portion of notes payable		9,112			4,405
Current portion of operating lease obligations		6,626			—
Current portion of financing lease obligations		2,329			4,827
Total current liabilities		295,647			183,981
Long-term deferred revenue		1,848			482
Operating lease obligations		20,784			—
Financing lease obligations		2,093			6,588
Notes payable		867,523			502,800
Tax receivable agreement liability		67,910			50,114
Warrant liability		117,220			68,772
Contingent consideration		66,988			150,808
Deferred taxes		441,340			396,217
Other noncurrent liabilities		1,020			1,057
Total liabilities		1,882,373			1,360,819
Commitments and Contingencies (Note 23)
Stockholders' Equity
Class A common stock; $0.0001 par value, 2,500,000,000 shares authorized; 300,415,025 and 187,051,142 issued and 300,238,371 and 187,051,142 outstanding as of November 30, 2021 and February 28, 2021		30			19
Class V common stock; $0.0001 par value; 42,747,890 and 40,000,000 shares authorized; 34,682,435 and 35,636,680 issued and outstanding as of November 30, 2021 and February 28, 2021		—			—
Series B-1 common stock; $0.0001 par value; 9,000,000 shares authorized; 94 and 8,120,367 issued and outstanding as of November 30, 2021 and February 28, 2021		—			—
Series B-2 common stock; $0.0001 par value; 4,000,000 shares authorized; 3,372,184 issued and outstanding as of November 30, 2021 and February 28, 2021		—			—
Additional paid-in capital		3,348,606			2,071,206
Accumulated other comprehensive (loss) income		(28,277	)		2,388
(Accumulated deficit) retained earnings		(211,192	)		10,800
Treasury stock, at cost: 176,654 shares as of November 30, 2021		(2,473	)		—
Total E2open Parent Holdings, Inc. equity		3,106,694			2,084,413
Noncontrolling interest		300,111			392,945
Total stockholders' equity		3,406,805			2,477,358
Total liabilities and stockholders' equity	$	5,289,178		$	3,838,177

See notes to condensed consolidated financial statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	Successor			Predecessor			Successor			Predecessor
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
(In thousands, except per share amounts)	November 30, 2021			November 30, 2020			November 30, 2021			November 30, 2020
Revenue
Subscriptions	$	106,969		$	70,374		$	219,728		$	209,013
Professional services		30,033			13,707			61,680			40,009
Total revenue		137,002			84,081			281,408			249,022
Cost of Revenue
Subscriptions		30,163			15,568			62,917			44,566
Professional services		17,587			11,346			38,694			32,791
Amortization of acquired intangible assets		25,036			4,945			48,885			15,453
Total cost of revenue		72,786			31,859			150,496			92,810
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
Other expense
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 tax expense		(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 Holdings, Inc. common shareholders per share:
Basic	$	(0.19	)				$	(0.98	)
Diluted	$	(0.19	)				$	(0.98	)

See notes to condensed consolidated financial statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)


	Successor			Predecessor			Successor			Predecessor
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
(In thousands)	November 30, 2021			November 30, 2020			November 30, 2021			November 30, 2020
Net loss	$	(64,289	)	$	(27,067	)	$	(257,632	)	$	(68,359	)
Other comprehensive loss, net:
Net foreign currency translation loss		(25,617	)		403			(30,665	)		57
Total other comprehensive loss, net		(25,617	)		403			(30,665	)		57
Comprehensive loss		(89,906	)	$	(26,664	)		(288,297	)	$	(68,302	)
Less: Comprehensive loss attributable to noncontrolling interest		(8,516	)					(39,882	)
Comprehensive loss attributable to E2open Parent Holdings, Inc.	$	(81,390	)				$	(248,415	)

See notes to condensed consolidated financial statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Predecessor
(In thousands)	Members' Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Members' Equity
Balance, February 29, 2020	$	433,992		$	(898	)	$	(218,502	)	$	214,592
Investment by member		1,788			—			—			1,788
Unit-based compensation		2,046			—			—			2,046
Comprehensive loss		—			(291	)		—			(291	)
Net loss		—			—			(23,752	)		(23,752	)
Balance, May 31, 2020		437,826			(1,189	)		(242,254	)		194,383
Investment by member		(10	)		—			—			(10	)
Unit-based compensation		1,971			—			—			1,971
Comprehensive loss		—			(55	)		—			(55	)
Net loss		—			—			(17,540	)		(17,540	)
Balance, August 31, 2020		439,787			(1,244	)		(259,794	)		178,749
Investment by member		1,606			—			—			1,606
Unit-based compensation		1,936			—			—			1,936
Comprehensive income		—			403			—			403
Net loss		—			—			(27,067	)		(27,067	)
Balance, November 30, 2020	$	443,329		$	(841	)	$	(286,861	)	$	155,627


	Successor
(In thousands)	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings (Accumulated Deficit)			Treasury Stock			Total E2open Equity			Noncontrolling Interest			Total Equity
Balance, February 28, 2021	$	19	$	2,071,206		$	2,388		$	10,800		$	—		$	2,084,413		$	392,945		$	2,477,358
Share-based compensation		—		2,043			—			—			—			2,043			—			2,043
Other comprehensive income		—		—			1,475			—			—			1,475			—			1,475
Net loss		—		—			—			(142,258	)		—			(142,258	)		(27,097	)		(169,355	)
Balance, May 31, 2021		19		2,073,249			3,863			(131,458	)		—			1,945,673			365,848			2,311,521
Share-based compensation		—		2,509			—			—			—			2,509			—			2,509
Business Combination purchase price adjustment		—		1,666			—			—			—			1,666			1,299			2,965
Conversion of Common Units to common stock		—		27,228			—			—			—			27,228			(43,995	)		(16,767	)
Conversion of Series B-1 shares to common stock		1		174,999			—			—			(2,473	)		172,527			—			172,527
Impact of Common Unit conversions on Tax Receivable Agreement		—		(7,512	)		—			—			—			(7,512	)		—			(7,512	)
Other comprehensive loss		—		—			(6,523	)		—			—			(6,523	)		—			(6,523	)
Net loss		—		—			—			(20,517	)		—			(20,517	)		(3,471	)		(23,988	)
Balance, August 31, 2021		20		2,272,139			(2,660	)		(151,975	)		(2,473	)		2,115,051			319,681			2,434,732
Share-based compensation		—		3,982			—			—			—			3,982			—			3,982
Issuance of common stock for BluJay Acquisition		7		730,847			—			—			—			730,854			—			730,854
Issuance of common stock for BluJay Acquisition PIPE financing, net of offering costs		3		292,897			—			—			—			292,900			—			292,900
Conversion of Common Units to common stock		—		14,498			—			—			—			14,498			(14,498	)		—
Exercise of warrants		—		1			—			—			—			1			—			1
Deferred taxes related to issuance of common stock for BluJay Acquisition				36,805												36,805						36,805
Impact of Common Unit conversions on Tax Receivable Agreement		—		(2,563	)		—			—			—			(2,563	)		—			(2,563	)
Other comprehensive loss		—		—			(25,617	)		—			—			(25,617	)		—			(25,617	)
Net loss		—		—			—			(59,217	)		—			(59,217	)		(5,072	)		(64,289	)
Balance, November 30, 2021	$	30	$	3,348,606		$	(28,277	)	$	(211,192	)	$	(2,473	)	$	3,106,694		$	300,111		$	3,406,805

See notes to condensed consolidated financial statements.

E2open Parent Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Successor			Predecessor
	Nine Months Ended			Nine Months Ended
(In thousands)	November 30, 2021			November 30, 2020
Cash flows from operating activities
Net loss	$	(257,632	)	$	(68,359	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		91,496			51,176
Amortization of deferred commissions		861			3,121
Amortization of debt issuance costs		2,389			3,236
Amortization of operating lease right-of-use assets		8,290			—
Share-based and unit-based compensation		8,534			5,953
Change in tax receivable agreement liability		4,606			—
Loss from change in fair value of warrant liability		48,448			—
Loss from change in fair value of contingent consideration		91,180			—
(Gain) loss on disposal of property and equipment		(233	)		35
Changes in operating assets and liabilities:
Accounts receivable, net		41,847			79,309
Prepaid expenses and other current assets		(7,586	)		(4,765	)
Other noncurrent assets		(4,489	)		(3,048	)
Accounts payable and accrued liabilities		5,871			(4,335	)
Incentive program payable		2,222			12,392
Deferred revenue		19,927			(67,847	)
Changes in other liabilities		(27,549	)		23,186
Net cash provided by operating activities		28,182			30,054
Cash flows from investing activities
Payments for acquisitions - net of cash acquired		(774,232	)		—
Capital expenditures		(24,627	)		(12,048	)
Net cash used in investing activities		(798,859	)		(12,048	)
Cash flows from financing activities
Proceeds from PIPE investment		300,000			—
Offering costs related to issuance of common stock in connection with PIPE investment		(7,100	)		—
Proceeds from sale of membership units		—			3,384
Proceeds from warrant exercise		1			—
Proceeds from indebtedness		395,000			15,574
Repayments of indebtedness		(18,860	)		(21,891	)
Repayments of financing lease obligations		(6,457	)		(5,145	)
Repurchase of common stock		(2,473	)		—
Repurchase of Common Units		(16,767	)		—
Payments of debt issuance costs		(10,357	)		—
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
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	56,462		$	17,132
Restricted cash		15,047			41,325
Total cash, cash equivalents and restricted cash	$	71,509		$	58,457
Supplemental Information - Cash Paid for:
Interest	$	18,461		$	49,898
Income taxes		2,890			1,225
Non-Cash Investing and Financing Activities:
Capital expenditures financed under financing lease obligations	$	—		$	11,076
Capital expenditures included in accounts payable and accrued liabilities		2,376			25
Right-of-use assets obtained in exchange for operating lease obligations		25,825			—
Prepaid software, maintenance and insurance under notes payable		—			892
Conversion of Common Units to Class A Common Stock		41,727			—
Conversion of Series B1 common stock to Class A Common Stock		175,000			—
Business Combination purchase price adjustment		2,965			—
Issuance of common stock for BluJay Acquisition		730,854			—
Deferred taxes related to issuance of common stock for BluJay Acquisition		36,805			—

See notes to condensed consolidated financial statements.

E2open Parent Holdings, Inc.

Notes to 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 (IPO).

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). 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 leading provider of cloud-based, end-to-end supply chain management 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 business-critical nature of our solutions, we maintain deep, long-term relationships with our customers across a wide range of end-markets, including technology, consumer, industrial and transportation, among others.

Basis of Presentation

As a result of the Business Combination, for accounting purposes, the Company is the acquirer and E2open Holdings is the acquiree and accounting predecessor. The financial statement presentation includes the financial statements of E2open Holdings as “Predecessor” for periods prior to the Closing Date and of the Company as “Successor” for the periods after the Closing Date, including the consolidation of E2open Holdings.

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. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2022. For further information, refer to the consolidated financial statements and notes thereto included in our 2021 Form 10-K.

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 in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Financing lease obligation were previously included in current portion of notes payable and capital lease obligations as well as notes payable and capital lease obligations on the Consolidated Balance Sheets. Beginning March 1, 2021, capital lease obligations became financing lease obligations and were presented separately on the Consolidated Balance Sheets. Additionally, financing leases are no longer presented with notes payable in the notes to the financial statements as all leases are presented together in one note. These reclassifications and changes did not affect our net income, total assets, liabilities, equity or cash flows.

