FinanceLooker

Excrept from filing document 2025-02-28

This Annual Report on Form 10 K 2025 Form 10 K contains forward looking statements within the meaning of the federal securities law and are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 Forward looking statements include all statements that do not relate solely to historical or current facts and generally can be identified by the use of words such as may can should will estimate plan project forecast intend expect anticipate believe seek target and similar expressions or future or conditional verbs Without limiting the generality of the foregoing forward looking statements contained in this document include expectations regarding the 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 2025 Form 10 K 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 the control of E2open Parent Holdings Inc we our us Company or E2open and outside the control of our directors officers and affiliates Accordingly we can give no assurance that any expectation or belief will result or will be achieved or accomplished Investors therefore should not place undue reliance on forward looking statements
All forward looking statements speak only as of the date of this 2025 Form 10 K and are expressly qualified in their entirety by the cautionary statements included in or incorporated by reference into this 2025 Form 10 K 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 required by law
We are a world class provider of cloud based end to end SCM and orchestration software Our connected supply chain software platform enables the largest companies to transform the way they make move and sell goods and services With a cloud native global SaaS platform purpose built for modern supply chains we connect more than 500 000 manufacturing logistics channel and distribution partners across our multi enterprise network processing over 18 billion transactions annually Our SaaS platform spans many key strategic and operational areas including omni channel demand sensing supply planning global trade management transportation and logistics and manufacturing and supply management We generate revenue from the sale of software subscriptions and professional services Our software combines networks data and applications to provide a deeply embedded mission critical platform that allows clients to optimize their channel and supply chains and accelerate their growth reduce costs increase visibility and improve resiliency Given the mission critical nature of our solutions we maintain long term relationships with our clients which is reflected by our long client tenure We serve approximately 5 600 clients in all major countries in the world across a wide range of end markets including consumer goods food and beverage manufacturing retail industrial and automotive aerospace and defense technology and transportation among others
We operate in what we believe is an attractive industry with strong secular tailwinds and a TAM which includes significant whitespace within our current client base This upsell opportunity within our existing client base is largely driven by their current technology landscape which is often a combination of legacy point solutions and home grown applications along with a combination of manual processes and spreadsheets As the process of bringing goods and services to market continues to evolve supply chains have grown more complex and the need for modern cloud based solutions has continued to increase Our SaaS platform has the ability to anticipate disruptions and opportunities in order to help companies improve efficiency reduce waste and operate sustainably We believe our cloud based end to end supply chain software platform offers a differentiated and more connected solution for clients to run a fully integrated supply chain solution providing not just visibility but the ability to orchestrate their extended supply chain
Our Supply ecosystem is comprised of partners for the production of goods that brands rely on to manufacture their products including components materials and manufacturing capacity Contract manufacturers co packers component and raw material suppliers across multiple tiers of the manufacturing process are grouped under this ecosystem
Our proprietary algorithms capture cleanse normalize and harmonize the data within our network ecosystems that feed our solutions to deliver compelling value to our clients Additionally our clients can combine internal and external vendor data with our network to drive informed decision making based on real time information Our ability to capture and harmonize data from our clients and their trading partners in any native format demonstrates the strong capabilities of our software architecture and integrated data model The combination of network ecosystems data and applications provides end to end supply chain visibility in a way that is unique to our platform and provides cost savings measures for our clients
Our end to end applications include advanced algorithms with artificial intelligence AI to help clients gain insights for enhanced decision making across channel supply chain planning execution and procurement functions The AI embedded within our applications encompasses a variety of technologies including supervised machine learning unsupervised machine learning and generative AI with large language models Our applications are organized into five product families Channel Planning Global Trade Logistics and Supply
Our core offerings are underpinned by an integrated data model that facilitates the flow and processing of data for participants across several ecosystems and applications This model facilitates low latency many to one to many data exchange across trading partner ecosystems The combination of our integrated and flexible data model along with our connected ecosystems powers our clients solutions allowing them to efficiently orchestrate their end to end supply chains This architecture is designed to ensure that each participant and data source within these ecosystems enhances our applications which in turn improves the network and the value we deliver to our clients and participants Additionally we believe utilizing our software to efficiently orchestrate our clients end to end supply chains enables our clients to realize significant value and return on investment
Our software architecture and ability to normalize and harmonize data creates a scalable software platform that can efficiently integrate acquisitions and new product applications seamlessly into a consolidated and holistic SaaS solution Our software architecture and this ability have been driving forces behind our robust track record of successful acquisition integrations
Importantly we believe there is incremental value we can create by utilizing the data flowing through our network to develop insights that can further help our clients as well as other target markets We plan to develop a comprehensive strategy to capture this market opportunity and deepen our relationships with clients which has the potential to meaningfully accelerate revenue growth
Our software is critical to the operations of companies with complex supply chain needs It not only provides operational efficiencies but also contributes a financial impact through cost reductions and enabling new revenue opportunities Our clients utilize our highly differentiated solutions to orchestrate their supply chains which enables them to realize significant value and return on investment especially in volatile environments
We believe there is a significant opportunity to drive growth through expansion of our existing client relationships Cross selling represents a strong growth area for us given that we have substantial whitespace within our current client base Our products and network provide a unique opportunity to facilitate end to end SCM This provides us a significant opportunity to cross sell additional products to our clients accelerating growth and strengthening relationships with our installed client base
As part of our growth strategy another key growth lever is winning new clients We have invested in strategic system integrator partnership initiatives to reach clients we could not previously reach We are building collaborative go to market partnerships with key strategic system integrator partners Our joint goal is to identify strategic integrator partners clients carrying out broad digital transformation projects who have supply chain software needs that match well with our vertical market expertise and product value proposition Additionally we plan to continue pursuing strategic partnerships and leverage the networks of our board of directors advisory board and others to elevate conversations with C level executives at key targets in our pipeline We also intend to utilize these relationships and networks as well as our own channel reseller and partner network to accelerate growth through the onboarding of new clients
From time to time we evaluate opportunities to acquire companies that will broaden our product offerings and expand our technology capabilities Our key strategic acquisition criteria include mission critical solutions in core markets complementary cloud applications with minimal product overlap new client relationships in vertical or geographic markets and TAM proprietary data and or network expansion We will continue to use this strategic lever as the opportunities arise
We consider the protection of our intellectual property and proprietary information to be an important facet of our business We own a number of trademarks patents copyrights and domain names registered in the United States and abroad that together are meaningful to our business including the e2open BluJay Logistyx and INTTRA marks among others From time to time we have pursued enforcement of our intellectual property rights against third parties and expect to do so in the future In addition we enter into customary confidentiality and invention assignment agreements with employees and contractors involved in the development of our intellectual property
We are subject to various laws and regulations of the United States and other jurisdictions including the European Union by supranational national and local government authorities including with respect to sanctions compliance privacy laws labor and employment laws and other laws In the United States our global sanctions compliance is monitored by the Office of Foreign Assets Control of the U S Treasury Department OFAC and certain of our subsidiaries have received a license from OFAC permitting certain business transactions or other activities involving sanctioned countries We monitor these regulatory requirements including the requirements for retaining our OFAC license and our compliance on a regular basis
Our organizational structure is what is commonly referred to as an umbrella partnership C corporation or Up C structure This organizational structure allows certain owners of E2open Holdings to retain their equity ownership in E2open Holdings an entity that is classified as a partnership for U S federal income tax purposes in the form of Common Units and Series 2 RCUs Each continuing owner of E2open Holdings also holds a number of shares of Class V common stock equal to the number of Common Units held by such owner which has no economic value but which entitles the holder to one vote per share at any meeting of our shareholders Those investors who prior to the Business Combination held Class A ordinary shares or Class B ordinary shares of CCNB1 and certain other investors and vested option holders by contrast hold their equity ownership in the Company a Delaware corporation that is a domestic corporation for U S federal income tax purposes
Management conducts regular enterprise risk assessments which are reviewed with the Risk Committee of the board of directors and then summarized for the board of directors Enterprise risk assessments include an evaluation of the impact likelihood and velocity of risks which determines the level of oversight necessary including the use of outside advisors and experts as needed A management comprised Executive Risk Committee responsible for reviewing and responding to risks also participates in the Disclosure Committee and provides input on relevant disclosure areas The board of directors has assigned certain risks to board committees e g environmental social and governance ESG to the Nominating Sustainability and Governance Committee and Enterprise Risk Management to the Risk Committee of the board of directors
We believe our success in delivering cloud based end to end SCM software relies on our culture values and the creativity and commitment of our people Each member of our global team performs an integral role within the organization that helps us to successfully manage our operations and serve our clients We operate in 22 offices across North America South America Europe and Asia Pacific As of February 28 2025 we had 3 873 full time employees with 1 143 in North and South America 451 in Europe and 2 279 in Asia Pacific
We invest in our people and strive to maintain a healthy safe and secure work environment where our employees are treated with respect and dignity We endeavor to create an inclusive and diverse community that inspires collaboration integrity engagement and innovation while offering the opportunity for personal and professional growth Our culture is built upon our operating principles be prepared build relationships on trust and respect be direct and transparent learn and operate with intensity make and meet commitments reliably always add values and own the results
We recognize and value the important role of employee training in our long term growth We strive to be the best in the industry which demands the best from each employee Training starts on day one to help streamline the transition employee onboarding We created e2immersion a several hour comprehensive introduction to e2open and how to navigate as a new hire E2immersion includes new hire material on everything from our applications to compliance procedures To ensure our employees ongoing personal and professional growth we developed e2open University where employees can participate in various online training classes These training classes are continually updated and new classes are added so that our employees have a full range of classes available on relevant topics Each year our employees receive role specific training which includes product overviews anti harassment insider trading cybersecurity awareness compliance with our Code of Business Conduct and other compliance and industry specific subjects E2open University also has courses on leadership and management skills as well as business planning and application deployments to name just a few
We use a framework called e2review to drive our performance review and engagement process E2review encourages continual open and interactive communication between employees and their managers allowing individual needs to be recognized and met as well as company goals to be supported This allows the employee and their manager to establish a professional development plan that facilitates personal employee growth while advancing our strategy
E2WIN is the e2open Women s Inclusion Network It is a global group that is open to employees of any gender identity E2WIN s mission is to create a gender equal community at e2open that enables talent of all backgrounds to inspire and empower one another and to build a more equal and inclusive workplace The objectives of the program are to provide unparalleled support to propel professional development at e2open allow more opportunities for our employees to connect with each other to grow their support network and increase attraction retention and promotion of women at e2open E2WIN achieves these objectives through several initiatives including a mentoring program regional and global group meetings guest speakers community service and training
We foster innovation through the annual e2opennovation contest where individuals or teams develop innovative useful cost saving and cutting edge solutions that benefit clients us and or fellow team members The competition includes two categories 1 move the needle where innovation advances our three year strategic goals and 2 hidden gems where innovation showcases work over the past year that elevates us and our clients
We have global culture and events committees which serve to embrace and share our global culture while generating programs and social activities throughout the year with the goal of helping to unify the team and give back to our communities We also launched a way for our remote employees to connect and engage through an employee resource group called e2unite The goal of e2unite is to provide resources for our remote team members to stay connected through technologies fostering social interactions aligning team members with our goals values and operating principles while enhancing the sense of well being
We work to keep our employees updated on our developments achievements and new product offerings through regular All Hands meetings with our senior leadership team We consistently work to improve the employee experience by addressing feedback collected through our global employee survey as well as various targeted surveys we conduct with managers new hires and employees leaving the Company We use Viva Engage as an internal communications tool enabling employees to connect by posting pictures of holiday and team celebrations using it to share news about new hires and work anniversaries and otherwise connect in a more personal way
Our website address is www e2open com Electronic copies of our SEC filings are available through the Investor Relations tab as soon as practicable after the reports are filed with the SEC Additionally our Code of Ethics Corporate Governance Guidelines Whistleblower Policy and the charters of our Audit Committee Compensation Committee Nominating Sustainability and Governance Committee and Risk Committee are located under the Governance tab of the Investor Relations section of our website
Risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward looking statements contained in this 2025 Form 10 K and other public statements we make are described below Based on the information currently known to us we believe that the matters discussed below identify the material risk factors affecting our business However the risks and uncertainties we face are not limited to those described below Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial but that could later become material may also adversely affect our business
No assurance can be given as to the timeline or outcome of the process including whether the process will result in a transaction or that any transaction that is agreed to will be completed Entry into or completion of any potential transaction or other strategic alternatives would be dependent on a number of factors that may be beyond our control including among other things market conditions industry trends regulatory approvals and the availability of financing for a potential transaction on reasonable terms Even if a transaction is entered into there can be no assurance that it will be successful or have a positive effect on stockholder value Our board of directors may also determine that no transaction is in the best interest of our stockholders