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 customer budget cycles and customary European vacation schedules, with higher sales 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

Recently Adopted Accounting Guidance

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The core principle of ASC 842, Leases is that a lessee should recognize the assets and liabilities that arise from leases. For operating leases, a lessee is required to recognize a right-of-use (ROU) asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. This standard is effective for calendar fiscal years beginning after December 15, 2021. Earlier application is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. We adopted this standard as of March 1, 2021 utilizing the modified retrospective approach and elected a set of practical expedients that allowed us not to reassess whether contracts are or contain leases, lease classification or initial direct costs for existing leases. See Note 21, Leases for more information related to our leases.

In October 2018, the FASB issued ASU 2018-17, Consolidated (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. ASU 2018-17 is effective for fiscal years beginning after December 15, 2020, and interim periods within those years. All entities are required to apply this standard retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. We adopted this standard as of March 1, 2021 and it did not have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities such as deferred revenue acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, ASU 2021-08 will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically such amounts were recognized by the acquirer at fair value in acquisition accounting. ASU 2021-08 should be applied prospectively to acquisitions occurring on or after the effective date. ASU 2021-08 is effective for annual periods beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, including in interim periods. We adopted this guidance as part of the BluJay Acquisition, defined below, which resulted in the deferred revenue being recognized under ASC 606 instead of fair value at the acquisition date. There were no other impacts due to the adoption of this guidance on our consolidated financial statements as the BluJay Acquisition was our only acquisition during the nine months ended November 30, 2021.

Recent Accounting Guidance Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (ASC 326), which is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. This standard replaces the existing incurred loss impairment methodology with an approach that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. This standard is effective for the fiscal year beginning after December 15, 2022, and all interim periods within. Early adoption is permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard provides guidance on accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. The amendments in this standard should be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. The standard is effective for fiscal years beginning after December 15, 2021, and interim periods within those years. Earlier application is permitted. We do not expect the adoption of this standard will have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards. The guidance amends certain disclosure requirements that had become redundant, outdated or superseded. Additionally, this guidance amends accounting for the interim period effects of changes in tax laws or rates and simplifies aspects of the accounting for franchise taxes. ASU 2019-12 is effective for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. Management is currently evaluating the effect of these provisions on our financial position and results of operations.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting to simplify the accounting for contract modifications made to replace LIBOR or other reference rates that are expected to be discontinued because of the reference rate reform. The guidance provides optional expediates and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criterion are met. The optional expedients and exceptions can be applied to contract modifications made until December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The amendments in ASU 2021-01 are elective and apply to our debt instruments that may be modified as a result of the reference rate reform. We are continuing to evaluate these standards, as well as the timing of the transition of various rates in our debt instruments affected by reference rate reform.

3. BluJay Acquisition

On May 27, 2021, we entered into a Purchase Agreement with the BluJay Sellers to acquire all the outstanding equity of BluJay. On September 1, 2021 (Acquisition Date), we completed the acquisition of BluJay (BluJay Acquisition). The BluJay Acquisition was accounted for as a business combination under ASC 805, Business Combinations.

The cash consideration in the BluJay Acquisition was provided by $380.0 million in proceeds from the issuance of an incremental term loan, $300.0 million in PIPE financing from institutional investors for the purchase of an aggregate of 28,909,022 shares of our Class A Common Stock and cash on hand. PIPE financing proceeds of $280.0 million were received in advance of the BluJay Acquisition.

The following summarizes the consideration paid for the BluJay Acquisition.


($ in thousands)	Fair Value
Equity consideration paid to BluJay (1)	$	730,854
Cash consideration to BluJay		350,658
Preference share consideration paid to BluJay (2)		86,190
Cash repayment of debt		334,483
Cash paid for seller transaction costs		26,686
Estimated consideration paid for the BluJay Acquisition	$	1,528,871

(1)

Equity consideration paid to BluJay equity holders consisted of the following:


(In thousands, except per share data)	Consideration
Common shares subject to sales restriction		72,383
Fair value per share	$	10.097
Equity consideration paid to BluJay	$	730,854

(2)

Represents the liability and dividends owed related to the BluJay preference shares at the date of the acquisition.

We recorded the preliminary allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values as of the Acquisition Date. The preliminary purchase price allocation is as follows:


($ in thousands)	Fair Value
Cash and cash equivalents	$	23,773
Account receivable, net		33,834
Other current assets		10,352
Property and equipment, net		6,503
Operating lease right-of-use assets		9,018
Intangible assets		484,800
Goodwill (1)		1,152,084
Non-current assets		2,200
Accounts payable		(11,773	)
Current liabilities (2)		(33,530	)
Deferred revenue (3)		(39,283	)
Non-current liabilities		(109,107	)
Total assets acquired and liabilities assumed	$	1,528,871

(1)

Goodwill represents the excess of the purchase price over the estimated fair value of the identifiable net assets acquired in the BluJay Acquisition. Goodwill associated with the BluJay Acquisition is not deductible for tax purposes.

(2)

Current liabilities includes a $2.7 million deferred acquisition liability that was acquired related to a prior acquisition by BluJay. The deferred acquisition liability is a fixed amount that was determined at the closing of the acquisition and payable after a certain period of time. The deferred acquisition liability was paid in December 2021.

(3)

The deferred revenue was recorded under ASC 606 in accordance with ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers; therefore a reduction in deferred revenues related to the estimated fair values of the acquired deferred revenues was not required.

The fair value of the intangible assets is as follows:


($ in thousands)	Useful Lives	Fair Value
Trade name	1	$	3,800
Developed technology (1)	5.9		301,000
Customer relationships (2)	2.5		180,000
Total intangible assets		$	484,800

(1)

The developed technology represents technology developed by BluJay and acquired by E2open, which was valued using the multi-period excess earnings method, a form of the income approach considering technology migration.

(2)

The customer relationships represent the existing customer relationships of BluJay and acquired by E2open that was estimated by applying the with-and-without methodology, a form of the income approach.

The preliminary allocation of the purchase price is based on preliminary valuations performed to determine the fair value of the net assets as of September 1, 2021. This allocation is subject to revision as the assessment is based on preliminary information subject to refinement.

We incurred $33.7 million ($12.1 million as of August 31, 2021) of expenses directly related to the BluJay Acquisition from March 1, 2021 through November 30, 2021 which are included in acquisition-related expense in the Condensed Consolidated Statements of Operations. Included in these expenses were $13.4 million acquisition-related advisory fees which were incurred on the Acquisition Date. In addition, we paid $10.4 million of debt issuance costs associated with the $380.0 million incremental term loan on the Acquisition Date which were capitalized and recorded as a reduction of the outstanding debt balances. At the closing of the BluJay Acquisition, we paid $7.1 million in fees related to the $300.0 million PIPE financing which were recorded as a reduction to the proceeds from the issuance of Class A Common Stock in the Condensed Consolidated Statements of Stockholders' Deficit. Additionally, we paid $26.7 million of acquisition-related advisory fees and other expenses related to the BluJay Acquisition on behalf of BluJay. These expenses were part of the purchase price consideration and not recognized as expense in our or BluJay's Condensed Consolidated Statements of Operations.

Unaudited Pro Forma Operating Results

The following unaudited pro forma combined financial information presents the results of operations as if the Business Combination on February 4, 2021 and BluJay Acquisition happened as of March 1, 2020. The unaudited pro forma results may not necessarily reflect actual results of operations that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma results reflect the step-up amortization adjustments for the fair value of intangible assets acquired, a reduction in revenues related to the estimated fair value of the acquired deferred revenue in the Business Combination, the elimination of historical interest expense incurred by E2open Holdings and BluJay on its debt and the incurrence of interest expense related to the issuance of debt in connection with the Business Combination and BluJay Acquisition, transaction expenses, nonrecurring post-combination compensation expense and the related adjustment to the income tax provision.


	Fiscal Year Ended
($ in millions)	February 28, 2021
Total revenue	$	449.8
Net loss		(216.9	)
Less: Net loss attributable to noncontrolling interest		(27.4	)
Net loss attributable to E2open Parent Holdings, Inc.	$	(189.5	)

Additionally, the Investor Rights Agreement was amended and restated to add certain of BluJay's existing stockholders as parties, including certain affiliates of Francisco Partners and Temasek as well as include a six month lock-up period from September 1, 2021 through February 28, 2022 for certain equity holders of E2open and BluJay. The Investor Rights Agreement also provides Francisco Partners and Temasek the right to nominate one member each to our board of directors. Mr. Deep Shah and Mr. Martin Fichtner became new directors on September 1, 2021.

4. 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, debt repayments, capital expenditures and operating expenses. Our ability to expand and grow our business will depend on many factors, including working capital needs and the evolution of operating cash flows.

We had $56.5 million in cash and cash equivalents as of November 30, 2021. We believe our existing cash and cash equivalents, cash provided by operating activities, and, if necessary, the borrowing capacity of up to $155.0 million available under our 2021 Revolving Credit Facility (see Note 10, Notes Payable) 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.

5. Goodwill

The following table presents the changes in goodwill:


($ in thousands)	Predecessor
Balance, February 28, 2019	$	482,378
Acquisitions:
Amber Road		263,317
Averetek		7,191
Currency translation adjustment		(130	)
Balance, February 29, 2020		752,756
Currency translation adjustment		33
Balance, February 3, 2021	$	752,789


($ in thousands)	Successor
Balance, February 4, 2021 (1)	$	2,628,964
Currency translation adjustment		(318	)
Balance, February 28, 2021		2,628,646
Business Combination purchase price adjustment (2)		4,267
BluJay Acquisition (3)		1,152,084
Currency translation adjustment		(24,861	)
Balance, November 30, 2021	$	3,760,136

(1)

Represents the opening balance of goodwill as of February 4, 2021 due to the Business Combination.

(2)

Consists of the post-closing adjustment of consideration and associated tax adjustments required as part of the merger transaction pursuant to Section 3.5 of the Business Combination Agreement. On July 6, 2021 we issued additional Class A Common Stock and Common Units valued at $3.0 million in total to each E2open Holdings member. Additional tax adjustments were required during the third quarter of fiscal year 2022.

(3)

Represents the goodwill acquired in the BluJay Acquisition as of September 1, 2021 and subsequent purchase price adjustments. See Note 3, BluJay Acquisition for additional information.

6. Intangible Assets, Net

Intangible assets, net consisted of the following:


	Successor
	November 30, 2021
($ in thousands)	Weighted Average Useful Life	Cost		Accumulated Amortized			Net
Indefinite-lived:
Trademark / Trade name	Indefinite	$	109,998	$	—		$	109,998
Definite-lived:
Customer relationships	13.4		477,009		(27,130	)		449,879
Technology	7.3		666,694		(48,777	)		617,917
Content library	10.0		50,000		(4,122	)		45,878
Trade name	1.0		3,689		(849	)		2,840
Total definite-lived			1,197,392		(80,878	)		1,116,514
Total intangible assets		$	1,307,390	$	(80,878	)	$	1,226,512


	Successor
	February 28, 2021
($ in thousands)	Weighted Average Useful Life	Cost		Accumulated Amortized			Net
Indefinite-lived:
Trademark / Trade name	Indefinite	$	109,924	$	—		$	109,924
Definite-lived:
Customer relationships	20.0		300,107		(1,248	)		298,859
Technology	8.5		370,106		(3,621	)		366,485
Content library	10.0		50,000		(417	)		49,583
Total definite-lived			720,213		(5,286	)		714,927
Total intangible assets		$	830,137	$	(5,286	)	$	824,851

Amortization of intangible assets is recorded in cost of revenue and operating expenses in the Condensed Consolidated Statements of Operations. We recorded amortization expense related to intangible assets of $44.5 million and $13.4 million for the three months ended November 30, 2021 and 2020, respectively. We recorded amortization expense related to intangible assets of $75.7 million and $40.8 million for the nine months ended November 30, 2021 and 2020, respectively.

7. Property and Equipment, Net

Property and equipment, net consisted of the following:


	Successor
($ in thousands)	November 30, 2021			February 28, 2021
Computer equipment	$	27,619		$	14,707
Software		32,565			21,141
Furniture and fixtures		3,501			1,828
Leasehold improvements		8,972			7,722
Gross property and equipment		72,657			45,398
Less accumulated depreciation and amortization		(16,879	)		(1,200	)
Property and equipment, net	$	55,778		$	44,198

Computer equipment and software include assets held under financing leases. Amortization of assets held under financing leases is included in depreciation expense. See Note 21, Leases for additional information regarding our financing leases.

Depreciation expense was $6.0 million and $3.9 million for the three months ended November 30, 2021 and 2020, respectively. Depreciation expense was $15.8 million and $10.4 million for the nine months ended November 30, 2021 and 2020, respectively.

8. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following:


	Successor
($ in thousands)	November 30, 2021		February 28, 2021
Accrued compensation	$	43,707	$	34,298
Accrued severance and retention		4,305		349
Trade accounts payable		21,374		17,858
Accrued professional services		4,589		2,938
Restructuring liability		918		1,639
Taxes payable		14,656		1,892
Interest payable		2,205		1,293
Customer deposits		2,020		1,811
Other		18,524		8,155
Total accounts payable and accrued liabilities	$	112,298	$	70,233

9. Tax Receivable Agreement

E2open Holdings entered into a Tax Receivable Agreement with selling equity holders of E2open Holdings that requires us to pay 85% of the tax savings that are realized as a result of increases in the tax basis in E2open Holdings’ assets as a result of the sale of E2open Holdings units and exchange of the E2open Holdings units for shares of Class A Common Stock and cash, as well as certain other tax benefits related to entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these cash savings.

Significant inputs and assumptions were used to initially estimate the future expected payments including the timing of the realization of the tax benefits, a tax rate of 24.1% and an imputed interest rate of 7%. Changes in any of these or other factors are expected to impact the timing and amount of gross payments. The fair value of these obligations will be accreted to the amount of the gross expected obligation. In addition, if we were to exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur, we will be required to make immediate cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made significantly in advance of the actual realization, if any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that we have sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein. The payments that we will be required to make will generally reduce the amount of the overall cash flow that might have otherwise been available, 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.

Pursuant to ASC 805, Business Combination and relevant tax law, we have calculated the fair value of the tax receivable agreement payments related to the transaction at the acquisition date and identified the timing of the utilization of the tax attributes. Under ASC 805, the Tax Receivable Agreement liability, as of the acquisition date, will be revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in the change in tax receivable agreement liability in the Condensed Consolidated Statements of Operations in the period in which the event occurred. Interest will accrue on the tax receivable agreement liability at a rate of LIBOR plus 100 basis points. In addition, under ASC 450, Contingencies 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 Tax Receivable Agreement liability was $67.9 million and $50.1 million as of November 30, 2021 and February 28, 2021, respectively. The increase in the Tax Receivable Agreement liability was due to an increase in the ASC 805 discounted liability of $4.6 million and increase in the ASC 450 liability of $13.2 million during the nine months ended November 30, 2021. The change in the fair value of the discounted liability was $1.5 million and $4.6 million during the three and nine months ended November 30, 2021, respectively, and recorded in change in tax receivable agreement liability on the Condensed Consolidated Statements of Operations.

10. Notes Payable

Notes payable outstanding were as follows:


	Successor
($ in thousands)	November 30, 2021			February 28, 2021
2021 Term Loan	$	901,425		$	525,000
Other notes payable		62			688
Total notes payable		901,487			525,688
Less unamortized debt issuance costs		(24,852	)		(18,483	)
Total notes payable, net		876,635			507,205
Less current portion		(9,112	)		(4,405	)
Notes payable, less current portion, net	$	867,523		$	502,800

2021 Term Loan and Revolving Credit Facility

On February 4, 2021, E2open, LLC, our subsidiary, entered into a credit agreement (Credit Agreement) that provided for $525.0 million in term loans (2021 Term Loan) and $75.0 million in commitments for revolving credit loans (2021 Revolving Credit Facility). On September 1, 2021, the 2021 Credit Agreement was amended to include a $380.0 million incremental term loan, an increase in the letter of credit sublimit from $15.0 million to $30.0 million and an increase in the 2021 Revolving Credit Facility from $75.0 million to $155.0 million. The 2021 Revolving Credit Facility will mature on February 4, 2026. E2open, LLC can request increases in the revolving commitments and additional term loan facilities, in minimum amounts of $2.0 million for each facility. The Credit Agreement was payable in quarterly installments of $1.3 million beginning in August 2021; however, the payments were increased to $2.3 million with the addition of the incremental term loan beginning in November 2021. The Credit Agreement is payable in full on February 4, 2028.

The Credit Agreement is guaranteed by E2open Intermediate, LLC, our subsidiary, and certain wholly owned subsidiaries of E2open, LLC, as guarantors, and is supported by a security interest in substantially all of the guarantors’ personal property and assets. The Credit Agreement contains certain customary events of default, representations and warranties as well as affirmative and negative covenants.

As of November 30, 2021 and February 28, 2021, the 2021 Term Loan had a variable interest rate of 4.00% and 3.69%, respectively, and no outstanding borrowings under the 2021 Revolving Credit Facility. We were in compliance with the First Lien Leverage Ratio for the Credit Agreement as of November 30, 2021 and February 28, 2021.

11. Contingent Consideration

Business Combination

The contingent consideration liability is due to the issuance of Series B-1 and B-2 common stock and Series 1 restricted common units (RCUs) and Series 2 RCUs of E2open Holdings as part of the Business Combination. These shares and units were issued on a proportional basis to each holder of Class A shares in CCNB1 and Common Units of E2open Holdings. These restricted shares and Common Units are treated as a contingent consideration liability under ASC 805 and valued at fair market value. The contingent consideration liability was recorded at fair value on the acquisition date and will be remeasured at each reporting date and adjusted if necessary. Any gain or loss recognized from the remeasurement will be recorded in gain (loss) from the change in fair value of contingent consideration on the Condensed Consolidated Statements of Operations as a nonoperating income (expense) as the change in fair value is not part of our core operating activities.

The contingent consideration liability was $67.0 million and $129.4 million as of November 30, 2021 and February 28, 2021, respectively. The fair value remeasurements resulted in a loss of $1.1 million and $77.5 million for the three and nine months ended November 30, 2021, respectively. There was no gain or loss for the three and nine months ended November 30, 2020 as the contingent consideration liability was not recorded until February 4, 2021.

The 8,120,367 shares of Series B-1 common stock, including the Sponsor Side Letter shares noted below, automatically convert into our Class A Common Stock on a one-to-one basis upon the occurrence of the first day on which the 5-day VWAP of our Class A Common Stock is equal to at least $13.50 per share; provided, however, that the reference to $13.50 per share shall be decreased by the aggregate per share amount of dividends actually paid in respect of a share of Class A Common Stock following the closing of the Business Combination.

As of June 8, 2021, the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share which was the triggering event for the Series B-1 common stock to automatically convert into our Class A Common Stock on a one-to-one basis. As such, 8,120,273 shares of Series B-1 common stock converted into 8,120,273 shares of Class A Common Stock. There were 94 shares of Series B-1 common stock pending conversion as of November 30, 2021.

There were 3,372,184 shares of Series B-2 common stock outstanding as of November 30, 2021. The Series B-2 common stock will automatically convert into our Class A Common Stock on a one-to-one basis upon the occurrence of the first day on which the 20-day VWAP is equal to at least $15.00 per share; provided, however, that the reference to $15.00 per share shall be decreased by the aggregate per share amount of dividends actually paid in respect of a share of Class A Common Stock following the closing of the Business Combination.

The 4,379,557 shares of Series 1 RCUs vest and become Common Units of E2open Holdings at such time as the 5-day VWAP of the Class A Common Stock is at least $13.50 per share; however, the $13.50 per share threshold will be decreased by the aggregate amount of dividends per share paid following the closing of the Business Combination.

As of June 8, 2021, the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share which was the triggering event for the Series 1 RCUs to vest and become Common Units of E2open Holdings. As such, 4,379,557 Series 1 RCUs became 4,379,557 Common Units of E2open Holdings along with entitling the holders of the newly vested common units to 4,379,557 shares of Class V Common Stock. Catch-Up Payments were not required as a result of the Series 1 RCU vesting.

There were 2,627,724 shares of Series 2 RCUs outstanding as of November 30, 2021. The Series 2 RCUs will vest (a) at such time as the 20-day VWAP of the Class A Common Stock is at least $15.00 per share; however, the $15.00 per share threshold will be decreased by the aggregate amount of dividends per share paid following the closing of the Business Combination; (b) upon the consummation of a qualifying change of control of us or the Sponsor and (c) upon the qualifying liquidation defined in the limited liability company agreement.

Upon the conversion of an RCU, the holder of such RCU will be entitled to receive a payment equal to the amount of ordinary distributions paid on an E2open Holdings unit from the Closing Date through (but not including) the date such RCU converts into an E2open Holdings unit. If any of the RCUs do not vest on or before the 10-year anniversary of the Closing Date, such units will be canceled for no consideration, and will not be entitled to receive any Catch-Up Payments.

We have not paid any dividends to date and do not expect to in the future.

Sponsor Side Letter

In connection with the execution of the Business Combination Agreement, the Sponsor, certain investors and CCNB1’s Independent Directors entered into the Sponsor Side Letter Agreement with CCNB1. Under the Sponsor Side Letter Agreement, 2,500,000 Class B ordinary shares of CCNB1 held by the Sponsor and CCNB1’s Independent Directors automatically converted into 2,500,000 shares of Series B-1 Common Stock, which, collectively, are referred to as the Restricted Sponsor Shares. The vesting conditions of the shares of Series B-1 Common Stock mirrored the Series 1 RCUs.

These restricted shares were treated as a contingent consideration liability under ASC 805 and valued at fair market value. The contingent consideration liability was recorded at fair value on the acquisition date and remeasured at each reporting date and adjusted if necessary. Any gain or loss recognized from the remeasurements was recorded in gain (loss) from the change in fair value of contingent consideration on the Condensed Consolidated Statements of Operations as a nonoperating income (expense) as the change in fair value was not part of our core operating activities.

As of June 8, 2021, the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share which was the triggering event for the Sponsor Side Letters shares to automatically convert into our Class A Common Stock on a one-to-one basis. As such, all of the Sponsor Side Letter shares converted into our Class A Common Stock and are included in the 8,120,273 Class A Common Stock discussed above.

The contingent consideration liability was $21.4 million as of February 28, 2021. The fair value remeasurements through June 8, 2021 resulted in a loss of $13.7 million for the nine months ended November 30, 2021. There was no gain or loss for the three and nine months ended November 30, 2020 as the Sponsor Side Letter was not entered into until February 4, 2021.

Averetek

E2open Holdings purchased Averetek, LLC (Averetek) in May 2019. The purchase agreement for Averetek included contingent payments of up to $2.0 million in consideration contingent upon successful attainment of revenue related criteria that extended up to two years subsequent to closing. The earn-out liability was recorded on the acquisition date in acquisition-related obligations on the Condensed Consolidated Balance Sheets and remeasured at each reporting date and adjusted if necessary. At the acquisition date, the fair value of the contingent consideration was $2.0 million. We determined there was no change in fair value of the contingent consideration as of February 28, 2021 or prior to payment. The earn-out liability was earned in May 2021 and paid in July 2021.