We have incurred and may continue to incur substantial expenses associated with identifying evaluating and negotiating potential strategic alternatives The process of reviewing potential strategic alternatives has been and may continue to be time consuming distracting and disruptive to our business operations We have also incurred and may continue to incur additional unanticipated expenses in connection with this process In addition we may be subject to costly and time consuming litigation related to the process Further the process has resulted and may continue to result in the loss of potential business opportunities and has had and may continue to have a negative effect on the market price and volatility of our common stock as well as our ability to recruit and retain qualified personnel
Changes in the global economic environment tariffs inflation elevated interest rates recessions or prolonged periods of slow economic growth and economic instability and actual and threatened geopolitical conflict could have an adverse effect on our industry and business as well as those of our clients and suppliers
Continuing concerns over economic and business prospects in the United States and throughout the world including impacts related to tariffs inflationary pressures and geopolitical disruptions have contributed to increased volatility and diminished expectations for the global economy As a global company we are subject to the risks arising from adverse changes in the domestic and global economies In addition uncertainty in the macroeconomic environment and associated global economic conditions have resulted in volatility in credit equity and foreign currency markets In fiscal 2025 and 2024 our revenues were subject to foreign currency exchange volatility resulting in a negative impact of approximately 0 3 million and a positive impact of approximately 2 2 million from foreign currency exchange rates year over year respectively These macroeconomic conditions have and are likely to continue to affect the buying patterns of our clients and prospective clients including the length of sales cycles our overall pipeline and pipeline conversion rates and our revenue growth expectations In addition we have experienced and could experience in the future delays in payments from our clients experiencing weakness in their business as a result of the macroeconomic environment and associated global economic conditions which could increase our credit risk exposure or adversely impact our cash flows and harm our financial condition For example in fiscal 2025 we experienced lower new bookings elevated churn lengthening sales cycles a decrease in pipeline conversion rates and slower revenue growth If macroeconomic or geopolitical conditions deteriorate our overall results of operations could be adversely affected we may not be able to grow at the rates we have experienced in the past and we could fail to meet the expectations of investors
The full extent of the impact of current macroeconomic factors including those related to inflationary pressures foreign exchange rates and geopolitical disruptions on our operational and financial performance remains uncertain and will depend on many factors outside our control To the extent these factors adversely affect our business results of operations and financial condition this may also have the effect of heightening many of the other risks described in this section
Our revenue results of operations and cash flows depend on the overall demand for and use of technology and information for global SCM which depends in part on the amount of spending allocated by our clients or potential clients on supply chain technology and information This spending depends on worldwide economic and geopolitical conditions The U S and other key international economies have experienced cyclical downturns from time to time in which economic activity was impacted by falling demand for a variety of goods and services tariffs poor liquidity reduced corporate profitability volatility in credit equity and foreign exchange markets bankruptcies a public health crisis and overall economic uncertainty These economic conditions can arise suddenly and the full impact of such conditions often remains uncertain In addition geopolitical developments can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets
Concerns about the systemic impact of a global recession tariffs increasing energy costs geopolitical issues or the availability and cost of credit could lead to increased market volatility decreased consumer confidence and diminished growth expectations in the U S economy and abroad which in turn could affect the rate of information technology spending and adversely affect our clients ability or willingness to purchase our services delay prospective clients purchasing decisions reduce the value or duration of their subscription contracts or affect attrition rates all of which could adversely affect our future sales and operating results Prolonged economic slowdowns may result in requests to renegotiate existing contracts on less advantageous terms to us than those currently in place payment defaults on existing contracts or non renewal at the end of a contract term
The SCM market is fragmented competitive and rapidly evolving We compete with other cloud based SCM vendors traditional enterprise resource planning vendors such as SAP and Oracle and other service providers as well as with solutions developed internally by enterprises seeking to manage their global supply chains and global trade Some of our actual and potential competitors may enjoy competitive advantages over us such as greater name recognition more varied offerings and larger marketing budgets as well as greater financial technical and other resources Furthermore some competitors may have best of breed solutions to problems created by the unique trading requirements of particular countries industries and or business processes Some key competitors are private companies with lower overhead and no exposure to the public markets which allow them to price deals in an unprofitable manner or otherwise compete in ways that we cannot compete as a public company As a result our competitors may be able to respond more quickly than we can to new or changing opportunities technologies standards or client requirements or devote greater resources to the promotion and sale of their products and services than we can
The intensity of competition in the SCM market has resulted in pricing pressure as the market has developed and our competitors frequently offer substantial price discounts for their products We expect the intensity of competition to increase in the future as existing competitors develop their capabilities and as new companies which could include one or more large software or trade content providers enter the market Increased competition could result in additional pricing pressure reduced sales shorter term lengths for client contracts lower margins or the failure of our solutions to achieve or maintain broad market acceptance If we are unable to compete effectively it will be difficult for us to maintain our pricing rates and add or retain clients and our business financial condition and results of operations will be harmed
We have a substantial amount of indebtedness and are significantly leveraged As of February 28 2025 we had outstanding indebtedness in the principal amount of 1 056 3 million Our 2021 Revolving Credit Facility has a borrowing capacity of 155 0 million with no outstanding borrowings as of February 28 2025 Our substantial level of indebtedness increases the possibility that we may be unable to generate sufficient cash to pay the principal interest or other amounts due in respect of our indebtedness Our substantial indebtedness combined with our other financial obligations and contractual commitments may have a material adverse impact on us and our business For example it could
All of the borrowings under the credit agreement Credit Agreement including the senior secured term loan due in 2028 and revolving credit facility due in 2026 bear interest at variable rates and are subject to the risk of changes in interest rates In April 2025 the revolving credit facility due date was extended to February 2028 The Federal Reserve raised interest rates substantially during fiscal 2023 and 2024 and as a result the interest we pay on our debt has increased significantly and has adversely impacted our results of operations and cash flows This adverse impact may continue or worsen during fiscal 2025 if the Federal Reserve maintains interest rates at their current higher levels or elects to raise interest rates further
In March and April 2023 we entered into interest rate collar agreements on a portion of our variable rate term loan debt in order to reduce our exposure to further increases in interest rates We have not entered into interest rate derivative or hedging agreements related to our revolving credit facility which is currently undrawn In the future we may enter into additional derivative or hedging agreements to further reduce our exposure to variable interest rates However we may not hedge all of our indebtedness and any hedges that we may have or will put in place may not fully mitigate our interest rate risk
In addition under the senior secured credit facilities we are required to satisfy specified financial ratios including a first lien secured debt leverage ratio Our ability to meet those financial ratios can be affected by events beyond our control and we may not be able to meet those ratios and tests
A breach of the covenants under our Credit Agreement could result in an event of default under the applicable indebtedness Such default may allow the creditors to accelerate the related debt In addition an event of default under the Credit Agreement would permit the lenders to terminate all commitments to further extend credit under that agreement Furthermore if we were unable to repay the amounts due and payable under the Credit Agreement those lenders could proceed against the collateral granted to them to secure such indebtedness A significant portion of our indebtedness could become immediately due and payable We cannot be certain whether we would have or would be able to obtain sufficient funds to make these accelerated payments If any such indebtedness is accelerated our assets may not be sufficient to repay in full such indebtedness and our other indebtedness
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance which in turn are subject to prevailing economic and competitive conditions and to certain financial business and other factors beyond our control We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal premium if any and interest on our indebtedness Recent changes in market interest rates including the recent significant increases in market interest rates experienced in fiscal 2023 and 2024 may continue to increase causing additional cash requirements to meet increasing interest payments Between February 2022 and February 2024 the 2021 Term Loan saw its variable interest rate rise from 4 00 to 8 95 The rising interest expenses may further hinder our ability to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal premium if any and interest on our indebtedness
If our cash flows and capital resources are insufficient to fund our debt service obligations we could face substantial liquidity problems and may be forced to reduce or delay investments and capital expenditures or to sell assets seek additional capital or restructure or refinance our indebtedness Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations The terms of existing or future debt instruments may restrict us from adopting some of these alternatives In addition any failure to make interest and principal payments on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating which could harm our ability to incur additional indebtedness In the absence of such cash flows and resources we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations Our credit facilities restrict E2open Holdings and our restricted subsidiaries ability to dispose of assets and use the proceeds from the disposition We may not be able to complete those dispositions or obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations
Our debt currently has a non investment grade rating and any rating assigned could be lowered or withdrawn entirely by a rating agency if in that rating agency s judgment future circumstances relating to the basis of the rating such as adverse changes in our performance under assorted financial metrics and other measures of financial strength our business and financial risk our industry or other factors determined by such rating agency so warrant There can be no assurances that our credit ratings or outlook will not be lowered in the future in response to adverse changes in these metrics and factors caused by our operating results or by actions that we take that reduce our profitability or that require us to incur additional indebtedness for items such as substantial acquisitions significant increases in costs and capital spending in security and IT systems significant costs related to settlements of litigation or regulatory requirements or by returning excess cash to shareholders through dividends Consequently real or anticipated changes in our credit rating will generally affect the market value of our indebtedness Additionally credit ratings may not reflect the potential effect of risks relating to the structure of our indebtedness Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing and may reduce our profitability
Approximately 85 of our revenue is recurring and consists of subscriptions revenue Our subscription products generally have recurring annual subscription periods While many of our subscriptions provide for automatic renewal our clients may opt out of automatic renewals and clients have no obligation to renew a subscription after the expiration of the term Our clients may or may not renew their subscriptions as a result of a number of factors including their satisfaction or dissatisfaction with our products and services our pricing or pricing structure the pricing or capabilities of the products and services offered by our competitors the effects of economic conditions or reductions in our clients spending levels or ability to pay for our offerings and services In addition our clients may renew for fewer subscriptions renew for shorter contract lengths if they were previously on multi year contracts or switch to lower cost offerings of our products and services If our clients do not renew their subscription arrangements maintenance or other services agreements or if they renew them on less favorable terms our revenue may decline A substantial portion of our quarterly subscription revenue is attributable to agreements entered into during previous quarters As a result if there is a decline in renewed subscription agreements in any one quarter only a small portion of the decline will be reflected in our revenue recognized in that quarter and the rest will be reflected in our revenue recognized in the following four quarters or more
Some of our clients have significant bargaining power when negotiating new licenses or subscriptions or renewals of existing agreements they have the ability to buy similar products from other vendors or develop systems internally These clients have and may continue to seek advantageous pricing and other commercial and performance terms that may require us to develop additional features in the products we sell to them or add complexity to our client agreements Currently as clients become larger our pricing model recognizes various factors such as the number of products purchased and the penetration of those products within a client s operations As such when a client buys more products their average cost per product can decline even though the total revenue from them increases To date we have generally seen sales to clients increase in proportion to or in excess of any reductions in the cost per product However there can be no guarantee that these results will continue in the future If we are unable to negotiate renewals with our largest clients on favorable terms our results of operations could be harmed
Many of our clients are large enterprise clients which means longer sales cycles relative to non enterprise clients greater competition more complex client due diligence less favorable contractual terms and less predictability in completing some of our sales Consequently a target client s decision to use our services may be an enterprise wide decision and if so these types of sales require us to provide greater levels of education regarding the use and benefits of our products and services as well as education regarding privacy and data protection laws and regulations to prospective clients In addition larger enterprise clients may demand more configuration integration services and features As a result of these factors these sales opportunities may require us to devote greater sales support and professional services resources to individual clients driving up costs and time required to complete sales while potentially requiring us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met
To increase our revenue we must add new clients or sell additional products or upgrades to existing clients Even if we capture a significant volume of leads from our digital marketing activities we must be able to convert those leads into sales of our products to new or existing clients in order to achieve revenue growth
We primarily rely on our direct sales force to sell our products to new and existing clients and convert qualified leads into sales Accordingly our ability to achieve significant growth in revenue in the future will depend on our ability to recruit train and retain a sufficient number of sales personnel and on the productivity of those personnel We may be unable to hire or retain a sufficient number of qualified individuals in the future in the markets where we do or plan to do business The market for sales personnel in the software space is highly competitive and it is increasingly difficult to compete and retain top talent If we are unable to sell products to new clients and additional products or upgrades to our existing clients through our direct sales force we may be unable to grow our revenue and our operating results could be adversely affected
We believe that our ability to increase our sales depends in part on maintaining and strengthening relationships with parties such as channel partners OEM partners integration partners and other strategic technology companies Once a relationship is established we likely will dedicate significant time and resources to it in an effort to advance our business interests and there is no assurance that any strategic relationship will achieve our business purposes or that the resources we use to develop the relationship will be cost effective Parties with whom we establish strategic relationships also work with companies that compete with us We have limited if any control as to whether these parties devote adequate resources to our strategic relationships Further companies with whom we maintain strategic relationships may de emphasize their dealings with us or become competitors in the future We also have limited if any control as to other business activities of these parties and we could experience reputational harm because of our association with such parties if they fail to execute on business initiatives are accused of breaking the law or suffer reputational harm for other reasons All of these factors could materially and adversely impact our business and results of operations
We have been successful to date despite not having strong brand name recognition with those for whom we compete for business Our ability to develop our brand is important in expanding our base of clients partners and employees Our brand will depend largely on our ability to remain a technology leader and continue to provide high quality innovative products services and features If we fail to develop our brand or if our investments in digital advertising events and other branding programming are unsuccessful our business operating results and financial condition may be materially and adversely affected
Due to the size and complexity of most of our software implementations our implementation cycle can be lengthy and may result in delays Our products may require modification or customization and must integrate with our clients existing systems This can be time consuming and expensive for clients and can result in implementation and deployment delays of our products Additional delays could result if we fail to attract train and retain services personnel These delays and resulting client dissatisfaction could limit our future sales opportunities harm our reputation and adversely impact results of operations cash flows and financial condition
We generally recognize revenue from clients ratably over the terms of their subscription and support agreements which typically have a term of one to five years Our enterprise client contracts have an average term of approximately three years As a result most of the revenue we report in each quarter is the result of subscription and support agreements entered into during previous quarters Consequently a decline in new or renewed subscriptions in any one quarter may not be reflected in our revenue results for that quarter However any such decline will negatively impact our revenue in future quarters Accordingly the effect of significant downturns in sales and market acceptance of our services and potential changes in our attrition rate may not be fully reflected in our results of operations until future periods Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period as revenue from new clients must be recognized over the applicable subscription and support term
We may not be able to successfully implement our strategic initiatives in accordance with our expectations or in the timeframe we desire which may result in an adverse impact on our business and financial results We also expect our operating expenses to increase in future periods and if our revenue growth does not increase to offset these anticipated increases in our operating expenses our business results of operations and financial condition will be harmed and we may not be able to achieve or maintain profitability
We have experienced rapid growth which has placed and will continue to place significant demands on our management and our operational and financial resources Our organizational structure is becoming more complex as we scale our operational financial and management controls as well as our reporting systems and procedures As we continue to grow we face challenges of integrating developing training and motivating a rapidly growing employee base in our various offices around the world and navigating a complex multi national regulatory landscape If we fail to manage our anticipated growth and change in a manner that preserves the functionality of our platforms and solutions the quality of our products and services may suffer which could negatively affect our brand and reputation and harm our ability to attract clients
To manage growth in our operations and personnel we need to continue to grow and improve our operational financial and management controls and our reporting systems and procedures We will require significant expenditures and the allocation of valuable management resources to grow and change in these areas Our expansion has placed and our expected future growth will continue to place a significant strain on our management client experience research and development sales and marketing administrative financial and other resources
We anticipate that significant additional investments will be required to scale our operations and increase productivity address the needs of our clients further develop and enhance our products and services and scale with our overall growth We will need to identify and invest in new technologies and systems to ensure the future scalability and success of the business If additional investments are required due to significant growth this will increase our cost base which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term
Our success depends in part on our ability to develop and market new and enhanced solutions modules and we may not be able to do so or do so quickly enough to respond to changes in demand Even if we anticipate changes in demand it may be difficult for us to transition existing clients to new versions of our solutions
Our success depends in part on our ability to develop and market new and enhanced solutions modules and to do so on a timely basis Successful module development and marketing depends on numerous factors including anticipating client requirements changes in technology requirements our ability to differentiate our solutions from those of our competitors and market acceptance of our solutions Enterprises are requiring their software application vendors to provide ever increasing levels of functionality and broader offerings Moreover our industry is characterized by rapid evolution and shifts in technology and client needs We may not be able to develop and market new or enhanced modules in a timely or cost effective manner or at all Our solutions also may not achieve market acceptance or correctly anticipate technological changes or the changing needs of our clients or potential clients
In addition even if we correctly anticipate changes in technology or demand it might be difficult for us to transition existing clients to new versions of our solutions Such transitions or upgrades may require considerable professional services effort and expense and clients may choose to discontinue using our solutions rather than proceed with a lengthy and expensive upgrade If clients fail to accept new versions of our solution if our newest solutions contain errors or if we expend too many resources supporting multiple versions of our solutions we may suffer a material adverse effect on our business financial position results of operations and cash flows
We derive and expect to continue to derive substantially all of our revenue from providing a cloud based SCM platform solutions and related services The market for cloud based SCM solutions is still evolving and it is uncertain whether this platform and solutions will sustain high levels of demand and market acceptance Our success will depend on the willingness of companies to accept our cloud based SCM platform and solutions as an alternative to manual processes traditional enterprise resource planning software and internally developed SCM solutions Some clients may be reluctant or unwilling to use our cloud based SCM platform or solutions for a number of reasons including data privacy concerns data and network security concerns and existing investments in SCM technology
Traditional approaches to SCM have required among other things purchasing hardware and licensing software Because these traditional approaches often require significant initial investments to purchase the necessary technology and establish systems that comply with clients unique requirements companies may be unwilling to abandon their current solutions for our cloud based SCM platform and solutions Other factors that may limit market acceptance of our platform and solutions include
If companies do not perceive the benefits of our cloud based SCM platform or solutions or if companies are unwilling to accept our platform and solutions as an alternative to traditional approaches the market for our platform and solutions might not continue to develop or might develop more slowly than we expect either of which could significantly adversely affect our revenues and growth prospects
As a provider of cloud based software services we store process and transmit large amounts of confidential information largely proprietary business data of our clients Our systems networks and services may be vulnerable to security incidents such as cyberattacks ransomware phishing social engineering malware infections insider threats denial of service attacks and other disruptions A successful security breach could result in the loss of proprietary information theft of client and employee data operational disruption loss of revenue regulatory investigations or legal liability Moreover public perception of the effectiveness of our security measures or the discovery of a breach regardless of materiality could damage our brand reduce demand for our services and negatively affect our ability to retain clients
As we continue to grow and as threat actors 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 and 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 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 have been the target of successful phishing attempts in the past resulting in immaterial monetary losses due to voluntary write offs Although we believe that these attempts were detected and neutralized without any compromise to our client data and prior to any significant impact to our business we have implemented additional measures to prevent such attacks in the future We will likely be subject to similar attacks in the future and continue to train our employees and provide communications to our clients to mitigate these activities and related losses 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
While we continually take 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 We are also subject to our clients testing the security of our systems and the manner in which we protect their data which further heightens our need to stay vigilant and up to date with the latest protections and cybersecurity practices Achieving this objective requires 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
Our products must integrate with a variety of network hardware and software platforms and we need to continuously modify and enhance our products to adapt to changes in hardware software networking browser and database technologies We believe a significant component of our value proposition to clients is the ability to optimize and configure our products to integrate with our systems and those of third parties If we are not able to integrate our products in a meaningful and efficient manner demand for our products could decrease and our business and results of operations would be harmed
In addition we have a large number of solutions and maintaining and integrating them effectively requires extensive resources Our continuing efforts to make our products more interoperative may not be successful Failure of our products to operate effectively with future infrastructure platforms and technologies could reduce the demand for our products resulting in client dissatisfaction and harm to our business If we are unable to respond to changes in a cost effective manner our products may become less marketable less competitive or obsolete and our business and results of operations may be harmed
Reliance on Third Party AI Technologies A significant portion of our AI capabilities relies on third party providers for cloud computing services machine learning frameworks and pre built AI models If any of these third party vendors experience technological failures service outages or disruptions in their offerings our ability to provide AI powered features could be significantly impaired which may harm our reputation and client retention
Data Privacy and Security Risks AI systems require access to large datasets to train and improve algorithms which may include confidential client data The collection processing and storage of such data expose us to privacy and security risks If our AI systems are compromised or if we fail to comply with evolving data protection laws such as Europe s General Data Protection Regulation GDPR we could face regulatory penalties reputational damage and litigation which could harm our business
Regulatory and Compliance Risks AI technology is subject to increasing scrutiny from governments and regulators worldwide In particular there is a lack of clear regulatory frameworks surrounding the development and deployment of AI technologies New laws or regulations could impose restrictions on the use of AI in our products require significant changes to our existing AI systems or subject us to additional compliance costs Any failure to comply with such regulations could result in fines penalties and reputational harm
Client Adoption and Market Acceptance While AI integration offers potential competitive advantages some of our clients may be reluctant to adopt AI powered solutions due to concerns over transparency or control If we fail to demonstrate the value of our AI technologies or if our clients reject AI features we could experience slower adoption rates and reduced revenue growth
We have goodwill of 1 213 8 million and 1 843 5 million and net intangible assets of 673 0 million and 841 0 million as of February 28 2025 and February 29 2024 respectively In accordance with U S GAAP goodwill and intangible assets with an indefinite life are not amortized but are subject to a periodic impairment evaluation Goodwill and acquired intangible assets with an indefinite life are tested for impairment at least annually or when events and circumstances indicate that fair value of a reporting unit may be below their carrying value Some factors that could lead to a goodwill impairment assessment would be
Acquired intangible assets with definite lives are amortized on a straight line basis over the estimated period over which we expect to realize economic value related to the intangible asset In addition we review long lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable If indicators of impairment are present we evaluate the carrying value in relation to estimates of future undiscounted cash flows Our ability to realize the value of the goodwill and intangible assets will depend on the future cash flows of the businesses we have acquired which in turn depends in part on how well we have integrated these businesses into our own business Judgments made by management relate to the expected useful lives of long lived assets and our ability to realize undiscounted cash flows of the carrying amounts of such assets The accuracy of these judgments may be adversely affected by several factors including significant
These types of events or indicators and the resulting impairment analysis could result in impairment charges in the future If we are not able to realize the value of the goodwill and intangible assets we may be required to incur material charges relating to the impairment of those assets We perform our annual goodwill impairment test during the fourth quarter of each year
During the third and fourth quarters of fiscal 2025 first and third quarters of fiscal 2024 and second and fourth quarters of fiscal 2023 we experienced a significant decline in the market price of our Class A Common Stock and market capitalization In addition in certain of these quarters we experienced slowing growth and lowered projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in us determining that triggering events occurred and goodwill impairment assessments were performed for the respective quarters The assessments indicated that the fair value of our equity and goodwill was less than its carrying amount and resulted in a goodwill impairment charge totaling 614 1 million 1 097 7 million and 901 6 million in fiscal 2025 2024 and 2023 respectively
Such impairment charges like the charges that we incurred in fiscal 2025 2024 and 2023 could materially and adversely affect our business results of operations and financial condition In accordance with U S GAAP we will continue to test goodwill for impairment at least annually or when events and circumstances trigger the requirement for an interim evaluation
Our success greatly depends on the continued service of our executives as well as our other key senior management technical personnel and sales personnel Our future success will depend in large part upon our ability to attract retain and motivate highly skilled executives and employees We face significant competition for individuals with the skills required to perform the services we offer and thus we may encounter increased compensation costs that are not offset by increased revenue In the broader technology industry in which we compete for talented hires there is substantial and continuous competition for engineers with high levels of experience in designing developing and managing software as well as competition for sales executives and operations personnel We cannot guarantee that we will be able to attract and retain sufficient numbers of these highly skilled employees or motivate them Because of the complexity of the supply chain market we may experience a significant time lag between the date on which technical and sales personnel are hired and the time at which these persons become fully productive
Volatility in or lack of performance of our stock price may also affect our ability to attract and retain key employees Many of our key employees have been granted and may be granted a substantial number of shares of common stock and or stock options Employees may be more likely to terminate their employment with us if the value of these awards significantly declines based on our stock price relative to the fair value grant price
We have employees in 20 countries and these global operations could be disrupted at any time by natural or other disasters telecommunications failures acts of terrorism or war power or water shortages extreme weather conditions whether as a result of climate change or otherwise medical epidemics or pandemics such as the COVID 19 pandemic and other natural or manmade disasters or catastrophic events The occurrence of any of these business disruptions could result in significant losses serious harm to our revenue profitability and financial condition adversely affect our competitive position increase our costs and expenses and require substantial expenditures and recovery time in order to fully resume operations We have a significant concentration of employees in India and Malaysia on whom we rely Any disaster or series of disasters in these countries where we have a concentration of employees could significantly disrupt our operations and have a material adverse effect on our business results of operations and financial condition