12. Fair Value Measurement

Our financial instruments include cash and cash equivalents; investments; accounts receivable, net; accounts payable; acquisition-related obligations; notes payable; and financing lease obligations. Accounts receivable, net; accounts payable; and acquisition-related obligations are stated at their carrying value, which approximates fair value, due to their short maturity. We measure our cash equivalents and investments at fair value, based on an exchange or exit price which represents the amount that would be received for an asset sale or an exit price, or paid to transfer a liability in an orderly transaction between knowledgeable and willing market participants. We estimate the fair value for notes payable and financing lease obligations by discounting the future cash flows of the related note and lease payments. As of November 30, 2021 and February 28, 2021, the fair value of the cash and cash equivalents, restricted cash, notes payable and financing lease obligations approximates their recorded values.

The following tables set forth details about our investments:


($ in thousands)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
November 30, 2021 (Successor)
Asset-backed securities	$	162	$	48	$	—	$	210

February 28, 2021 (Successor)
Asset-backed securities	$	162	$	62	$	—	$	224

Observable inputs are based on market data obtained from independent sources. Unobservable inputs reflect our assessment of the assumptions market participants would use to value certain financial instruments. This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

Our assets and liabilities that are measured at fair value on a recurring basis, by level, within the fair value hierarchy are summarized as follows:


	Successor
	November 30, 2021
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	4	$	—	$	—	$	4
Total cash equivalents		4		—		—		4
Investments:
Asset-backed securities		—		210		—		210
Total investments		—		210		—		210
Total assets	$	4	$	210	$	—	$	214

Liabilities:
Warrant liability	$	47,334	$	—	$	69,886	$	117,220
Contingent consideration		—		—		66,988		66,988
Total liabilities	$	47,334	$	—	$	136,874	$	184,208


	Successor
	February 28, 2021
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market	$	4	$	—	$	—	$	4
Total cash equivalents		4		—		—		4
Investments:
Asset-backed securities		—		224		—		224
Total investments		—		224		—		224
Total assets	$	4	$	224	$	—	$	228

Liabilities:
Acquisition-related obligations	$	—	$	—	$	2,000	$	2,000
Warrant liability		25,806		—		42,966		68,772
Contingent consideration		—		—		150,808		150,808
Total liabilities	$	25,806	$	—	$	195,774	$	221,580

The warrant liability was previously categorized as a Level 3 liability. The public warrants have been valued using publicly traded prices in active markets since the IPO of CCNB1; therefore, the portion of the warrant liability associated with the public markets has been reclassed from Level 3 to Level 1 in the above tables to better reflect its fair value categorization.

Contingent Consideration

The following table provides a reconciliation of the beginning and ending balances of acquisition related accrued earn-outs and contingent consideration using significant unobservable inputs (Level 3):


	Successor
($ in thousands)	November 30, 2021			February 28, 2021
Beginning of period	$	152,808		$	2,000
Acquisition date fair value of contingent consideration		—			184,548
Conversion to Class A Common Stock		(175,000	)		—
Cash payments		(2,000	)		—
Loss (gain) from fair value of contingent consideration		91,180			(33,740	)
End of period	$	66,988		$	152,808

The change in the fair value of the earn-out is recorded in acquisition-related expenses while the change in the fair value of the contingent consideration is recorded in gain (loss) from change in fair value of contingent consideration in the Condensed Consolidated Statements of Operations.

Our warrant liability is measured at fair value on a recurring basis using active market quoted prices (Level 1) and significant unobservable inputs (Level 3). The following table provides a reconciliation of the warrant liability from February 4, 2021 through February 28, 2021 and February 28, 2021 through November 30, 2021:


	Successor
($ in thousands)	November 30, 2021		February 28, 2021
Beginning of period	$	68,772	$	91,959
Loss (gain) from fair value of warrant liability		48,448		(23,187	)
End of period	$	117,220	$	68,772

The change in the fair value of the warrant liability is recorded in gain (loss) from change in fair value of warrant liability in the Condensed Consolidated Statements of Operations.

The fair values of our Level 1 financial instruments, which are traded in active markets, are based on quoted market prices for identical instruments. The fair values of our Level 2 financial instruments are based on quoted market prices for comparable instruments or model-driven valuations using observable market data or inputs corroborated by observable market data.

Our earn-out liabilities and contingent consideration are valued using a Monte Carlo simulation model. The assumptions used in preparing these models include estimates such as volatility, contractual terms, discount rates, dividend yield and risk-free interest rates. These valuation models use unobservable market input, and therefore the liabilities are classified as Level 3.

Our public warrants are valued using active market quoted prices, which are Level 1 imputes. The private placement warrants are valued using a binomial pricing model when the warrants are subject to the make-whole table, or otherwise are valued using a Black-Scholes pricing model. The Forward Purchase Warrants are valued utilizing observable market prices for public shares and warrants, relative to the present value of contractual cash proceeds. The assumptions used in preparing these models include estimates such as volatility, contractual terms, discount rates, dividend yield, expiration dates and risk-free interest rates. These valuation models use unobservable market input, and therefore the liability is classified as both Level 1 and Level 3.

13. Revenue

We generate revenue from the sale of subscriptions and professional services. We recognize revenue when the customer contract and associated performance obligations have been identified, transaction price has been determined and allocated to the performance obligations in the contract, and performance obligations have been satisfied. We recognize revenue net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Total Revenue by Geographic Locations

Revenue by geographic regions consisted of the following:


	Successor		Predecessor		Successor		Predecessor
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
($ in thousands)	November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
Americas	$	110,690	$	81,768	$	248,910	$	239,567
Europe		20,367		1,607		22,989		4,304
Asia Pacific		5,945		706		9,509		5,151
Total revenue	$	137,002	$	84,081	$	281,408	$	249,022

Revenues by geography are determined based on the region of our contracting entity, which may be different than the region of the customer. Americas revenue attributed to the United States was 81% and 97% during the three months ended November 30, 2021 and 2020, respectively. Americas revenue attributed to the United States was 89% and 96% during the nine months ended November 30, 2021 and 2020. No other country represented more than 10% of total revenue during these periods.

As a result of the BluJay Acquisition, additional revenue has been obtained in both our subscriptions and professional services revenue. For the three and nine months ended November 30, 2021, BluJay contributed $40.3 million to subscriptions revenues and $11.4 million to professional services revenue. BluJay's total revenues represent 10% of Americas, 7% of Europe and 1% of Asia Pacific revenue for the nine months ended November 30, 2021.

During the three and nine months ended November 30, 2021, we recorded a $10.4 million and $47.1 million reduction to revenue to amortize the deferred revenue fair value adjustment that resulted from the purchase price allocation in the Business Combination, respectively. With the early adoption of ASU 2021-08, a fair value adjustment to deferred revenue is no longer required; therefore, an adjustment to deferred revenue was not made for the BluJay Acquisition.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the customer is not committed. The customer is not considered committed when they are able to terminate for convenience without payment of a substantive penalty under the contract. Additionally, as a practical expedient of ASC 606, Revenue from Contracts with Customers we have not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. As of November 30, 2021 and February 28, 2021, approximately $730.8 million and $555.7 million of revenue was expected to be recognized from remaining performance obligations, respectively. These amounts are expected to be recognized over the next five years.

Contract Assets and Liabilities

Contract assets primarily represent contractual receivables recognized for performance obligations that have been satisfied but for which amounts have not been billed. Contract assets were $20.6 million and $13.4 million as of November 30, 2021 and February 28, 2021, respectively. Contract liabilities consist of deferred revenue which includes billings in excess of revenue recognized related to subscription contracts and professional services. Deferred revenue is recognized as revenue when we perform under the contract. Deferred revenue was $149.4 million and $90.2 million as of November 30, 2021 and February 28, 2021, respectively. Revenue recognized during the three and nine months ended November 30, 2021, included in deferred revenue on the Condensed Consolidated Balance Sheets as of February 28, 2021, was $26.4 million and $73.8 million, respectively.

As of February 4, 2021, a fair value adjustment of $60.7 million was recorded to reduce our deferred revenue to its fair value as part of the Business Combination. As deferred revenue is recognized, any fair value adjustment related to the deferred revenue is also recognized as a reduction to revenue. As of November 30, 2021 and February 28, 2021, the fair value adjustment to reduce deferred revenue as part of the Business Combination was $6.9 million and $54.0 million, respectively. With the early adoption of ASU 2021-08, a fair value adjustment to deferred revenue is no longer required; therefore, an adjustment to deferred revenue was not made for the BluJay Acquisition.

Sales Commissions

With the adoption of ASC 606 and ASC 340-40, Contracts with Customers as of March 1, 2019, we began deferring and amortizing sales commissions that are incremental and directly related to obtaining customer contracts. As part of the Business Combination in February 2021, the prepaid commissions were revalued resulting in a reduced balance on the Condensed Consolidated Balance Sheets and lower amortization expense during fiscal year 2022 as compared to fiscal year 2021.

Amortization expense of $0.5 million and $1.1 million was recorded in sales and marketing expense in the Condensed Consolidated Statements of Operations for the three months ended November 30, 2021 and 2020, respectively. Amortization expense of $0.9 million and $3.1 million was recorded in sales and marketing expense for the nine months ended November 30, 2021 and 2020, respectively. Certain sales commissions that would have an amortization period of less than a year are expensed as incurred in sales and marketing expense. As of November 30, 2021 and February 28, 2021, we had a total of $8.9 million and $1.6 million of capitalized sales commissions included in prepaid expenses and other current assets and other noncurrent assets in the Condensed Consolidated Balance Sheets, respectively.

14. Severance and Exit Costs

In connection with acquisitions, we conducted post-acquisition related operational reviews to reallocate resources to strategic areas of the business. The operational reviews resulted in workforce reductions, certain real estate leases that were vacated and other expenses. Severance and exit costs included in acquisition-related expenses in the Condensed Consolidated Statements of Operations were as follows:


	Successor		Predecessor		Successor		Predecessor
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
($ in thousands)	November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
Severance	$	4,545	$	303	$	5,199	$	1,963
Lease exits		767		1,586		1,583		2,590
Total severance and exit costs	$	5,312	$	1,889	$	6,782	$	4,553

Included in accounts payable and accrued liabilities as of November 30, 2021 and February 28, 2021 is a restructuring liability, primarily consisting of lease related obligations, of $0.9 million and $1.6 million, respectively, and a restructuring severance liability of $4.3 million and $0.3 million, respectively. We expect these amounts to be substantially paid within the next 12 months.

The following table provides a reconciliation of the severance and exit cost accruals from February 4, 2021 through February 28, 2021 and February 28, 2021 through November 30, 2021 :


	Successor
($ in thousands)	November 30, 2021			February 28, 2021
Beginning of period	$	1,988		$	3,730
Payments		(2,967	)		(6,463	)
Impairment of right-of-use assets		(580	)		—
Expenses		6,782			4,721
End of period	$	5,223		$	1,988

15. Warrants

As of November 30, 2021 and February 28, 2021, there were an aggregate of 29,079,872 and 29,079,972 warrants outstanding, respectively, which include the public warrants, private placement warrants and Forward Purchase Warrants. Each warrant entitles its holders to purchase one share of Class A Common Stock at an exercise price of $11.50 per share. The private placement warrants became exercisable with the Domestication. The Forward Purchase Warrants became exercisable upon effectiveness of our Form S-1 which was initially filed on March 5, 2021 and deemed effective on March 29, 2021. The public warrants became exercisable on April 28, 2021. The public warrants, private placement warrants and Forward Purchase Warrants will expire five years after the Closing Date, or earlier upon redemption or liquidation. Once the warrants became exercisable, we have the option to redeem the outstanding warrants when various conditions are met, such as specific stock prices, as detailed in the specific warrant agreements. However, the 10,280,000 private placement warrants are nonredeemable so long as they are held by our Sponsor or its permitted transferees. The warrants are recorded as a liability in warrant liability on the Condensed Consolidated Balance Sheets with a balance of $117.2 million and $68.8 million as of November 30, 2021 and February 28, 2021, respectively. During the three and nine months ended November 30, 2021, a loss of $7.2 million and $48.4 million was recognized in gain (loss) from change in fair value of the warrant liability in the Condensed Consolidated Statements of Operations, respectively. During November 2021, 100 warrants were exercised with a total exercise price of $1,150.

16. Stockholders’ Equity

Class V Common Stock

We were authorized to issue 40,000,000 Class V common stock with a par value of $0.0001 per share. As of August 19, 2021, the number of shares authorized for issuance was increased to 42,747,890 Class V common stock with a par value of $0.0001. These shares have no economic value but entitle the holder to one vote per share. The holders of Common Units are entitled to Class V common stock on a one for one basis.

The following table reflects the changes in our outstanding stock:


	Class A			Class V			Series B-1			Series B-2
Balance, February 28, 2021		187,051,142			35,636,680			8,120,367			3,372,184
Conversion of Series B-1 common stock (1)		8,120,273			—			(8,120,273	)		—
Conversion of Series 1 RCUs (2)		—			4,379,557			—			—
Business Combination post-close adjustment issuance (3)		133,322			92,690			—			—
Issuance of common stock for BluJay Acquisition (4)		72,383,299			—			—			—
Issuance of common stock for BluJay Acquisition PIPE financing (5)		28,909,022			—			—			—
Conversion of Common Units (6)		3,817,867			(5,426,492	)		—			—
Exercise of warrants (7)		100			—			—			—
Repurchase shares (8)		(176,654	)		—			—			—
Balance, November 30, 2021		300,238,371			34,682,435			94			3,372,184

(1)

(2)

As of June 8, 2021, the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share which was the triggering event for the Series 1 restricted common units to automatically convert into Common Units and the holders receive one share of Class V Common Stock. See Note 11, Contingent Consideration for additional information.

(3)

On July 6, 2021, pursuant to Section 3.5 of the Business Combination Agreement, we issued additional Class A Common Stock and Common Units valued in total at $3.0 million to each E2open Holdings member as part of the post-closing adjustment of consideration required as part of the merger transaction.

(4)

On September 1, 2021, we issued 72,383,299 shares of Class A Common Stock as part of the purchase consideration for the BluJay Acquisition.

(5)

On September 1, 2021, 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 in connection with the BluJay Acquisition.

(6)

Class A Common Stock issued for the conversion of Common Units settled in stock. During the nine months ended November 30, 2021, we paid $16.8 million in cash for the repurchase of 1,619,864 Common Units that were converted into cash instead of stock at our option. Class V Common Stock is retired when Common Units are converted into Class A Common Stock or settled in cash. As a result of Common Unit conversions prior to August 19, 2021, 11,239 Class V Common Stock related to Common Unit conversions to Class A Common Stock were not issued and subsequently retired due to the limitation of authorized shares.

(7)

On November 19, 2021, 100 warrants were exercised at $11.50 per warrant and converted into 100 shares of Class A Common Stock.

(8)

On July 13, 2021, our board of directors waived the Lock-up Period solely in respect of withholding shares to cover taxes upon the issuance of Class A Common Stock to the executive officers upon the conversion of the Series B-1 and Series B-2 common stock. The shares were repurchased at an average price of $14.00 per share, or $2.5 million, to cover withholding taxes associated with the Series B-1 conversion to Class A Common Stock. See Note 11, Contingent Consideration for additional details on the conversions.

See Note 3, BluJay Acquisition for information regarding additional Class A Common Stock issuances and the lock-up period.

Membership Units

Prior to the Business Combination, E2open Holdings had three classes of units: Class A, Class A-1 and Class B. Class A units were the only units with voting rights. Holders of Class A and Class A-1 units were entitled to priority distributions until each unit received $1.00 per unit. Remaining distributions, if any, were made pro rata to all units. Class B units were incentive, profit-interest units issued to management, which participated as long as E2open Holdings made distributions to any Class A units equal to the participation level of the applicable Class B units.

During the nine months ended November 30, 2020, we received $3.4 million in proceeds from the sale of membership units.

17. Noncontrolling Interests

Noncontrolling interest represents the portion of E2open Holdings that we control and consolidate but do not own. As of November 30, 2021 and February 28, 2021, the noncontrolling interests represent a 10.4% and 16.0% ownership in E2open Holdings, respectively.

Generally, common units of E2open Holdings participate in net income or loss allocations and distributions and entitle their holder to the right, subject to the terms set forth in the limited liability agreement, to require E2open Holdings to redeem all or a portion of the common units held by such participant. At our option, we may satisfy this redemption with cash or by exchanging Class V Common Stock for our Class A Common Stock on a one-for-one basis.

On June 8, 2021, the 4,379,557 Series 1 RCUs vested and became Common Units along with entitling the holders of the newly vested common units to 4,379,557 shares of Class V Common Stock.

On July 6, 2021, pursuant to Section 3.5 of the Business Combination Agreement, we issued 103,929 additional Common Units in total to each E2open Holdings member in a pro rata amount reflecting the number of Common Units they received at the closing of the Business Combination as part of the post-closing adjustment as consideration required as part of the merger transaction.

As part of the Business Combination, certain individuals were party to the Lock-Up Period which expired on August 4, 2021. As a result, 1,194,458 and 3,817,867 Common Units were converted into Class A Common Stock with a value of $14.5 million and $41.7 million based off the 5-day VWAP for the three and nine months ended November 30, 2021, respectively. Additionally, 1,619,864 Common Units were settled with the payment of $16.8 million of cash during the nine months ended November 30, 2021. No Common Units were settled in cash during the three months ended November 30, 2021. This activity resulted in a decrease to noncontrolling interests of $14.5 million and $58.5 million during the three and nine months ended November 30, 2021, respectively.

See Note 24, Subsequent Events for information on additional Common Unit conversions.

As part of the BluJay Acquisition, certain individuals who are parties to the Investor Rights Agreements entered into a new lock-up period that will expire on February 28, 2022.

As of November 30, 2021 and February 28, 2021, there were a total of 34.7 million and 35.6 million Common Units held by participants of E2open Holdings, respectively.

We follow the guidance issued by the FASB regarding the classification and measurement of redeemable securities. Accordingly, we have determined that the common units meet the requirements to be classified as permanent equity.

18. Other Comprehensive (Loss) Income

We did not reclass any items to the Condensed Consolidated Statements of Operations from accumulated other comprehensive (loss) income during the three and nine months ended November 30, 2021 and 2020.

Accumulated other comprehensive (loss) income in the equity section of our Condensed Consolidated Balance Sheets includes:


	Successor
($ in thousands)	November 30, 2021			February 28, 2021
Foreign currency translation adjustment	$	(28,277	)	$	2,388
Accumulated other comprehensive (loss) income	$	(28,277	)	$	2,388

19. Earnings Per Share

Basic earnings per share is calculated as net income divided by the average number of shares of common stock outstanding. Diluted earnings per share assumes, when dilutive, the issuance of the net incremental shares from options and restricted shares. The following is a reconciliation of the denominators of the basic and diluted per share computations for net income:


	Successor
	Three Months Ended			Nine Months Ended
(in thousands, except per share data)	November 30, 2021			November 30, 2021
Net loss per share:
Numerator - basic:
Net loss per share:	$	(64,289	)	$	(257,632	)
Less: Net loss attributable to noncontrolling interests		(5,072	)		(35,640	)
Net loss attributable to E2open Parent Holdings, Inc. - basic	$	(59,217	)	$	(221,992	)

Numerator - diluted:
Net loss attributable to E2open Parent Holdings, Inc. - basic	$	(59,217	)	$	(221,992	)
Add: Net loss and tax effect attributable to noncontrolling interests		—			—
Net loss attributable to E2open Parent Holdings, Inc. - diluted	$	(59,217	)	$	(221,992	)

Denominator - basic:
Weighted average shares outstanding - basic		308,132			227,186
Net income per share - basic	$	(0.19	)	$	(0.98	)

Denominator - diluted:
Weighted average shares outstanding - basic		308,132			227,186
Weighted average effect of dilutive securities:
Shares related to Common Units		—			—
Weighted average shares outstanding - diluted		308,132			227,186
Diluted net income per common share	$	(0.19	)	$	(0.98	)

Potential common shares issuable to employee or directors upon exercise or conversion of shares under our share-based compensation plans are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders.

The following table summarizes the weighted-average potential common shares excluded from diluted loss per common share as their effect would be anti-dilutive:


	Successor
	Three Months Ended		Nine Months Ended
	November 30, 2021		November 30, 2021
Shares related to Series B-1 common stock		94		60
Shares related to Series B-2 common stock		3,372,184		3,372,184
Shares related to restricted common units Series 2		2,627,724		2,627,724
Shares related to warrants (1)		29,079,959		29,079,968
Shares related to Common Units		34,885,501		36,404,078
Shares related to options		2,573,978		2,533,856
Shares related to restricted stock		2,243,739		1,513,856
Units/Shares excluded from the dilution computation		74,783,179		75,531,726

(1)

The warrants include the public warrants, private placement warrants and Forward Purchase Warrants.

20. Share-Based and Unit-Based Compensation

2021 Incentive Plan

The E2open Parent Holdings, Inc. 2021 Omnibus Incentive Plan (2021 Incentive Plan) became effective on the Closing Date with the approval of CCNB1’s shareholders and the board of directors. The 2021 Incentive Plan allows us to make equity and equity-based incentive awards to officers, employees, directors and consultants. There are 15,000,000 shares of Class A Common Stock reserved for issuance under the 2021 Incentive Plan which can be granted as stock options, restricted stock awards, restricted stock units, performance stock awards, cash awards and other equity-based awards. No award may vest earlier than the first anniversary of the date of grant, expect under limited conditions. The 2021 Incentive Plan replaced the 2015 Plan and 2015 Restricted Plan, as defined below.

Our board of directors have approved the grant of options and RSUs under the 2021 Incentive Plan.

Currently, all options are performance based and are measured based on obtaining an organic growth target over a one-year period with a quarter of the options vesting at the end of the performance period and the remaining options vesting equally over the following three years. Our executive officers and senior management have been granted these performance based options. The performance target was originally set at 100%. In November 2021, the performance target was reviewed with a best estimate adjusted made for exceeding the 100% target. The probability of meeting the performance target is remeasured each quarter and adjusted as needed.

The RSUs are either performance based or time based. The performance based RSUs are measured based on obtaining an organic growth target over a one-year period with a quarter of the options vesting at the end of the performance period and the remaining RSU's vesting equally over the following three years. The performance target was originally set at 100%. In November 2021, the performance target was reviewed with a best estimate adjustment made for exceeding the 100% target. The probability of meeting the performance target is remeasured each quarter and adjusted as needed. The time based RSUs for executive officers, senior management and employees vest ratably over a three-year period while the time based RSUs for non-employee directors of our board of directors have a one-year vesting period. As of November 30, 2021, there are 912,832 unvested performance based RSUs and 1,340,647 unvested time based RSUs.

As of November 30, 2021, there were 10,188,963 shares of Class A Common Stock available for grant under the 2021 Incentive Plan.

Activity under the 2021 Incentive Plan related to options was as follows:


	Successor
	Number of Shares (in thousands)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in years)
Balance, February 28, 2021		—		$	—		—
Granted		2,583			9.86
Forfeited		(26	)		10.86
Balance, November 30, 2021		2,557		$	9.85		9.3

As of November 30, 2021, there was $4.7 million of unrecognized compensation cost related to unvested options.