We have significant international operations around the world including India Malaysia the United Kingdom the Netherlands Belgium Germany Poland China and Hong Kong We market and sell our products worldwide We expect to continue to expand our international operations for the foreseeable future The continued international expansion of our operations requires significant management attention and financial resources and results in increased administrative and compliance costs Our limited experience in operating our business in certain regions outside the United States increases the risk that our expansion efforts into those regions may not be successful In particular our business model may not be successful in particular countries or regions outside the United States for reasons that we currently are unable to anticipate We are subject to risks associated with international sales and operations including but not limited to
The occurrence of any one of these risks could negatively affect our international business and consequently our operating results We cannot be certain that the investment and additional resources required to establish acquire or integrate operations in other countries will produce desired levels of revenue or profitability If we are unable to effectively manage our expansion into additional geographic markets our financial condition and results of operations could be harmed
The current geopolitical conflicts have caused and may continue to lead to disruptions instability and volatility in local regional national and global markets and economies Countries worldwide have imposed targeted sanctions and export control measures and have threatened additional sanctions and export control measures which have resulted in severe or complete restriction on exports to and other commerce and business dealings We have been working closely with outside advisors to ensure our products comply with all sanctions and global regulatory requirements To date the conflicts have not materially affected our business However we continue to monitor the situation
We conduct a portion of our business in currencies other than the United States dollar Our revenues expenses operating profit and net income are affected when the dollar weakens or strengthens in relation to other currencies In addition we have significant operations in India and Malaysia that do not have a natural in market revenue hedge to mitigate currency risk to our operating expense Volatility in the markets and exchange rates for foreign currencies and contracts in foreign currencies may in the future have a significant impact on our reported operating results and financial condition
Our continued growth depends in part on the ability of our existing and potential clients to access our websites software or cloud based products within an acceptable amount of time We have experienced and may in the future experience service disruptions outages and other performance problems due to a variety of factors including infrastructure changes human or software errors capacity constraints due to an overwhelming number of users accessing our website simultaneously denial of service fraud or security attacks In some instances we may not be able to identify the cause or causes of these website performance problems within an acceptable period of time It may become increasingly difficult to maintain and improve our website performance especially during peak usage times and as our user traffic increases If our websites are unavailable or if our clients are unable to access our software or cloud based products within a reasonable amount of time or at all our business would be negatively affected Additionally our data centers and networks and third party data centers and networks may experience technical failures and downtime may fail to distribute appropriate updates or may fail to meet the increased requirements of a growing client base
We provide certain of our solutions through third party data center hosting facilities located in the United States and other countries While we control and have access to our servers and all of the components of our network that are located in such third party data centers we do not control the operation of these facilities Our operations depend on the protection of the equipment and information we store in these third party centers or utilize from third party providers against damage or service interruptions that may be caused by fire flood severe storm power loss telecommunications failures natural disasters war criminal act military action terrorist attack financial failure of the service provider and other events beyond our control In addition third party malfeasance such as intentional misconduct by computer hackers unauthorized intrusions computer viruses ransomware or denial of service attacks may also cause substantial service disruptions A prolonged service disruption affecting our products could damage our reputation with potential clients cause us to lose existing clients expose us to liability or otherwise adversely affect our business We may also incur significant costs for using alternative equipment or taking other actions in preparation for or in reaction to events that damage the data centers or infrastructure we use or rely on including the additional expense of transitioning to substitute facilities or service providers Following expiration of the current agreement terms the owners of the data center facilities have no obligation to renew their agreements with us on commercially reasonable terms or at all If we are unable to renew these agreements on commercially reasonable terms or if one of our data center operators is acquired we may be required to transfer our servers and other infrastructure to new data center facilities and we may incur significant costs and possible service interruptions in connection with doing so
The information we source from third parties for inclusion in our knowledge databases may not be accurate and complete Our trade experts may make errors in interpreting legal and other requirements when processing this information and our trade content may not be updated on a timely basis which can expose our clients to fines and other substantial claims and penalties
Our clients often use our solutions as a system of record and many of our clients are subject to regulation of their products services and activities Our knowledge library includes trade content sourced from government agencies and transportation carriers in numerous countries It is often sourced from text documents and includes import and export regulations shipping documents preferential duties and taxes specifications for free trade agreements transportation rates sailing schedules embargoed country and restricted party lists and harmonized tariff codes The information in these text documents may not be timely accurate or complete Our team of trade experts transforms these documents into a normalized and propriety knowledge base which is interpretable by software Our trade experts have to interpret the legal and other requirements contained in the source documents and we can provide no assurances that our trade experts do not make errors in the interpretation of these requirements Furthermore rules and regulations and other trade content used in our solutions change constantly and we must continuously update our knowledge library Maintaining a complete and accurate knowledge library is time consuming and costly and we can provide no assurances that our specialists will always make appropriate updates to the library on a timely basis Errors or defects in updating the trade content we provide to our clients and any defects or errors in or failure of our software hardware or systems can result in an inability to process transactions in a timely manner or lead to violations that could expose our clients to fines and other substantial claims and penalties and involve criminal liability In addition these errors and delays could damage our reputation with both existing and new clients and result in lost clients and decreased revenue which could materially and adversely affect our business revenue and results of operations
Any of these problems may enable our clients to terminate our agreements require us to issue credits or refunds and subject us to product liability breach of warranty or other contractual claims We also may be required to indemnify our clients or third parties as a result of any of these problems Any provisions in our client agreements intended to limit liability may not be sufficient to protect us against any such claims Insurance may not be available on acceptable terms or at all In addition any insurance we do have may not cover claims related to specific defects errors failures or delays may not cover indirect or consequential damages and may be inadequate Defending a suit regardless of its merit could be costly and divert management s attention In general losses from clients terminating their agreements with us and our cost of defending claims resulting from defects errors failures or delays might be substantial and could have a material adverse effect on our business financial position results of operations and cash flows
We use NetSuite to manage our financial processes and other third party vendors to manage sales professional services online marketing and web services We believe the availability of these services is essential to the management of our high volume transaction oriented business model As we expand our operations we expect to utilize additional systems and service providers that may also be essential to managing our business Although the systems and services that we require are typically available from a number of providers it is time consuming and costly to qualify and implement these relationships Therefore if one or more of our providers suffer an interruption in their business experience delays disruptions or quality control problems in their operations or we have to change or add additional systems and services our ability to manage our business and produce timely and accurate financial statements would suffer
We leverage third party software for use with our solution Performance issues errors and defects or failure to successfully integrate or license necessary third party software could cause delays errors or failures of our solution increases in our expenses and reductions in our sales which could materially and adversely affect our business and results of operations
We use software licensed from a variety of third parties in connection with the operation of our products Any performance issues errors bugs or defects in third party software could result in errors or a failure of our products which could adversely affect our business and results of operations In the future we might need to license other software to enhance our solution and meet evolving client demands and requirements Any limitations in our ability to use third party software could significantly increase our expenses and otherwise result in delays a reduction in functionality or errors or failures of our solution until equivalent technology or content is either developed by us or if available identified obtained through purchase or license and integrated into our solution In addition third party licenses may expose us to increased risks including risks associated with the integration of new technology the diversion of resources from the development of our own proprietary technology and our inability to generate revenues from new technology sufficient to offset associated acquisition and maintenance costs all of which may increase our expenses and materially and adversely affect our business and results of operations
CC Capital Insight Partners Francisco Partners and Temasek and their respective affiliates collectively the Controlling Entities collectively control approximately 37 of our total voting equity as of February 28 2025 The Controlling Entities are entitled to at least one board representation pursuant to the Amended and Restated Investor Rights Agreement at this time all Controlling Entities have exercised their right to board representation except for Francisco Partners As a result they have significant influence over our decisions to enter into any corporate transaction In addition the Controlling Entities are each in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us The Controlling Entities may also pursue acquisition opportunities that may be complementary to our business and as a result those acquisition opportunities may not be available to us Our certificate of incorporation provides that certain parties may engage in competitive businesses and renounces any entitlement to certain corporate opportunities offered to the private placement investors or any of their managers officers directors equity holders members principals affiliates and subsidiaries other than us and our subsidiaries that are not expressly offered to them in their capacities as our directors or officers The certificate of incorporation also provides that certain parties or any of their managers officers directors equity holders members principals affiliates and subsidiaries other than us and our subsidiaries do not have any fiduciary duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries
We may issue additional shares of our Class A Common Stock or other equity securities of equal or senior rank in the future in connection with among other things future acquisitions repayment of outstanding indebtedness or under our 2021 Incentive Plan without stockholder approval in a number of circumstances
The trading market for our Class A Common Stock and public warrants will be influenced by the research and reports that industry or securities analysts may publish about us our business and operations our market or our competitors Our current securities and industry analysts may elect to drop their coverage of us and others may never publish research on us If no securities or industry analysts publish coverage of us the trading price and trading volume of our securities will likely be negatively impacted If any of the analysts who may cover us change their recommendation regarding our stock adversely or provide more favorable relative recommendations about our competitors the price of our securities will likely decline If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us we could lose visibility in the financial markets which could cause our trading price or trading volume of our securities to decline
We may amend the terms of the warrants in a manner that may be adverse to holders of the public warrants with the approval by the holders of at least 50 of the then outstanding public warrants As a result the exercise price of your warrants could be increased the exercise period could be shortened and the number of shares of Class A Common Stock purchasable upon exercise of a warrant could be decreased all without your approval
Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer Trust Company as warrant agent and us The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision An amendment requires the approval of at least 50 of the holders of the outstanding public warrants to make any change that adversely affects the interests of the registered holders of the public warrants
Accordingly we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50 of the outstanding public warrants approve of such amendment Although our ability to amend the terms of the public warrants with the consent of at least 50 of the outstanding public warrants is unlimited examples of such amendments could be amendments to among other things increase the exercise price of the warrants convert the warrants into cash shorten the exercise period or decrease the number of shares of Class A Common Stock purchasable upon exercise of a warrant
As of February 28 2025 we have 29 079 872 warrants outstanding that are exercisable to purchase one Class A Common Stock at 11 50 per share The outstanding warrants consist of 13 799 872 warrants offered in the IPO 10 280 000 private placement warrants issued in conjunction with the closing of the IPO and 5 000 000 Forward Purchase Warrants issued pursuant to the Forward Purchase Agreement When the warrants are exercised they will increase the number of issued and outstanding shares of Class A Common Stock and reduce the value of the Class A Common Stock These warrants expire five years after the Closing Date in February 2026 or earlier upon redemption or liquidation
We are a holding company with no material assets other than our ownership of the Common Units and RCUs and our managing member interest in E2open Holdings As a result we have no independent means of generating revenue or cash flow Our ability to pay taxes make payments under the Tax Receivable Agreement and pay dividends will depend on the financial results and cash flows of E2open Holdings Deterioration in the financial condition earnings or cash flow of E2open Holdings for any reason could limit or impair E2open Holdings ability to pay such distributions Additionally to the extent that we need funds and E2open Holdings is restricted from making such distributions under applicable law or regulation or under the terms of any financing arrangements or E2open Holdings is otherwise unable to provide such funds it could materially adversely affect our liquidity and financial condition
E2open Holdings is treated as a partnership for U S federal income tax purposes and as such generally will not be subject to any entity level U S federal income tax Instead taxable income will be allocated to holders of Common Units Accordingly we are required to pay income taxes on our allocable share of any net taxable income of E2open Holdings Under the terms of the Third Amended and Restated Limited Liability Company Agreement Third Company Agreement E2open Holdings is obligated to make tax distributions to holders of Common Units including us calculated at certain assumed tax rates In addition to income taxes we incur expenses related to our operations including payment obligations under the Tax Receivable Agreement which could be significant of which some will be reimbursed by E2open Holdings excluding payment obligations under the Tax Receivable Agreement We intend to cause E2open Holdings to make ordinary distributions on a pro rata basis and tax distributions which in certain circumstances may be made on a non pro rata basis to holders of Common Units in amounts sufficient to cover all applicable taxes relevant operating expenses payments under the Tax Receivable Agreement and dividends if any declared by us However as discussed below E2open Holdings ability to make such distributions may be subject to various limitations and restrictions including but not limited to retention of amounts necessary to satisfy E2open s obligations and restrictions on distributions that would violate any applicable restrictions contained in E2open Holdings debt agreements or any applicable law or that would have the effect of rendering E2open Holdings insolvent To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason such payments will be deferred and will accrue interest until paid provided however that nonpayment for a specified period may constitute a material breach of a material obligation under the Tax Receivable Agreement and therefore accelerate payments under the Tax Receivable Agreement which could be substantial