Activity under the 2021 Incentive Plan related to RSUs was as follows:


	Successor
	Number of Units (in thousands)			Weighted Average Grant Date Fair Value Per Unit		Weighted Average Remaining Recognition Period (in years)
Balance, February 28, 2021		—		$	—		—
Granted		2,408			12.70
Forfeited		(155	)		12.87
Balance, November 30, 2021		2,253		$	12.69		2.9

As of November 30, 2021, there was $24.0 million of unrecognized compensation cost related to unvested RSUs.

The estimated grant-date fair values of the options granted during the nine months ended November 30, 2021 were calculated using the Black-Scholes option-pricing valuation model, based on the following assumptions:


Expected term (in years)		6.25
Expected equity price volatility		46.39% - 46.65%
Risk-free interest rate		0.96% - 1.12%
Expected dividend yield		0%

See Note 24, Subsequent Events for information related to additional RSU grants.

Prior to the Business Combination, we had unit-based compensation plans that authorized (a) the discretionary granting of unit options and (b) the discretionary issuance of non-vested restricted units.

Unit Options

In 2015, E2open Holdings adopted the 2015 Unit Option Plan (2015 Plan). Under the 2015 Plan, E2open Holdings issued Series A unit options to certain employees eligible to participate in E2open Holdings unit option plan. The options issued under the 2015 Plan were subject to certain transfer restrictions and were initially deemed unvested. With respect to options issued to certain employees, options either vested 25% in the first year, and quarterly thereafter over a four-year period (Time-Based Units) or based upon an exit event (Exit-Based Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the employee’s continued employment with the E2open Holdings.

Fair value of the unit options was determined on the date of grant using a pricing model affected by E2open Holdings’ unit price, as well as by certain assumptions including E2open Holdings’ expected equity price volatility over the term of the awards, actual and projected employee option exercise behavior, risk-free interest rates and expected dividends. E2open Holdings did not grant any new options during the periods from March 1, 2020 through February 3, 2021.

E2open Holdings was authorized to issue 46.0 million unit options under the 2015 Plan. As of February 3, 2021, outstanding unit options were 19.9 million. Unit options available for grant were 2.7 million as of February 3, 2021; however, the 2015 Plan was terminated as part of the Business Combination.

Activity under E2open Holdings’ unit option plan was as follows:


	Predecessor
	Number of Units (in thousands)			Weighted Average Exercise Price Per Unit		Weighted Average Term (in years)
Balance, February 29, 2020		22,001		$	1.51		1.9
Exercised		(1,350	)		1.45
Forfeited		(645	)		1.65
Balance, November 30, 2020		20,006		$	1.51		1.2

As of February 3, 2021, there was $2.4 million of unrecognized compensation cost which was expected to be recognized over a weighted-average period of 1.1 year. The weighted-average contractual life of options outstanding was 6.7 years and the weighted-average contractual life of options exercisable was 6.4 years as of February 3, 2021.

We did not recognize any compensation expense for Exit-Based units for the three and nine months ended November 30, 2020 as these awards were not probable of vesting during these time periods.

On January 24, 2021, the board of directors accelerated the vesting of all unvested unit options outstanding under the 2015 Plan as of the completion of the Business Combination on February 4, 2021.

Restricted Equity Plan

In 2015, E2open Holdings established the 2015 Restricted Equity Plan (2015 Restricted Plan) that was adopted for certain officers eligible to participate in the 2015 Restricted Plan. The units issued under the 2015 Restricted Plan were subject to certain transfer restrictions and were initially deemed unvested. With respect to units issued to certain officers, Class B units either vested 25% annually over a four-year period (Time-Based Units) or based upon an exit event (Exit-Based Units). The vesting of both the Time-Based Units and Exit-Based Units were subject to the employee’s continued employment with E2open Holdings. E2open Holdings authorized 32.0 million units under the 2015 Restricted Plan. As of February 3, 2021 and February 29, 2020, outstanding restricted units were 22.0 million. No restricted units were available for grant as of February 3, 2021. The 2015 Restricted Plan was terminated as part of the Business Combination.

Activity under E2open Holdings’ 2015 Restricted Plan was as follows:


	Predecessor
	Number of Units (in thousands)			Weighted Average Grant Date Fair Value Per Unit		Weighted Average Remaining Term (in years)
Balance, February 29, 2020		8,955		$	1.40		1.5
Released		(2,893	)		1.48
Balance, November 30, 2020		6,062		$	1.49		0.5

The aggregate fair value of units vested during the three and nine months ended November 30, 2020 was $1.0 million and $2.9 million, respectively. Unrecognized compensation expense related to the Class B units was $5.4 million as of the February 3, 2021, which was expected to be recognized over a weighted-average period of approximately one year. E2open Holdings did not recognize any compensation expense for Exit-Based Units for the three and nine months ended November 30, 2020.

On January 24, 2021, the board of directors accelerated the vesting of all unvested unit options outstanding under the 2015 Restricted Plan as of the completion of the Business Combination on February 4, 2021.

The table below sets forth the functional classification in the Condensed Consolidated Statements of Operations of our equity-based compensation expense:


	Successor		Predecessor		Successor		Predecessor
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
($ in thousands)	November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
Cost of revenue	$	399	$	181	$	856	$	406
Research and development		648		265		1,345		557
Sales and marketing		727		255		1,487		631
General and administrative		2,208		1,235		4,846		4,359
Total share-based and unit-based compensation	$	3,982	$	1,936	$	8,534	$	5,953

21. Leases

Effective March 1, 2021, we began accounting for leases in accordance with ASC 842, Leases, which requires lessees to recognize lease liabilities and ROU assets on the balance sheet for most operating leases. Prior to March 1, 2021, we accounted for leases in accordance with ASC 840, Leases, under which operating leases were not recorded on the balance sheet.

We made the accounting policy election not to apply the recognition provisions of ASC 842 to short-term leases which are leases with a lease term of 12 months or less. Instead, we will recognize the lease payments for short-term leases on a straight-line basis over the lease term. We currently do not have any short-term leases.

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. The lease liability is calculated based on the remaining minimum rental payments under current leasing standards for existing operating leases and the ROU asset is calculated the same as the lease liability, reduced for a $0.6 million impairment related to an office lease we had exited as of February 28, 2021. We did not include any optional extension periods or cancelations in the valuation.

Operating lease liabilities reflect our obligation to make future lease payments for real estate locations. Lease terms are comprised of contractual terms. Payments are discounted using the rate we would pay to borrow amounts equal to the lease payments over the lease term (our incremental borrowing rate). We do not separate lease and non-lease components for contracts in which we are the lessee. ROU assets are measured based on lease liabilities adjusted for incentives and timing differences between operating lease expense and payments, recognized on a straight-line basis over the lease term. Operating lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are recognized as incurred. Common area maintenance and other executory costs are the main components of variable lease payments. Operating and variable lease expenses are recorded in general and administrative expense in the Condensed Consolidated Statements of Operations.

Real Estate Leases

We lease our primary office space under non-cancelable operating leases with various expiration dates through August 2029. Many of our leases have an option to be extended from two to five years, and several of our leases give us the right to cancel early with proper notification. Additionally, we have a sublease on one of our office leases.

Several of the operating lease agreements require us to provide security deposits. As of November 30, 2021, and February 28, 2021, lease deposits were $3.5 million and $2.9 million, respectively. The deposits are generally refundable at the expiration of the lease, assuming all obligations under the lease agreement have been met. Deposits are included in prepaid and other current assets and other noncurrent assets in the Condensed Consolidated Balance Sheets.

Vehicle Leases

We lease vehicles under non-cancelable operating lease arrangements which have various expiration dates through June 2025. We do not have the right to purchase the vehicles at the end of the lease term.

Equipment Leases

We purchase equipment under non-cancelable financing lease arrangements related to software and computer equipment and have various expiration dates through October 2023. We have the right to purchase the software and computer equipment anytime during the lease or upon lease completion.

Balance Sheet Presentation

The following tables presents the amounts and classifications of our estimated ROU assets, net and lease liabilities:


		Successor
($ in thousands)	Balance Sheet Location	November 30, 2021
Operating lease right-of-use assets	Operating lease right-of-use assets	$	26,553
Finance lease right-of-use asset	Property and equipment, net		4,400
Total right-of-use assets		$	30,953


		Successor
($ in thousands)	Balance Sheet Location	November 30, 2021
Operating lease liability - current	Current portion of operating lease obligations	$	6,626
Operating lease liability	Operating lease obligations		20,784
Finance lease liability - current	Current portion of finance lease obligations		2,329
Finance lease liability	Finance lease obligations		2,093
Total lease liabilities		$	31,832

Lease Cost and Cash Flows

The following table summarizes our total lease cost:


	Successor
	Three Months Ended			Nine Months Ended
($ in thousands)	November 30, 2021			November 30, 2021
Finance lease cost:
Amortization of right-of-use asset	$	717		$	2,308
Interest on lease liability		79			496
Finance lease cost		796			2,804
Operating lease cost:
Operating lease cost		1,008			3,500
Variable lease cost		2,022			4,001
Sublease income		(189	)		(722	)
Operating net lease cost		2,841			6,779
Total net lease cost	$	3,637		$	9,583

We currently do not have any short-term leases.

Rent expense for the three and nine months ended November 30, 2020 was $1.7 million and $5.9 million which was recognized under ASC 840, Leases.

Supplemental cash flow information related to leases was as follows:


	Successor
	Nine Months Ended
($ in thousands)	November 30, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases	$	5,272

The following table presents the weighted-average remaining lease terms and discount rates of our leases:


	Successor
	Nine Months Ended
	November 30, 2021
Weighted-average remaining lease term (in years):
Finance lease		1.58
Operating lease		4.29
Weighted-average discount rate:
Finance lease		9.20	%
Operating lease		4.40	%

Lease Liability Maturity Analysis

The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities as of November 30, 2021:


($ in thousands)	Operating Leases			Finance Leases
December 1, 2021 to February 28, 2022	$	2,737		$	385
2023		8,200			2,272
2024		6,932			2,105
2025		4,859			—
2026		3,020			—
Thereafter		4,121			—
Total		29,869			4,762
Less: Present value discount		(2,459	)		(340	)
Lease liabilities	$	27,410		$	4,422

Future minimum lease payments under non-cancelable operating leases as of February 28, 2021, prior to the adoption of the new lease standard discussed in Note 1, Organization and Description of Business were as follows for the fiscal years ended:


($ in thousands)	Amount
2022	$	8,507
2023		6,540
2024		5,555
2025		4,204
2026		3,218
Thereafter		5,434
Total minimum lease payments	$	33,458

22. Income Taxes

We calculate the provision for income taxes during interim periods by applying an estimate of the forecasted annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss or loss excluding unusual or infrequently occurring discrete items) for the reporting period. Our provision for income taxes was a benefit of $10.8 million, or negative 14.3%, for the three months ended November 30, 2021 compared to an expense of $9.7 million, or 55.7%, for the three months ended November 30, 2020. Our provision for income taxes was a benefit of $3.4 million, or negative 1.3%, for the nine months ended November 30, 2021 compared to an expense of $24.1 million, or 54.4%, for the nine months ended November 30, 2020.

The change in the provision for income taxes for the three and nine months ended November 30, 2021 as compared to the three and nine months ended November 30, 2020 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 the 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.

As of November 30, 2021 and February 28, 2021, total gross unrecognized tax benefits were $2.7 million. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of November 30, 2021 and February 28, 2021, the total amount of gross interest and penalties accrued was $0.3 million which is classified as other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

23. Commitments and Contingencies

From time to time, we are subject to contingencies that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any such contingencies will have a material adverse effect upon our Condensed Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.