We anticipate that the distributions received from E2open Holdings may in certain periods exceed our actual tax liabilities and obligations to make payments under the Tax Receivable Agreement Our board of directors in its sole discretion may make any determination from time to time with respect to the use of any such excess cash so accumulated which may include among other uses paying dividends on our Class A Common Stock We have no obligation to distribute such cash or other available cash other than any declared dividend to our stockholders See Dividends in Part II Item 5 Market for Registrant s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities
Dividends on our common stock if any will be paid at the discretion of our board of directors which will consider among other things our available cash available borrowings and other funds legally available therefor considering the retention of any amounts necessary to satisfy our obligations that will not be reimbursed by E2open Holdings including taxes and amounts payable under the Tax Receivable Agreement and any restrictions in the applicable bank financing agreements Financing arrangements may include restrictive covenants that restrict our ability to pay dividends or make other distributions to our stockholders In addition E2open Holdings is generally prohibited under Delaware law from making a distribution to a member to the extent that at the time of the distribution after giving effect to the distribution liabilities of E2open Holdings with certain exceptions exceed the fair value of its assets E2open Holdings subsidiaries are generally subject to similar legal limitations on their ability to make distributions to E2open Holdings If E2open does not have sufficient funds to make distributions our ability to declare and pay cash dividends may also be restricted or impaired
Pursuant to the Tax Receivable Agreement associated with the Business Combination Agreement we are required to pay certain sellers 85 of the tax savings that we realize as a result of increases in tax basis in E2open Holdings These payments may be substantial as well as exceed actual tax benefits The timing of these payments may also be accelerated
The sellers sold E2open Holdings units for the consideration paid pursuant to the Business Combination Agreement and certain sellers may in the future exchange their Common Units for shares of our Class A Common Stock or cash pursuant to the Third Company Agreement These sales purchases redemptions and exchanges are expected to result in increases in our allocable share of the tax basis of the tangible and intangible assets of E2open Holdings which may increase for income tax purposes depreciation and amortization deductions to which we are entitled In addition as a result of certain mergers within the transaction we may inherit certain pre existing tax attributes
The Tax Receivable Agreement provides for the payment by us of 85 of certain tax benefits that we realize or are deemed realized as a result of the increases in tax basis described above utilization of pre existing tax attributes of certain sellers and realization of additional tax benefits attributable to payments under the Tax Receivable Agreement These payments are our obligations and not E2open Holdings The actual increase in our allocable share of E2open Holdings tax basis in their assets the availability of pre existing tax attributes of certain sellers as well as the amount and timing of any payments under the Tax Receivable Agreement will vary depending upon a number of factors including the timing of exchanges the market price of the Class A Common Stock at the time of the exchange the extent to which such exchanges are taxable and the amount and timing of the recognition of our income While many of the factors that will determine the amount of payments that we will make under the Tax Receivable Agreement are outside of our control we expect that the payments we will make under the Tax Receivable Agreement will be substantial and could have a material adverse effect on our financial condition Any payments we make under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason the unpaid amounts will be deferred and will accrue interest until paid however nonpayment for a specified period may constitute a material breach under the Tax Receivable Agreement and therefore accelerate payments due under the Tax Receivable Agreement as further described below Furthermore our future obligation to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition particularly in the case of an acquirer that cannot use some or all of the tax benefits that may be deemed realized under the Tax Receivable Agreement
Payments under the Tax Receivable Agreement will be based on our tax reporting positions and the IRS or another taxing authority may challenge all or any part of the tax basis increases the amount or availability of pre existing tax attributes of certain sellers and other tax positions that we take and a court may sustain such a challenge In the event that any tax benefits we initially claimed are disallowed as a result of such a challenge the Sellers and the exchanging holders will not be required to reimburse us for any excess payments that may have been previously made under the Tax Receivable Agreement Rather excess payments made to such holders will be netted against future cash payments we are required to make if any after the determination of such excess A challenge to any tax benefits claimed by us may not arise for a number of years following the time payments begin to be made with respect to such benefits or even if challenged soon thereafter the excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement and as a result there might not be sufficient future cash payments to net such excess As a result in certain circumstances we could make payments under the Tax Receivable Agreement in excess of our actual income or franchise tax savings which could materially impair our financial condition
Moreover the Tax Receivable Agreement provides that in the event that we exercise our early termination rights fail to make timely payment or materially breach the Tax Receivable Agreement or if there is a change of control our obligations under the Tax Receivable Agreement will accelerate and we will be required to make a lump sum cash payment to the sellers and or other applicable parties equal to the present value of all forecasted future payments that would have otherwise been made under the Tax Receivable Agreement The lump sum payment could be substantial and could exceed the actual tax benefits that we realize subsequent to such payment which may cause a material negative effect on our liquidity
Our software platform utilizes software licensed by third parties under any one or more open source licenses and we expect to continue to incorporate open source software in our business in the future There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our solutions Such a situation could result in infringement claims and the need to reengineer our solutions both of which could be costly depending on the specific circumstances In addition to license risk use of open source software may increase security vulnerabilities or infringing or broken code if not properly supported and managed
As a supplier of supply chain solutions we rely on and use software and data that we create as well as those from third party sources Often our clients are processing data through our solutions that we do not review While we generally attempt to protect against such risks with contractual obligations and indemnities despite our efforts we may receive claims that we have infringed a third party s intellectual property rights or breached a contract
As a result of claims against us regarding suspected infringement our technologies may be subject to injunction we may be required to pay damages or we may have to seek a license to continue certain practices which may not be available on reasonable terms if at all all of which may significantly increase our operating expenses or may require us to restrict our business activities and limit our ability to deliver our products and services and or certain features integrations and capabilities of our platform As a result we may also be required to develop alternative non infringing technology which could require significant effort and expense and or cause us to alter our products or services potentially negatively affecting our business Further many of our subscription agreements require us to indemnify our clients for third party intellectual property infringement claims so any alleged infringement by us resulting in claims against such clients would increase our liability Additionally our exposure to risks associated with various claims including the use of intellectual property may be increased as a result of acquisitions of other companies
We are subject to requirements under the U S Treasury Department s Office of Foreign Assets Control OFAC anti corruption anti bribery and similar laws such as the U S Foreign Corrupt Practices Act of 1977 as amended FCPA the U S domestic bribery statute contained in 18 U S C 201 the U S Travel Act the USA PATRIOT Act the U K Bribery Act 2010 and other anti corruption anti bribery and anti money laundering laws in countries in which we conduct activities Anti corruption and anti bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies their employees and agents from promising authorizing making offering or providing anything of value to a foreign official for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment As we increase our international sales and business our risks under these laws may increase In addition we may use third parties to sell access to our platform and conduct business on our behalf abroad We can be held liable for the corrupt or other illegal activities of such future third party intermediaries and our employees representatives contractors partners and agents even if we do not explicitly authorize such activities Any violation of economic and trade sanction laws export and import laws the FCPA or other applicable anti corruption laws or anti money laundering laws could also result in whistleblower complaints adverse media coverage investigations loss of export privileges or our license issued by OFAC severe criminal or civil sanctions and in the case of the FCPA suspension or debarment from U S government contracts any of which could have a materially adverse effect on our reputation business results of operations and prospects
We are subject to income taxes in the United States and various jurisdictions outside of the United States Significant judgment is often required in the determination of our worldwide provision for income taxes Any changes ambiguity or uncertainty in taxing jurisdictions administrative interpretations decisions policies and positions could materially impact our income tax liabilities We may also be subject to additional tax liabilities and penalties due to changes in non income based taxes resulting from changes in federal state or international tax laws changes in taxing jurisdictions administrative interpretations decisions policies and positions results of tax examinations settlements or judicial decisions changes in accounting principles changes to the business operations including acquisitions and the evaluation of new information that results in a change to a tax position taken in a prior period Any resulting increase in our tax obligation or cash taxes paid could adversely affect our cash flows and financial results Additionally new income sales use or other tax laws statutes rules regulations or ordinances could be enacted at any time Those enactments could harm our domestic and international business operations our business results of operations and financial condition
Further tax regulations could be interpreted changed modified or applied adversely to us These events could require us or our paying clients to pay additional tax amounts on a prospective or retroactive basis as well as require us or our paying clients to pay fines and or penalties and interest for past amounts deemed to be due If we raise our prices to offset the costs of these changes existing and potential future paying clients may elect not to purchase our products and services
As a multinational organization we may be subject to taxation in various jurisdictions around the world with increasingly complex tax laws the application of which can be uncertain Countries trading regions and local taxing jurisdictions have differing rules and regulations governing sales and use taxes and these rules and regulations are subject to varying interpretations that may change over time We collect and remit U S sales and value added tax VAT in several jurisdictions However it is possible that we could face sales tax or VAT audits and that our liability for these taxes could exceed our estimates as tax authorities could still assert that we are obligated to collect additional tax amounts from our paying clients and remit those taxes to those authorities We could also be subject to audits in states and international jurisdictions for which we have not accrued tax liabilities Further one or more state or foreign authorities could seek to impose additional sales use or other tax collection and record keeping obligations on us or may determine that such taxes should have but have not been paid by us Liability for past taxes may also include substantial interest and penalty charges Any successful action by state foreign or other authorities to compel us to collect and remit sales tax use tax or other taxes either retroactively prospectively or both could harm our business results of operations and financial condition
As our business continues to grow and if we become more profitable we anticipate that our income tax obligations could significantly increase If our existing tax credits and net operating loss carryforwards become fully utilized we may be unable to offset or otherwise mitigate our tax obligations to the same extent as in prior years This could have a material impact to our future cash flows or operating results
Under Section 382 of the Internal Revenue Code of 1986 as amended our ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if we experience an ownership change A Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5 of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three year period Similar rules may apply under state tax laws The Business Combination resulted in an ownership change with respect to our corporate subsidiaries which may limit our ability to utilize pre existing tax attributes of such corporate subsidiaries In addition future issuances of our common stock could cause an ownership change It is possible that any such ownership change or any future ownership change could have a material effect on the use of our net operating loss carryforwards or other tax attributes which could have a material adverse effect on our results of operations and profitability
Regulation related to the provision of services on the internet is increasing as federal state and foreign governments continue to adopt new laws and regulations addressing data privacy and the collection processing storage and use of personal information In some cases foreign data privacy laws and regulations such as the European Union s General Data Protection Regulation also governs the processing of personal information Further laws are increasingly aimed at the use of personal information for marketing purposes such as the European Union s e Privacy Directive and the country specific regulations that implement that directive Such laws and regulations are subject to differing interpretations and are inconsistent among jurisdictions These and other requirements could reduce demand for our products or restrict our ability to store and process data or in some cases impact our ability to offer our services and products in certain locations
In addition to government activity privacy advocacy and other industry groups have established or may establish new self regulatory standards that may place additional burdens on us Our clients may expect us to meet voluntary certification or other standards established by third parties If we are unable to maintain these certifications or meet these standards it could adversely affect our ability to provide our products to certain clients and could harm our business
Furthermore concerns regarding data privacy may cause our clients clients to resist providing the data necessary to allow our clients to use our service effectively Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales and adoption of our cloud based products
The future success of our business depends upon the continued use of the internet as a primary medium for commerce communication and business applications Federal state or foreign governmental bodies or agencies have in the past adopted and may in the future adopt laws or regulations affecting the use of the internet as a commercial medium The adoption of any laws or regulations that could reduce the growth popularity or use of the internet including laws or practices limiting internet neutrality could decrease the demand for or the usage of our products and services increase our cost of doing business and harm our results of operations Changes in these laws or regulations could require us to modify our platform or certain aspects of our platform in order to comply with these changes In addition government agencies or private organizations have imposed and may impose additional taxes fees or other charges for accessing the internet or commerce conducted via the internet These laws or charges could limit the growth of internet related commerce or communications generally or result in reductions in the demand for internet based products such as ours In addition the use of the internet as a business tool could be harmed due to delays in the development or adoption of new standards and protocols to handle increased demands of internet activity security reliability cost ease of use accessibility and quality of service Further our platform depends on the quality of our users access to the internet
In June 2018 the repeal of the Federal Communications Commission s FCC net neutrality rules took effect and returned to a light touch regulatory framework The prior rules were designed to ensure that all online content is treated the same by internet service providers and other companies that provide broadband services Additionally in September 2018 California enacted the California Internet Consumer Protection and Net Neutrality Act of 2018 making California the fourth state to enact a state level net neutrality law since the FCC repealed its nationwide regulations mandating that all broadband services in California must be provided in accordance with state net neutrality requirements The U S Department of Justice has sued to block the law going into effect and California has agreed to delay enforcement until the resolution of the FCC s repeal of the federal rules A number of other states are considering legislation or executive actions that would regulate the conduct of broadband providers We cannot predict whether the FCC order or state initiatives will be modified overturned or vacated by legal action of the court federal legislation or the FCC With the repeal of net neutrality rules in effect we could incur greater operating expenses which could harm our results of operations As the internet continues to experience growth in the number of users frequency of use and amount of data transmitted the internet infrastructure that we and our users rely on may be unable to support the demands placed upon it The failure of the internet infrastructure that we or our users rely on even for a short period of time could undermine our operations and harm our results of operations