24. Subsequent Events

On December 8, 2021, 1,121,596 Common Units were converted into an equivalent number of Class A Common Stock with a value of $13.2 million based off the 5-day VWAP.

On January 1, 2022, certain executives and management were granted an aggregate of 33,301 RSUs with a grant date fair value of $11.26 per share. All of these RSUs are service based which will vest ratably over a three-year period.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This item contains a discussion of our business, including a general overview of our business, results of operations, liquidity and capital resources and quantitative and qualitative disclosures about market risk.

The following discussion should be read in conjunction with Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K and the unaudited condensed financial statements and related notes beginning on page 5. This Item 2 contains “forward looking” statements that involve risks and uncertainties. See Forward-Looking Statements at the beginning of this Quarterly Report.

Overview

We are a leading provider of cloud-based, end-to-end SCM software. Our software combines networks, data and applications to provide a deeply embedded, mission-critical platform that allows customers to optimize their supply chain by accelerating growth, reducing costs, increasing visibility and driving improved resiliency. Given the mission-critical nature of our solutions, we maintain deep, long-term relationships with our customers, which is reflected by our gross retention and customer tenure.

Recent Events

On September 1, 2021, we completed the BluJay Acquisition with the issuance of 72,383,299 shares of Class A Common Stock to the BluJay Sellers and the payment of $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.

Results of Operations

The following table is our Condensed Consolidated Statements of Operations for the periods indicated:


	Successor			Predecessor			Successor			Predecessor
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 2021			November 30, 2020			November 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 Holdings, Inc. Class A common 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 from E2open.

Three Months Ended November 30, 2021 compared to Three Months Balance at November 30, 2020

Revenue


	Successor			Predecessor
	Three Months Ended			Three Months Ended
($ in thousands)	November 30, 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 ended November 30, 2021, a $36.6 million, or 52%, increase compared to subscriptions revenue of $70.4 million for the three months ended November 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 ended November 30, 2021, a $16.3 million increase compared to $13.7 million for the three months ended November 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
($ in thousands)	November 30, 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	%

Cost of subscriptions was $30.2 million for the three months ended November 30, 2021, a $14.6 million, or 94%, increase compared to $15.6 million for the three months ended November 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 ended November 30, 2021, a $6.2 million, or 55%, increase compared to $11.3 million for the three months ended November 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 ended November 30, 2021, a $20.1 million increase compared to $4.9 million for the three months ended November 30, 2020, driven primarily by the revaluation and change in the composition of the intangible assets as part of the Business Combination in February 2021 and the BluJay Acquisition in September 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
($ in thousands)	November 30, 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 ended November 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
($ in thousands)	November 30, 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 ended November 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.

General and Administrative


	Successor			Predecessor
	Three Months Ended			Three Months Ended
($ in thousands)	November 30, 2021			November 30, 2020			$ Change		% Change
General 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 ended November 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
($ in thousands)	November 30, 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 ended November 30, 2021, a $27.2 million increase compared to $6.0 million for the three months ended November 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 ended November 30, 2021, an $11.0 million increase, compared to $8.5 million for the three months ended November 30, 2020. The increase was a result of the BluJay Acquisition in September 2021 partially offset by the revaluation and change in the composition of the intangible assets associated with the Business Combination in February 2021.

Interest and Other Expense, Net


	Successor			Predecessor
	Three Months Ended			Three Months Ended
($ in thousands)	November 30, 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 ended November 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 ended November 30, 2021 was $3.1 million.

Loss from Change in Fair Value of Warrant Liability

We recorded a loss of $7.2 million during the three months ended November 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 ended November 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
($ in thousands)	November 30, 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 ended November 30, 2021, a $57.7 million increase compared to $17.4 million for the three months ended November 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 ended November 30, 2021 compared to a $9.7 million expense for the three 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 s 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 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 Ended November 30, 2021 compared to Nine Months Ended November 30, 2020

Revenue


	Successor			Predecessor
	Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 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	%

Subscriptions revenue was $219.7 million for the nine months ended November 30, 2021, a $10.7 million, or 5%, increase compared to subscriptions revenue of $209.0 million for the nine months ended November 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 ended November 30, 2021, a $21.7 million, or 54%, increase compared to $40.0 million for the nine months ended November 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
($ in thousands)	November 30, 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.

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
($ in thousands)	November 30, 2021			November 30, 2020			$ Change		% Change
Research 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 ended November 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
($ in thousands)	November 30, 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 ended November 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 in February 2021.

General and Administrative


	Successor			Predecessor
	Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 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 ended November 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

Acquisition and other related expenses were $50.2 million for the nine months ended November 30, 2021, a $38.8 million increase compared to $11.4 million for the nine months ended November 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 ended November 30, 2021, a $1.5 million, or 6%, increase, compared to $25.4 million for the nine months ended November 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 in February 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 ended November 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 ended November 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 ended November 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 ended November 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 on June 8, 2021. We did not have restricted Series B-1 and B-2 common stock prior to the Business Combination.

Provision for Income Taxes


	Successor			Predecessor
	Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 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 with U.S. GAAP. We believe these non-GAAP measures are useful in evaluating our operating performance, as they are similar to measures reported by our public competitors and are regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. These non-GAAP measures are not intended to be a substitute for any U.S. GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We calculate and define Non-GAAP revenue and subscriptions revenue excluding amortization of the deferred revenue fair value adjustment related to the purchase price allocation in the Business Combination. We calculate and define Non-GAAP gross profit as gross profit excluding amortization of the deferred revenue fair value adjustment, depreciation and amortization, share-based compensation and certain other non-cash and non-recurring items. We define and calculate 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 with U.S. GAAP because they are non-recurring (for example, in the case of transaction-related costs and amortization of the deferred revenue fair value adjustment), non-cash (for example, in the case of depreciation, amortization, changes in the tax receivable agreement liability, (gain) loss from changes in the fair value of the warrant liability and contingent consideration, share-based compensation and amortization of the deferred revenue fair value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense). There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in the U.S. GAAP financial presentation. The items excluded from U.S. GAAP financial measures such as net income or loss to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. As a result, non-GAAP financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with U.S. GAAP.

The table below presents our Non-GAAP revenue reconciled to our reported revenue, the closest U.S. GAAP measure, for the periods indicated:


	Successor		Predecessor		Successor		Predecessor
	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
($ in thousands)	November 30, 2021		November 30, 2020		November 30, 2021		November 30, 2020
Subscriptions revenue	$	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 U.S. GAAP measure, for the periods indicated:


	Successor			Predecessor			Successor			Predecessor
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 2021			November 30, 2020			November 30, 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.

The table below presents our Adjusted EBITDA reconciled to our net loss, the closest U.S. GAAP measure, for the periods indicated:


	Successor			Predecessor			Successor			Predecessor
	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
($ in thousands)	November 30, 2021			November 30, 2020			November 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 November 30, 2021 compared to Three Months Ended November 30, 2020

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.

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 Ended			Three Months Ended
($ in thousands)	November 30, 2021			November 30, 2020			$ Change		% Change
Non-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 ended November 30, 2021, a $43.7 million, or 73%, increase compared to $59.7 million for the three 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 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	%

EBITDA was a loss of $14.6 million for the three months ended November 30, 2021, a $31.5 million decrease compared to $16.9 million for three months ended November 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
($ in thousands)	November 30, 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 ended November 30, 2021, a $17.6 million, or 62%, increase compared to $28.3 million for the three months ended November 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 November 30, 2021 compared to Nine Months Ended November 30, 2020

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.

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 Ended			Nine Months Ended
($ in thousands)	November 30, 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
($ in thousands)	November 30, 2021			November 30, 2020			$ Change		% Change
Adjusted EBITDA	$	108,581		$	81,368		$	27,213		33	%
Adjusted EBITDA margin		33.1	%		32.7	%

Adjusted EBITDA was $108.6 million for the nine months ended November 30, 2021, a $27.2 million, or 33%, increase compared to $81.4 million for the nine months ended November 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 of November 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 February 4, 2021, as part of the Business Combination, E2open, LLC, our subsidiary, entered into the 2021 Term Loan for $525.0 million and the 2021 Revolving Credit Facility for $75.0 million. On September 1, 2021, as part of the BluJay Acquisition, the 2021 Credit Agreement was amended to include a $380.0 million incremental term loan, an increase in the letter of credit sublimit from $15.0 million to $30.0 million and an increase in the 2021 Revolving Credit Facility from $75.0 million to $155.0 million.

The 2021 Term Loan will mature on February 4, 2028, while the 2021 Revolving Credit Facility will mature on February 4, 2026. E2open, LLC can request increases in the revolving commitments and additional term loan facilities, in minimum amounts of $2.0 million for each facility. The Credit Agreement was payable in quarterly installments of $1.3 million beginning in August 2021; however, the payments were increased to $2.3 million with the addition of the incremental term loan beginning in November 2021. The Credit Agreement is payable in full on February 4, 2028.

The 2021 Term Loan has a variable interest rate which was 4.00% and 3.69% as of November 30, 2021 and February 28, 2021, respectively. Principal payments of $1.3 million are due on the last day of each February, May, August and November commencing August 2021. As of November 30, 2021 and February 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
($ in thousands)	November 30, 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

Nine Months Ended November 30, 2021 compared to Nine Months Ended November 30, 2020

As of November 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 of February 28, 2021.

Net cash provided by operating activities for the nine months ended November 30, 2021 was $28.2 million compared to $30.1 million for the nine months ended November 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 ended November 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 ended November 30, 2021 was $633.0 million compared to net cash used of $8.1 million for nine months ended November 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 of E2open Holdings. Pursuant to the Tax Receivable Agreement, we will pay certain sellers, as applicable, 85% of the tax savings that we realize from increases in the tax basis in E2open Holdings’ assets as a result of the sale of E2open Holdings’ equity interests, the future exchange of the Common Units for shares of Class A Common Stock (or cash), certain pre-existing tax attributes of certain sellers and certain other tax benefits related to entering into the Tax Receivable Agreement including tax benefits attributable to payments under the Tax Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur. We will retain the benefit of the remaining 15% of these cash savings.

Amounts payable under the Tax Receivable Agreement will be contingent upon, among other things, our generation of taxable income over the term of the Tax Receivable Agreement. If we do not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits subject to the Tax Receivable Agreement, we would not be required to make the related payments under the Tax Receivable Agreement. Although the amount of any payments required to be made under the Tax Receivable Agreement may be significant, the timing of these payments will vary and will generally be limited to one payment per member per year. The amount of such payments is also generally limited to the extent we are unable to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement in a given period.

The liability related to the Tax Receivable Agreement was $67.9 million as of November 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 in E2open Holdings for our common stock, as this amount is not readily determinable and is dependent on several future variables, including timing of future exchanges, stock price at date of exchange, tax attributes of the individual parties to the exchange and changes in future applicable federal and state tax rates.

In addition, if we exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur, we are required to make immediate cash payments. Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed upon discount rate, as defined in the Tax Receivable Agreement. The early termination payment may be made significantly in advance of the actual realization, if any, of those future tax benefits. Such payments will be calculated based on certain assumptions, including that we have sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein. The payments that we would be required to make will generally reduce the amount of the overall cash flow that might have otherwise been available to us, but we expect the cash tax savings we will realize from the utilization of the related tax benefits will exceed the amount of any required payments.

We are entitled to receive quarterly tax distributions from E2open Holdings, subject to limitations imposed by applicable law and contractual restrictions. The cash received from such tax distributions will first be used to satisfy any tax liability and then make any payments required under the Tax Receivable Agreement. We expect that such tax distributions will be sufficient to fund both our tax liability and the required payments under the Tax Receivable Agreement.