Internet access is frequently provided by companies that have significant market power that could take actions that degrade disrupt or increase the cost of user access to our platform which would negatively impact our business The performance of the internet and its acceptance as a business tool has been harmed by viruses worms and similar malicious programs and the internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure If the use of the internet is adversely affected by these issues demand for our platform could decline
Our processes for assessing identifying and managing material risks from cybersecurity threats are embodied in our enterprise wide cybersecurity risk management program Cyber Risk Program which governs our cybersecurity oversight and management structure as well as our cybersecurity strategy and processes
The Risk Committee of our board of directors is responsible for the oversight of our Cyber Risk Program The Chief Legal Officer provides quarterly updates to the Risk committee regarding the status findings and developments within the Cyber Risk Program In addition the Risk Committee receives updates and presentations from the Senior Vice President Information Security and Compliance SVP at each Risk Committee meeting that cover among other things our cyber incidents and responses ongoing cyber threats material risks deployment of cybersecurity controls and risk mitigants engagement of third parties e g consultants and auditors and third party tools our cyber insurance coverages and our employee training programs The Risk Committee then reports to the full board of directors at each regular meeting of the board of directors Additionally at least one member of our board of directors possesses cybersecurity risk oversight experience which contributes to the board s ability to understand and evaluate cybersecurity related matters
The principal objectives of our Cyber Risk Program are to minimize the risks associated with cybersecurity threats to our business operations financial performance and financial condition and protect the confidential information intellectual property and other assets of E2open and those of our clients vendors partners employees and consumers that can be at risk due to cybersecurity threats to E2open
We have incorporated industry recognized cybersecurity frameworks and standards into our Cyber Risk Program including frameworks from the National Institute of Standards and Technology NIST and security control auditing protocols from the Center for Internet Security CIS and the International Organizations for Standardization ISO Recognizing that the nature of cybersecurity threats and the particular threat vectors we face continually change we continue to invest in updating and enhancing our Cyber Risk Program
Under our Cyber Risk Program our SVP and the cybersecurity staff along with the Cyber Response Team with input where appropriate from our third party advisors work to identify our cybersecurity threats assess the risks and deploy appropriate technologies and processes to mitigate the risks When cybersecurity incidents occur these resources work to manage through the incident utilizing advanced security tools and playbooks and in accordance with processes set out in our various policies and practice documents which include internal communications protocols to keep the executive team and where appropriate the Risk Committee and board of directors informed Pertinent policy and practice documents include among others our Crisis Response Plan which describes the detailed processes and procedures that should be followed in the event of a cybersecurity incident
The Cyber Risk Program is integrated into our overall risk management systems and processes Our risk management systems and processes comprise numerous components including published policies and procedures risk detection systems tools and protocols automated and human internal and external independent auditing management committee review defined lines of communications employee training engagement of outside advisors and experts assessment and utilization of both commercial and self insurance opportunities client contract standardization where possible legal review of vendor engagements and new products for regulatory compliance and regular operations reviews with the Chief Executive Officer and Risk Committee E2open utilizes the foregoing systems and processes to best ensure effective management of our risks and associated cybersecurity threats
As part of our Cyber Risk Program we engage outside independent auditors consultants and professional advisors We use independent auditors to certify compliance with internal control over financial reporting the American Institute of Certified Public Accountants Systems and Organization Controls SOC 2 security framework We also conduct reviews for compliance with data protection regulation such as Europe s GDPR and regulation of various U S states as the California Consumer Privacy Act CCPA We also engage industry leading cybersecurity service and systems providers to assist with protection from and detection of cybersecurity threats and incidents and our responses to them
Our cybersecurity team under the oversight of the SVP performs risk assessments on third party service providers and other third parties such as partner companies as well as third party software and hardware utilized in its operations that may have the potential to create cybersecurity threats to our data and operations Based on the results of these regular assessments including assessments made before engaging a third party we may decide to take action to address and mitigate certain risks or determine that the risk is not acceptable and terminate the relationship with the third party or determine not to engage a third party
See the risk factor entitled Cyber attacks and security vulnerabilities could result in serious harm to our reputation business and financial condition in Item 1A Risk Factors To date we have not identified any material cybersecurity threats or incidents that have materially affected our business strategy results of operations or financial condition However we cannot guarantee that future incidents will not have a material impact
Our data centers are operated through co location facilities where we provide our own equipment to be used in leased space While the data center space is leased we own all the equipment that sits within those data centers We also have managed service locations where we do not own any equipment and do not have access to the facilities A third party manages the data center operations and equipment We utilize and optimize data centers and public cloud services throughout the world to attain secure application availability at a minimum of 99 5 uptime infrastructure The following table sets forth our material technology infrastructure including location and function for our properties throughout the world all of which are leased
In 2014 Kewill a predecessor of BluJay entered into a software licensing and service contract with a customer that resulted in a dispute over Kewill s performance under the agreement In June 2020 prior to our acquisition of BluJay the customer filed suit BluJay and its external counsel considered the claims meritless and intended to file a counter claim for delinquent uncollected receivables At the time of the BluJay Acquisition in September 2021 an allowance for credit losses was recorded in purchase accounting against the uncollected receivables from this customer No further accrual was established for this litigation at the time of the acquisition or in subsequent periods through the first quarter of fiscal 2024 as in our judgment which was based on the advice of external legal counsel the claims were without merit Any loss beyond the uncollected receivables was not considered probable and the maximum exposure was believed to be immaterial In February 2022 consistent with the related contractual terms the case moved to binding arbitration Upon conclusion of the arbitration proceedings in August 2023 the arbitrator ruled against BluJay On September 14 2023 the parties agreed to a settlement for 17 8 million which resolved the matter and released us from all alleged claims The settlement was paid on September 20 2023
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
Our public warrants which have an exercise price of 11 50 per share and expire in February 2026 were previously listed on the NYSE under the symbols ETWO WT On March 24 2025 the staff of the NYSE Regulation determined to commence proceedings to delist our warrants and immediately suspended their trading These actions were pursuant to minimum trading price requirements contained in Section 802 01D of the Listed Company Manual As of March 25 2025 these warrants began trading on the OTC Markets under the ticker symbol OTC ETWOW As a result any over the counter market quotes reflect inter dealer prices without retail mark ups mark downs or commissions and may not represent actual transactions
As of February 28 2025 there were 29 079 872 warrants outstanding Each warrant entitles its holder to purchase one share of our Class A Common Stock at an exercise price of 11 50 per share The 10 280 000 private placement warrants became exercisable upon the Domestication The Forward Purchase Warrants became exercisable upon the effectiveness of our Form S 1 which was initially filed on March 5 2021 and became effective March 29 2021 The 13 799 872 public warrants became exercisable on April 28 2021 The private placement warrants public warrants and Forward Purchase Warrants expire five years after the Closing Date or earlier upon redemption or liquidation There were no warrants exercised during the fiscal years ended February 28 2025 February 29 2024 and February 28 2023
The E2open Parent Holdings Inc 2021 Omnibus Incentive Plan 2021 Incentive Plan is our only equity compensation plan We currently utilize the 2021 Incentive Plan to make equity and equity based incentive awards to officers employees directors and consultants For more information about the 2021 Incentive Plan see Note 23 Share Based Compensation in the Notes to the Consolidated Financial Statements
The following graph shows our cumulative total stockholder return for the period from June 15 2020 and ending on February 28 2025 June 15 2020 is the day the units and warrants began trading separately on the NYSE The graph also shows the cumulative total returns of the Russell 3000 index in which we are included and our peer group listed below
This graph shall not be deemed incorporated by reference by any general statement incorporated by reference to this Form 10 K into any filing under the Securities Act or Exchange Act except to the extent that we specifically incorporate this information by reference therein and shall not otherwise be deemed filed under either the Securities Act or Exchange Act
The following discussion should be read in conjunction with the consolidated financial statements and related notes in Item 8 Financial Statements of this 2025 Form 10 K This Item 7 contains forward looking statements that involve risks and uncertainties See Forward Looking Statements at the beginning of this 2025 Form 10 K
We are a world class end to end supply chain software platform that enables the world s largest companies to transform the way they make move and sell goods and services Our SaaS platform spans many key strategic and operational areas including channel planning global trade logistics and supply With a cloud native global SaaS platform purpose built for modern supply chains we connect manufacturing logistics channel and distribution partners as one multi enterprise network Our SaaS platform anticipates disruptions and opportunities to help companies improve efficiency reduce waste and operate sustainably In aggregate we serve clients in all major countries in the world across a wide range of end markets including consumer goods food and beverage manufacturing retail industrial and automotive aerospace and defense technology and transportation among others
We operate in what we believe is an attractive industry with strong secular tailwinds and a TAM which includes significant whitespace within our current client base This upsell opportunity within our existing client base is largely driven by their current technology solution which is often a combination of legacy point solutions and home grown applications which could be a combination of manual processes and spreadsheets As manufacturing continues to evolve supply chains have grown more complex creating the need for a modern cloud based solution We believe our cloud based end to end software platform offers a differentiated and more connected solution for clients that provides all the mechanisms needed to run a fully integrated supply chain solution with visibility at every point If our clients initially purchase portions of our software they can add on additional modules as the need arises
Our go to market strategy is focused on both expanding the adoption of our product portfolio with existing clients and the acquisition of new clients We primarily target our selling efforts on large enterprise organizations and sell our software primarily through a direct sales force enhanced by the additional go to market presence of our partners Our go to market strategy enables our sales force to develop deep long term relationships with existing and potential clients across the relevant functions from buying managers IT resources division leaders and C level executives Our go to market approach aligns with the client by engaging with them and their specific needs instead of selling a single product This permits us to dive into the true need and find the best solution instead of trying to make one product work for every client This alignment with the client enables us to sustain our high client retention and long client tenure as well as drive maximum spend within each client through an efficient focused sales model
Our sales and marketing organizations are comprised of field sales inside sales and sales development personnel and we organized these teams based on client size geography and industry Our main priority is understanding a client s primary need usually a specific piece of their supply chain in order to provide the correct solution within our software platform Once a client adopts our solution and sees firsthand the power of our unique platform we have the potential to cross sell additional products as well as expand into additional departments divisions and geographies with the same solution or additional solutions within our software platform
During the third and fourth quarters of fiscal 2025 first and third quarters of fiscal 2024 and second and fourth quarters of fiscal 2023 we experienced a significant decline in the market price of our Class A Common Stock and market capitalization In addition in certain of these quarters we experienced slowing growth and lowered projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in us determining that triggering events occurred and goodwill impairment assessments were performed for the respective quarters
During fiscal 2025 2024 and 2023 the fair value of E2open was calculated using a combination of the discounted cash flow method guideline public company method and guideline transaction method In each impairment the approaches generated similar results and indicated that the fair value of E2open s goodwill was less than its carrying amount and resulted in goodwill impairment charges totaling 614 1 million 1 097 7 million and 901 6 million in fiscal 2025 2024 and 2023 respectively
During the third and fourth quarters of fiscal 2025 and first and third quarters of fiscal 2024 we experienced a significant decline in the market price of our Class A Common Stock and market capitalization In addition in certain of these quarters we experienced slowing growth and lowered projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in us determining that triggering events occurred and indefinite lived intangible asset impairment assessments were performed for the respective quarters The fair value of the indefinite lived intangible asset was calculated using the relief from royalty payments method which was based on management s estimates of projected net sales and terminal growth rates taking into consideration market and industry conditions The assessments indicated that the fair value of E2open s indefinite lived intangible asset was less than its carrying amount therefore during the fiscal years ended February 28 2025 and February 29 2024 we recognized an impairment charge of 18 5 million and 34 0 million to intangible assets net for the indefinite lived trademark trade name respectively We did not have an impairment for intangible asset during the fiscal year ended February 28 2023 See Note 8 Intangible Assets Net to the Notes to the Consolidated Financial Statements
We generate revenue from the sale of subscriptions and professional services We recognize revenue when the client contract and associated performance obligations have been identified the transaction price has been determined and allocated to the performance obligations in the contract and the performance obligations have been satisfied
We offer cloud based on demand software solutions which enable our clients to have constant access to our solutions without the need to manage and support the software and associated hardware themselves We house the hardware and software in third party facilities and provide our clients with access to software solutions along with data security and storage backup recovery services and solution support
We charge primarily fixed annual subscription fees or in limited cases transaction fees based on the volume of transactions requested by clients Typically the volume based fees comprise a small percentage of this revenue source Our client contracts typically have a term of one to five years while our enterprise client contracts have an average term of approximately three years We recognize revenue ratably over the life of the contracts
For subscription based contracts we generally invoice in advance Subscription revenue is recognized ratably over the life of the contract For transactional based contracts we recognize revenue for these contracts when the performance obligation is fulfilled Transaction based contracts represented 2 2 and 4 of our revenue in the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively
Professional services revenue is derived primarily from fees for enabling services including consulting and deployment services for purchased solutions These services are often sold in conjunction with the sale of our solutions We provide professional services primarily on a time and materials basis but sometimes on a fixed fee basis Clients are invoiced for professional services either monthly in arrears or as with fixed fee arrangements in advance and upon reaching project milestones Professional services revenue is recognized over time For services that are contracted at a fixed price progress is generally measured based on labor hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations For services that are contracted on time and materials or a prepaid basis progress is generally based on actual labor hours expended These input methods e g hours incurred or expended and milestone completion are considered a faithful depiction of our efforts to satisfy services contracts as they represent the performance obligation consumed by the client and performed by us and therefore reflect the transfer of services to a client under contract
We enter into arrangements with multiple performance obligations comprised of subscriptions and professional services Arrangements with clients typically do not provide the client with the right to take possession of the software supporting the on demand solutions We primarily account for subscription and professional services revenue as separate units of accounting and allocate revenue to each deliverable in an arrangement based on a standalone selling price We evaluate the standalone selling price for each element by considering prices we charge for similar offerings size of the order and historical pricing practices Other revenue primarily includes perpetual license fees which are recognized upon delivery to the client
Revenues by geography are determined based on the region of our contracting entity which may be different than the region of the client or where the software solutions are being utilized or accessed United States revenue was approximately 85 84 and 83 during the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively No other country represented more than ten percent of total revenue during these periods
Cost of subscription revenue consists primarily of costs related to delivering our service and providing support to clients including personnel and related costs costs associated with data center operations and capacity fees paid to third parties to license their technology and depreciation expense directly related to delivering our solutions Cost of subscription revenue also includes the costs associated with our logistics as a service revenue which consists of costs related to managing a company s transportation network including truck rail ocean and air freight as well as inbound outbound logistics from production facilities to warehouses retailers and end users consumers We generally expense our cost of subscription revenue as we incur the costs
Cost of professional services and other revenue consists primarily of personnel and related travel costs the costs of contracted third party vendors and reimbursable expenses As our personnel are employed on a full time basis our cost of professional services is largely fixed in the short term while our professional services and other revenue may fluctuate leading to fluctuations in professional services and other gross profit We expense our cost of professional services and other revenue as we incur the costs
Research and development expenses primarily consist of personnel and related costs of our research and development staff costs of certain third party contractors depreciation amortization and other allocated costs Research and development expenses are expensed as incurred excluding the capitalization of internally developed software costs
Sales and marketing expenses primarily consist of personnel and related costs for our sales and marketing staff It also includes the costs of promotional events corporate communications online marketing solution marketing and other brand building activities in addition to depreciation amortization and other allocated costs We defer and amortize sales commissions that are incremental and directly related to obtaining client contracts in accordance with ASC 606 and ASC 340 40 Other Assets and Deferred Cost Contracts with Customers We amortize sales commissions over the period that products are expected to be delivered to clients including expected renewals We have determined this period to be four years beginning when costs are incurred Certain sales commissions that would have an amortization period of less than a year are expensed as incurred to sales and marketing expenses
General and administrative expenses primarily consist of personnel and related costs for our executive administrative finance information technology legal accounting investor relations and human resource staff It also includes professional fees expenses related to our board of directors and advisory board public company costs other corporate expenses depreciation amortization and other allocated costs
The restricted shares Common Units and deferred consideration payments are treated as a contingent consideration liability under ASC 805 Business Combination and valued at fair market value on the acquisition date and remeasured at each reporting date and adjusted if necessary 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 Any change in the fair value of the deferred consideration from the remeasurement was recorded in acquisition related expenses on the Consolidated Statements of Operations Any change in the fair value of the restricted shares and Common Units from the remeasurement will be recorded in gain loss from change in fair value of contingent consideration on the Consolidated Statements of Operations
The provision for income taxes consists of a deferred income tax benefit and current tax expense The current income taxes primarily result from our profitable operations in foreign subsidiaries which are subject to corporate income taxes in foreign jurisdictions plus a relatively immaterial amount of U S federal and state income taxes on our lower tier entities not offset by net operating loss carryforwards The deferred income tax benefit is primarily due to a decrease in overall outside basis difference in the partnership and the book tax difference realized from intangible amortization Certain deferred tax assets of E2open Parent Holdings Inc are offset by a valuation allowance while the deferred tax assets of certain other U S corporate tax consolidated groups and non U S jurisdictions remain offset by a full valuation allowance Realization of these deferred tax assets depends upon future earnings the timing and amount of which are uncertain Utilization of our net operating losses may be subject to annual limitations due to the ownership change rules under the Internal Revenue Code of 1986 as amended IRS Code and similar state provisions We have analyzed the effect of the IRS Code Section 382 for each of our acquisitions Based on analysis of acquired net operating losses and credits utilization of our net operating losses and research and development credits will be subject to annual limitations In the event of future changes in ownership the availability of net operating loss carryforwards could be further limited
Professional services and other revenue was 79 7 million in fiscal 2025 a 18 0 million or 18 decrease compared to 97 8 million in fiscal 2024 The decrease in professional services and other revenue was due to lower billable hours partially driven by a higher focus of resources on retention and client satisfaction and a decline in new bookings
Our subscriptions revenue as a percentage of total revenue increased to 87 for the fiscal year ended February 28 2025 from 85 for the fiscal year ended February 29 2024 This increase was primarily due to a decline in professional services revenue Our professional services and other revenue as a percentage of total revenue was 13 for fiscal 2025 compared to 15 for fiscal 2024 as professional services and other revenue declined
Cost of subscriptions was 145 7 million in fiscal 2025 a 0 3 million decrease compared to 146 0 million in fiscal 2024 This decrease was primarily driven by a 3 8 million decline in personnel costs and 2 8 million decrease in depreciation expense when compared to the prior year These decreases were partially offset by increases of 4 9 million in software costs 1 7 million for hosting costs and 1 0 million in share based compensation expense when compared to the prior year
Research and development expenses were 98 0 million in fiscal 2025 a 3 5 million or 3 decrease compared to 101 4 million in fiscal 2024 The decrease was primarily due to a 5 8 million decline in personnel costs due to higher research and development software capitalization an increased mix of offshore resources as well as a 1 2 million reduction in consulting expenses compared to the prior year These decreases were partially offset by a 2 1 million increase in depreciation expense mainly related to capitalized software costs and 1 0 million increase in share based compensation expense
Sales and marketing expenses were 79 3 million in fiscal 2024 a 8 4 million decrease compared to 87 7 million in fiscal 2024 The decrease was mostly driven by reductions of 2 6 million in marketing expenses 1 9 million in bad debt expense 1 6 million in software costs 1 2 million in personnel costs and 1 0 million in travel expenses when compared to the prior year These decreases were partially offset by a 1 0 million increase in share based compensation expense
General and administrative expenses were 86 2 million in fiscal 2025 a 21 8 million or 20 decrease compared to 108 0 million in fiscal 2024 The decrease was mainly a result of the 17 8 million legal settlement in fiscal 2024 associated with the unfavorable ruling related to a 2014 contract between Kewill a predecessor of BluJay and a customer regarding Kewill s performance under the agreement as noted above Additionally we incurred lower spend for personnel costs of 4 6 million consulting expenses of 5 2 million depreciation expense of 1 1 million and facilities costs of 2 3 million for such items as rent and building maintenance due to office closures resulting from moving to a more remote workforce These decreases were partially offset by 14 0 million of higher share based compensation expense with the majority of the increase related to awards for onboarding our Chief Executive Officer CEO when compared to the prior year
As indicated above goodwill impairment triggering events occurred during fiscal 2025 and 2024 resulting in the performance of goodwill impairment assessments The result of the impairment assessments was the realization of a 614 1 million and 1 097 7 million impairment charge in fiscal 2025 and 2024 respectively
As indicated above indefinite lived intangible asset triggering events occurred during fiscal 2025 and 2024 resulting in the performance of indefinite lived intangible impairment assessments The result of the impairment assessments was the realization of a 18 5 million and 34 0 million impairment charge in fiscal 2025 and 2024 respectively
Interest and other expense net was 99 3 million in fiscal 2025 a 3 1 million or 3 decrease compared to 102 5 million in fiscal 2024 The decrease in interest and other expense net was driven by lower interest rates on our debt in fiscal 2025 and higher interest income from money market funds in fiscal 2025 compared to fiscal 2024 partially offset by higher realized exchange losses in fiscal 2025 compared to fiscal 2024
We regularly evaluate the carrying value of our investment for impairment and whether any events or circumstances are identified that would significantly harm the fair value of the investment During the fourth quarter of fiscal 2025 we determined that there was substantial doubt about the private firm s ability to continue as a going concern As a result we determined that our investment had no value and should be fully impaired as of February 28 2025 This resulted in a 5 5 million impairment No impairments were previously taken related to this investment
During fiscal 2025 we recorded a gain of 5 6 million related to the change in the fair value of the tax receivable agreement liability including interest compared to 2 2 million during fiscal 2024 We have calculated the fair value of the Tax Receivable Agreement payments and identified the timing of the utilization of the tax attributes The Tax Receivable Agreement liability related to exchanges as of the Business Combination date is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in gain loss from change in tax receivable agreement liability in the Consolidated Statements of Operations in the period in which the event occurred
In addition under ASC 450 transactions with partnership unit holders after the acquisition date will result in additional Tax Receivable Agreement liabilities that are recorded on a gross undiscounted basis During fiscal 2025 and 2024 the Tax Receivable Agreement applicable to this guidance increased by 1 1 million and 2 2 million respectively
We recorded a gain of 14 1 million in fiscal 2025 a 0 8 million or 5 decrease compared to 14 9 million in fiscal 2024 for the change in fair value on the revaluation of our warrant liability associated with our warrants This change in fair value was related to such items as the change in our stock price the volatility of the stock price of our peer group changes in the risk free interest rate and expected exercise date of the warrants We are required to revalue the warrants at the end of each reporting period and reflect in the 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 recorded a gain of 12 9 million in fiscal 2025 a 1 4 million or 12 increase compared to 11 5 million in fiscal 2024 for the change in fair value on the revaluation of our contingent consideration associated with our restricted B 2 common stock This change in fair value was related to such items as the change in the volatility of the stock price of our peer group changes in the risk free interest rate and our expected stock price We are required to revalue the contingent consideration at the end of each reporting period or upon conversion and reflect in the 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
A discussion regarding our financial condition and results of operations for the fiscal year ended February 29 2024 as compared to the fiscal year ended February 28 2023 can be found in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10 K for the fiscal year ended February 29 2024 filed with the SEC on April 29 2024
This document includes Non GAAP gross profit Non GAAP gross margin EBITDA and Adjusted EBITDA which are non GAAP performance measures that we use to supplement our results presented in accordance with U S GAAP We believe these non GAAP measures are useful in evaluating our operating performance as they are similar to measures reported by our public competitors and are regularly used by security analysts institutional investors and other interested parties in analyzing operating performance and prospects These non GAAP measures are not intended to be a substitute for any U S GAAP financial measure and as calculated may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry
We calculate and define Non GAAP gross profit as gross profit excluding depreciation and amortization share based compensation and certain other non cash and non recurring items We define and calculate EBITDA as net income or losses excluding interest income or expense income tax expense or benefit depreciation and amortization and Adjusted EBITDA as further adjusted for the following items goodwill impairment charge indefinite lived intangible asset impairment charge impairment of cost method investment right of use assets impairment charge transaction related costs gain loss from change in the tax receivable agreement liability gain loss from changes in the fair value of the warrant liability and contingent consideration share based compensation and certain other non cash and non recurring items as described in the reconciliation below We also report Non GAAP gross profit and Adjusted EBITDA as a percentage of total 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 litigation settlements goodwill impairment charge indefinite lived intangible asset impairment charge impairment of cost method investment and right of use assets impairment charge non cash for example in the case of depreciation amortization gain loss from change in the tax receivable agreement liability gain loss from changes in the fair value of the warrant liability and contingent consideration and share based compensation or are not related to our underlying business performance for example in the case of interest income and expense There are limitations to non GAAP financial measures because they exclude charges and credits that are required to be included in the U S GAAP financial presentation The items excluded from U S GAAP financial measures such as net income or loss to arrive at non GAAP financial measures are significant components for understanding and assessing our financial performance As a result non GAAP financial measures should be considered together with and not alternatives to financial measures prepared in accordance with U S GAAP
Gross profit was 299 7 million for the fiscal year ended February 28 2025 a 18 0 million or 6 decrease compared to 317 7 million for the fiscal year ended February 29 2024 Subscriptions gross profit was down 2 while professional services and other gross profit was down 45 Gross margin was 49 and 50 for fiscal 2025 and 2024 respectively
Non GAAP gross profit was 416 0 million for the fiscal year ended February 28 2025 a 24 5 million or 6 decrease compared to 440 5 million for the fiscal year ended February 29 2024 The decrease in Non GAAP gross profit was primarily due to a decline in total revenue as well as 4 8 million in higher software costs and 2 1 million in additional hosting expenses in subscription costs of revenue These decreases in Non GAAP gross profit were partially offset by 7 4 million in lower personnel costs The Non GAAP gross margin was 69 for fiscal 2025 and 2024
EBITDA was a negative 448 2 million for fiscal 2025 a 505 9 million increase compared to a negative 954 2 million for fiscal 2024 EBITDA margin was a negative 74 for fiscal 2025 compared to a negative 150 for fiscal 2024 The increase in EBITDA and EBITDA margins was primarily related to the reduction in the impairment on goodwill of 483 6 million and indefinite lived intangible asset impairment of 15 5 million between fiscal 2025 and 2024 We also incurred a 17 8 million litigation settlement for the unfavorable arbitration ruling related to the Kewill customer case in fiscal 2024 Additionally there was a 17 3 million increase in share based compensation expense between periods mainly related to awards for onboarding our CEO These increases were partially offset by the decrease in gross profit
Adjusted EBITDA was 215 5 million for fiscal 2025 a 4 9 million or 2 decrease compared to 220 3 million for fiscal 2024 Adjusted EBITDA margin was 36 for fiscal 2025 compared to 35 for fiscal 2024 The decrease in Adjusted EBITDA was primarily a result of lower revenue and gross profit partially offset by lower operating expenses compared to the prior year