Conversion of Contingent Consideration

The contingent consideration liability was $67.0 million and $150.8 million as of November 30, 2021 and February 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 ended November 30, 2021, respectively. There was no gain or loss for the three and nine months ended November 30, 2020 as the contingent consideration liability was not recorded until February 4, 2021. The contingent liability represents the Series B-1 common stock, Series B-2 common stock, Series 1 RCUs and Series 2 RCUs.

As of June 8, 2021, the Series B-1 common stock and Series 1 RCUs were no longer reflected as a contingent consideration liability as the 5-day VWAP of our Class A Common Stock exceeded $13.50 per share. This triggering event resulted in the 8,120,273 Series B-1 common stock converting into Class A Common Stock and 4,379,557 Series 1 RCUs becoming 4,379,557 Common Units of E2open Holdings along with entitling the holders of the newly vested common units to 4,379,557 shares of Class V Common Stock.

Leases

Effective March 1, 2021, we began accounting for leases in accordance with ASC 842, Leases, which requires lessees to recognize lease liabilities and ROU assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for periods of greater than 12 months. Upon adoption of ASC 842, we recognized an operating lease liability of $23.0 million, a ROU operating asset of $22.4 million and no change to retained earnings.

Our non-cancelable operating leases for our office spaces have various expiration dates through August 2029. Under these leases, our undiscounted future cash flows utilized in the calculation of the lease liabilities as of November 30, 2021 were: $2.7 million for December 1, 2021 through February 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 through June 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 of November 30, 2021 were: $0.4 million for December 1, 2021 through February 28, 2022, $2.3 million for fiscal 2023 and $2.1 million for fiscal 2024. These numbers include interest of $0.3 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 of November 30, 2021 and February 28, 2021.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Preparation of the financial statements requires management to make judgments, estimates and assumptions that impact the reported amount of revenue and expenses, assets and liabilities and the disclosure of contingent assets and liabilities. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our consolidated financial statements. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies to the Notes to the Consolidated Financial Statements in our 2021 Form 10-K.

There have been no changes to our critical accounting policies and estimates during the three and nine months ended November 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in the market risks during the three and nine months ended November 30, 2021 from those previously disclosed in Part II, Item 7A., Quantitative and Qualitative Disclosures About Market Risk of our 2021 Form 10-K, except as described below.

Foreign Currency Exchange Rate Risk

The functional currency of our foreign subsidiaries is generally the local currency. Assets and liabilities are translated into U.S. dollars at the exchange rate in effect as of the consolidated balance sheet date.

As a result of the BluJay Acquisition, our foreign operations have substantially increased resulting in significant expenses, assets and liabilities denominated in foreign currencies. The currencies of our operations are now the Australia dollar, British pound, Canada dollar, Danish krone, the Euro, Hong Kong dollar, Malaysia ringgit, People's Republic of China renminbi and the Singapore dollar. As a result, our operating results, profitability and cash flows are impacted when the U.S. dollar fluctuates relative to these foreign currencies. We translate our foreign currency-denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our unaudited condensed consolidated financial statements. Increases and decreases in the value of the U.S. dollar compared with such foreign currencies will affect our reported results of operations and the value of our assets and liabilities on our unaudited condensed consolidated balance sheets, even if our results of operations or the value of those assets and liabilities has not changed in its original currency. These transactions could significantly affect the comparability of our results between financial periods or result in significant changes to the carrying value of our assets, liabilities and shareholders' equity.

We cannot give any assurances as to the effect that future changes in foreign currency rates will have on our financial position, operating results or cash flows.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We have disclosure controls and procedures in place to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These controls and procedures are accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by the Quarterly Report. In designing and evaluating these disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating and implementing possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal controls over financial reporting during the quarter ended November 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We review our disclosure controls and procedures, which may include internal controls over financial reporting, on an ongoing basis. From time to time, management makes changes to enhance the effectiveness of these controls and ensure that they continue to meet the needs of our business activities over time.

PART II—Other Information

Item 1. Legal Proceedings.

From time to time, we are subject to contingencies that arise in the ordinary course of business. We record an accrual for a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We do not currently believe the resolution of any such contingencies will have a material adverse effect upon our Consolidated Balance Sheets, Statements of Operations or Statements of Cash Flows.

Item 1A. Risk Factors.

There have been no material changes in our risk factors during the three and nine months ended November 30, 2021 from those previously disclosed in Part I, Item 1A., Risk Factors of our 2021 Form 10-K, Part II, Item 1A., Risk Factors of our May 31, 2021 Form 10-Q filed with the SEC on July 16, 2021 (Q1 2022 Form 10-Q) and Part II, Item 1A., Risk Factors of our August 31, 2021 Form 10-Q filed with the SEC on October 13, 2021 (Q2 2022 Form 10-Q), other than set forth below. You should carefully consider the risk factors discussed in our 2021 Form 10-K, Q1 2022 Form 10-Q and Q2 2022 Form 10-Q, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or future results.

Risks Related to Our Business Model

Cyber-attacks and security vulnerabilities could result in serious harm to our reputation, business and financial condition.

Threats to network and data security are constantly evolving and becoming increasingly diverse and sophisticated. Our products and services, servers and computer systems and those of third parties that we rely on in our operations could be vulnerable to cybersecurity risks. As such, we may be subject to risks inherent to companies that process client data for client mission critical systems like SCM solutions.

As we continue to grow and as threat actors have become more sophisticated, we have observed increased threat activity to our products and systems. We are the target of attempts on a regular basis to identify and exploit system vulnerabilities and/or penetrate or bypass our security measures in order to gain unauthorized access to our systems. To mitigate these risks, we employ multiple methods at different layers of our systems to defend against intrusion and attack. We do not have visibility into all unauthorized incursions, however, our systems could experience incursions of which we are not aware. When we become aware of unauthorized access to our systems, we take steps intended to identify and remediate the source and impact of the incursions. Despite our efforts to keep our systems secure and remedy identified vulnerabilities, future attacks could be successful and result in contractual liability to clients or loss of client trust and ultimately client business.

We may experience breaches of our security measures due to human error, system errors or vulnerabilities. In particular, our platform and the other systems or networks used in our business may experience an increase in attempted cyber-attacks, targeted intrusion, ransomware and phishing campaigns. We maintain errors, omission and cyber liability insurance policies covering security and privacy damages. However, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

In December 2021, the Apache Software Foundation publicly disclosed a remote code execution (RCE) vulnerability in its Log4j 2 product (Log4j), an open-source component widely used in Java-based software applications to log and track error messages. In the subsequent weeks, the foundation disclosed several additional RCE vulnerabilities, expanding the opportunities for bad actors and attackers to remotely access a target using Log4j and potentially steal data, install malware or take control of the target's system. Certain applications in the E2open product suite and infrastructure did utilize the affected versions of Log4j. Although in accordance with our cybersecurity incidence response protocol, we identified and remediated all areas with known Log4j vulnerabilities, we expect the risk of additional vulnerabilities and potential attacks to continue for several months given the complexity and widespread nature of the situation.

In addition, while we are continually taking steps to enhance our cybersecurity defenses, increased investments, coordination, and resources are required to achieve our objective of ensuring over time that our cybersecurity infrastructure meets or exceeds evolving industry standards. Achieving this objective will require continued effort and vigilance, including sustained investment of money and management resources in order to support the ongoing development and maintenance of systems that meet these standards.

At present, we believe the regulatory and private action risks related to personal data we process as part of our business-to-business supply chain solutions are low. We process a limited amount of personal data, typically business contact information, supplied by our clients. Regulations surrounding personal data are rapidly changing and that makes global compliance challenging and unpredictable. Failure to comply with regulations may subject us to regulatory investigations, reputational harm, contractual liability to clients and potential liability to data subjects.

Risks Related to the Global Pandemic

Mandatory COVID-19 vaccination of employees or testing of employees could impact our workforce and have a material adverse effect on our business and results of operations.

In September 2021, President Biden announced a proposed new rule requiring all employers with at least 100 employees to require that their employees be fully vaccinated or tested weekly. In November 2021, the U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) issued an emergency temporary standard (ETS) to carry out this mandate. The ETS is subject to multiple legal challenges, which have delayed its implementation. Due to the uncertainty of the outcome of the legal challenges to the ETS, as well as the uncertainty in implementation details, we cannot anticipate the precise impact it might have on our business Any such mandate could have a material adverse impact on our business and results of operations, including workforce restraints and increased costs.

As a global company, it is anticipated that we would be subject to COVID-19 vaccination and testing mandates should the ETS or similar regulations go into effect in other jurisdictions in which we operate. Implementation of these requirements by us may result in employee attrition, including attrition of critically skilled labor, absenteeism within our skilled labor force, challenges securing future labor needs, inefficiencies connected to employee turnover and costs associated with implementation and on-going compliance, which could have a material adverse effect on our business, financial condition and results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

There were no shares withheld by us and transferred to treasury shares in connection with tax withholdings upon the conversion or exercise of any stock, award or warrant during the third quarter of fiscal year 2022.

Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).


Exhibit Number		Description
2.1†		Share Purchase Deed dated as of May 27, 2021, by and among E2open Parent Holdings, Inc. and BluJay TopCo Limited and the other parties thereto (incorporated by reference to Exhibit 2.1 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272) filed with the SEC on June 1, 2021).
2.2†		Management Warranty Deed dated as of May 27, 2021, by and among E2open Parent Holdings, Inc. and the other parties thereto (incorporated by reference to Exhibit 2.2 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272) filed with the SEC on June 1, 2021).
2.3†		Tax Warranty Deed dated as of May 27, 2021, by and among E2open Parent Holdings, Inc. and the other parties thereto (incorporated by reference to Exhibit 2.3 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272) filed with the SEC on June 1, 2021).
3.1		Certificate of Domestication of the CC Neuberger Principal Holdings I (incorporated by reference to Exhibit 3.1 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272), filed with the SEC on February 10, 2021).
3.2		Certificate of Incorporation of the E2open Parent Holdings, Inc. (incorporated by reference to Exhibit 3.2 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272) filed with the SEC on February 10, 2021).
3.3		Amendment to the Certificate of Incorporation of E2open Parent Holdings, Inc. (incorporated by reference to Exhibit 3.3 of E2open Parent Holdings, Inc.'s Form S-1 (File No. 333-259562) filed with the SEC on September 15, 2021).
3.4		Bylaws of the E2open Parent Holdings, Inc. (incorporated by reference to Exhibit 3.3 of E2open Parent Holdings, Inc.’s Form 8-K (File 001-39272) filed with the SEC of February 10, 2021).
10.1		Form of Subscription Agreement (incorporated by reference to Exhibit 10.5 of E2open Parent Holdings, Inc.’s Form 8-K (File No. 001-39272) filed with the SEC on June 1, 2021).
10.2		Form of Lock-up Agreement (incorporated by reference to Exhibit 10.2 of E2open Parent Holdings, Inc.'s Form 8-K (File No. 001-39272), filed with the SEC on September 3, 2021).
10.3		Amendment No. 2 to Credit Agreement, dated September 1, 2021, by and among E2open Intermediate, LLC, E2open, LLC, Goldman Sachs Bank USA, and the financial institutions parties thereto as lenders and issuing banks (incorporated by reference to Exhibit 10.4 of E2open Parent Holdings, Inc.'s Form 8-K (File No. 001-39272), filed with the SEC on September 3, 2021).
31.3*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File

* Filed herewith.

† Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	E2open Parent Holdings, Inc.

Date: January 12, 2022	By:	/s/ Michael A. Farlekas
		Michael A. Farlekas
		Chief Executive Officer

Date: January 12, 2022	By:	/s/ Jarett J. Janik
		Jarett J. Janik
		Chief Financial Officer