A discussion regarding our non GAAP financial measures for the fiscal year ended February 29 2024 as compared to the fiscal year ended February 28 2023 can be found under the heading Non GAAP Financial Measures in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10 K for the fiscal year ended February 29 2024 filed with the SEC on April 29 2024
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 197 4 million in cash and cash equivalents and 155 0 million of unused borrowing capacity under our 2021 Revolving Credit Facility as of February 28 2025 See Note 13 Notes Payable to the Notes to the 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 February 2021 E2open LLC our subsidiary entered into the Credit Agreement which provided for the 525 0 million term loan 2021 Term Loan and a 75 0 million revolver 2021 Revolving Credit Facility In September 2021 the Credit Agreement was amended to include a 380 0 million incremental term loan an increase in the letter of credit sublimit from 15 0 million to 30 0 million and an increase in the 2021 Revolving Credit Facility from 75 0 million to 155 0 million In April 2022 the Credit Agreement was amended to include a 190 0 million incremental term loan bringing our total borrowing under term loans to 1 095 0 million
The 2021 Revolving Credit Facility will mature on February 4 2026 E2open LLC can request increases in the revolving commitments and additional term loan facilities in minimum amounts of 2 0 million for each facility Principal payments are due on the Credit Agreement the last day of February May August and November The Credit Agreement is payable in quarterly installments of 2 7 million The Credit Agreement is payable in full on February 4 2028
On April 18 2025 E2open LLC signed an amendment to the Credit Agreement to extend the maturity date of the 2021 Revolving Credit Facility to February 4 2028 to coincide with the maturity date of the 2021 Term Loan Additionally the availability under the 2021 Revolving Credit Facility decreased from 155 0 million to 123 8 million
The 2021 Term Loan has a variable interest rate resulting in an interest rate of 7 94 and 8 95 as of February 28 2025 and February 29 2024 respectively which was based on SOFR plus 350 basis points and LIBOR plus 350 basis points respectively As of February 28 2025 and February 29 2024 the 2021 Term Loan had a principal balance outstanding of 1 056 3 million and 1 067 2 million respectively There were no outstanding borrowings no outstanding letters of credit and 155 0 million available borrowing capacity under the 2021 Revolving Credit Facility as of February 28 2025 and February 29 2024
Beginning in March 2023 we entered into zero cost interest rate collars to reduce our exposure to the variability of our interest rate associated with our outstanding debt By keeping interest rates within the executed bands or caps and floors of the collars we are able to reduce exposure to the interest rate risk Effective March 31 2023 we entered into an interest rate collar with a notional amount of 200 0 million and a maturity date of March 31 2026 The executed cap was 4 75 and the floor was 2 57 Effective April 6 2023 an additional interest rate collar was executed with a notional amount of 100 0 million and a maturity date of March 31 2026 The executed cap was 4 50 and the floor was 2 56
A discussion regarding our cash flows for the fiscal year ended February 29 2024 as compared to the fiscal year ended February 28 2023 can be found under the heading Cash Flows in Part II Item 7 Management s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10 K for the fiscal year ended February 29 2024 filed with the SEC on April 29 2024
Concurrently with the completion of the Business Combination we entered into the Tax Receivable Agreement with certain selling equity holders of E2open Holdings The Tax Receivable Agreement provides for the payment by the Company of 85 of certain tax benefits that are realized or deemed realized as a result of increases in tax utilization of pre existing tax attributes of certain sellers and realization of additional tax benefits attributable to payments under the Tax Receivable Agreement The term of the Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless we exercise our right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other acceleration events occur We will retain the benefit of the remaining 15 of the cash tax 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 During the year ended February 28 2025 we paid 1 8 million to Tax Receivable Agreement holders of E2open Holdings We did not make any payments to Tax Receivable Agreement holders of E2open Holdings prior to fiscal 2025
The liability related to the Tax Receivable Agreement was 63 4 million and 69 7 million as of February 28 2025 and February 29 2024 assuming 1 a corporate tax rate of 23 8 and 23 7 as of February 28 2025 and February 29 2024 respectively 2 no dispositions of corporate subsidiaries 3 no material changes in tax law and 4 we do not elect an early termination of the Tax Receivable Agreement However due to the uncertainty of various factors including a the timing and value of future exchanges b the amount and timing of our future taxable income c changes in our tax rate d no future dispositions of any corporate stock e changes in the tax law and f changes in the discount rate the likely tax savings we will realize and the resulting amounts we are likely to pay to the selling equity holders of E2open Holdings pursuant to the Tax Receivable Agreement are uncertain Interest accrued on the portion of the Tax Receivable Agreement liability recorded under ASC 805 at a rate of LIBOR plus 100 basis points through June 30 2023 Beginning July 1 2023 interest will accrue at SOFR plus the applicable spread for the quarter The portion of the Tax Receivable Agreement liability under ASC 450 is recorded on a gross undiscounted basis These transactions such as a conversion of Common Units to Class A Common Stock result in a change in the Tax Receivable Agreement liability and a charge to equity
The liability recorded on the balance sheet does not include an estimate of the amount of payments to be made if certain sellers exchanged their remaining interests in E2open Holdings for our common stock as this amount is dependent on several future variables including timing of future exchanges stock price at date of exchange tax attributes of the individual parties to the exchange and changes in future applicable federal and state tax rates
In addition if we exercise our right to terminate the Tax Receivable Agreement or certain other acceleration events occur we will be required to make immediate cash payments Such cash payments will be equal to the present value of the assumed future realized tax benefits based on a set of assumptions and using an agreed upon discount rate as defined in the Tax Receivable Agreement The early termination payment may be made significantly in advance of the actual realization if any of those future tax benefits Such payments will be calculated based on certain assumptions including that we have sufficient taxable income to utilize the full amount of any tax benefits subject to the Tax Receivable Agreement over the period specified therein The payments that we will be required to make will generally reduce the amount of overall cash flow that might have otherwise been available to us but we expect the cash tax savings we will realize from the utilization of the related tax benefits will exceed the amount of any required payments
As of February 28 2025 and February 29 2024 we had a current Tax Receivable Agreement liability of 4 2 million and 1 8 million which was recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheets The determination of current and long term is based on management s estimate of taxable income for the fiscal year and the determination that a Tax Receivable Agreement liability payment is due and payable within the next twelve months To the extent the estimate differs from actual results a reclass may be required for portions of the Tax Receivable Agreement liability between current and long term
We are entitled to receive quarterly tax distributions from E2open Holdings subject to limitations imposed by applicable law and contractual restrictions The cash received from such tax distributions will first be used by us to satisfy any tax liability and then make any payments required under the Tax Receivable Agreement
As of February 28 2025 and February 29 2024 there were an aggregate of 29 079 872 warrants outstanding Each warrant entitles its holder to purchase one share of our Class A Common Stock at an exercise price of 11 50 per share The warrants are recorded as a liability in warrant liability on the Consolidated Balance Sheets with a balance of 0 6 million and 14 7 million as of February 28 2025 and February 29 2024 respectively During the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 a gain of 14 1 million 14 9 million and 37 5 million was recognized in gain from change in fair value of the warrant liability in the Consolidated Statements of Operations respectively
The contingent consideration liability was 5 1 million and 18 0 million as of February 28 2025 and February 29 2024 respectively The fair value remeasurements resulted in a gain of 12 9 million 11 5 million and 16 0 million for the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively The contingent liability represents the Series B 2 common stock and Series 2 RCUs
Our non cancelable operating leases for our office spaces have various expiration dates through September 2031 Under these leases our undiscounted future cash flows utilized in the calculation of the lease liabilities as of February 28 2025 were 7 3 million for fiscal 2026 5 8 million for fiscal 2027 3 2 million for fiscal 2028 1 4 million for fiscal 2029 and 0 8 million for fiscal 2030 and 0 7 million thereafter These numbers include interest of 2 2 million
Our non cancelable financing lease arrangements relate to software and computer equipment and have various expiration dates through November 2028 We have the right to purchase the software and computer equipment anytime during the lease or upon lease completion Under these leases our undiscounted future cash flows utilized in the calculation of the lease liabilities as of February 28 2025 were 2 4 million for fiscal 2026 1 9 million for fiscal 2027 1 0 million for fiscal 2028 and 0 6 million for fiscal 2029 These numbers include interest of 0 6 million
On December 27 2024 we entered into a Master Service Agreement MSA with a third party which will provide certain business services transformation advisory services and digital solutions for us in an effort to drive long term transformation and efficiencies for our internal processes The term of the agreement is seven years The MSA can be terminated after twelve months with at least 180 days notice and payment of the applicable termination fee which can range from 2 5 million to 17 0 million depending upon reason and timing of the termination
Our 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
Subscriptions revenue which primarily consists of fees to provide clients cloud based access to our solution is recognized ratably over the life of the contract Subscriptions revenue includes logistics as a service which employs logistics professionals to manage a company s transportation network including truck rail ocean and air freight as well as inbound outbound logistics from production facilities to warehouses retailers and end users consumers Typically amounts that have been invoiced are recorded in accounts receivable and deferred revenue or revenue depending on whether the revenue recognition criteria have been met Transaction related revenue is recognized as the transactions occur
Professional services and other revenue is derived primarily from fees for enabling services including solution consulting and solution deployment These services are sold in conjunction with the sale of our solutions We provide professional services primarily on a time and materials basis but sometimes on a fixed fee basis Professional services revenue is recognized as the services are provided For services that are contracted at a fixed price progress is generally measured based on labor hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations For services that are contracted on time and materials or prepaid basis progress is generally based on actual labor hours expended These input methods e g hours incurred or expended and milestones completed are considered a faithful depiction of our efforts to satisfy services contracts as they represent the performance obligation consumed by the client and performed by us and therefore reflect the transfer of services to a client under such contracts
If our estimate of the total hours required for a performance obligation at a fixed price is inaccurate then our revenue recognition timing will be impacted as labor hours as a percentage of total estimated hours will be adjusted at the end of the contract resulting in additional or reduced revenue recognized as needed to account for the change in hours We adjust our estimated total hours and the appropriate revenue recognition each month Any adjustments should not have a material impact to our financial condition and results of operations Other revenue primarily includes perpetual license fees which are recognized upon delivery to the client
We enter into arrangements with multiple performance obligations comprising of subscriptions and professional services Arrangements with clients typically do not provide the client with the right to take possession of the software supporting the on demand solutions We primarily account for subscriptions and professional services revenue as separate units of accounting and allocate revenue to each deliverable in an arrangement based on a standalone selling price Judgment is required to determine the standalone selling price for each distinct performance obligation We evaluate the standalone selling price for each element by considering prices we charge for similar offerings size of the order and historical pricing practices If our judgment is incorrect for a particular item within an arrangement the timing of our revenue could be impacted between periods such that we would recognize revenue in a different period than we would have if a different judgment had been used however the revenue for the full arrangement would have the same result
Deferred revenue from subscriptions represents amounts collected from or invoiced to clients in advance of earning subscriptions revenue Typically we bill our subscriptions fees in advance of providing the service Deferred revenue from professional services represents revenue for time and material contracts where the revenue is recognized when milestones are achieved and accepted by the client for fixed price contracts
We measure and recognize compensation expense for all share based awards at fair value over the requisite service period We use the Black Scholes option pricing model or Monte Carlo simulation model to determine the grant date fair value of options The input variables for the Black Scholes model or Monte Carlo simulation model are the expected life of the option volatility of our peer group and our common stock risk free rate of return and expected dividend yield For restricted stock grants and certain performance based awards fair value is determined as the average price of our Class A Common Stock on the date of grant Certain performance based awards with a market condition are calculated using the Monte Carlo simulation model The determination of fair value of share based awards on the date of grant using an option pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables These variables include but are not limited to the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors
The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior The risk free interest rate is based on the U S Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date Volatility is based on historical and expected future volatility of our Class A Common Stock We have not historically issued any dividends and do not expect to in the future
For performance based awards where the number of shares includes a modifier to determine the number of shares earned at the end of the performance period the number of shares earned will depend on which range the performance attribute falls within over the performance period The performance attributes have been revenue growth bookings and Adjusted EBITDA or a combination thereof The performance based awards with a market condition are based on the closing price of our stock for 20 days out of 30 consecutive trading days during the three year performance period The fair value of the performance based shares with performance attributes is determined using an intrinsic value model or Monte Carlo simulation model In the period it becomes probable that the minimum threshold specified in the performance based award will be achieved we will recognize expense for the proportionate share of the total fair value of the award related to the vesting period that has already lapsed The remaining fair value of the award is expensed on an accelerated attribution method over the balance of the vesting period as the awards vest in increments If we determine that it is no longer probable that we will achieve the minimum performance threshold specified in the award all of the previously recognized compensation expense will be reversed in the period such determination is made
E2open Holdings entered into a Tax Receivable Agreement with certain selling equity holders of E2open Holdings that requires E2open to pay 85 of the tax savings that are realized because of increases in the tax basis in E2open Holdings assets This increase is either from the sale or exchange of Common Units for shares of Class A Common Stock or cash as well as from tax benefits attributable to payments under the Tax Receivable Agreement E2open will retain the benefit of the remaining 15 of the cash savings
We 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 pursuant to ASC 805 and relevant tax laws The Tax Receivable Agreement liability is 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 Consolidated Statements of Operations Interest accrued on the portion of the Tax Receivable Agreement liability recorded under ASC 805 at a rate of LIBOR plus 100 basis points through June 30 2023 Beginning July 1 2023 interest will accrue at SOFR plus the applicable spread for the quarter The portion of the Tax Receivable Agreement liability under ASC 450 Contingencies is recorded on a gross undiscounted basis These transactions such as a conversion of Common Units to Class A Common Stock result in a change in the Tax Receivable Agreement liability and a charge to equity
We now have a current Tax Receivable Agreement liability which is recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheets The determination of current and long term is based on management s estimate of taxable income for the fiscal year and the determination that a Tax Receivable Agreement liability payment is due and payable within the next twelve months To the extent the estimate differs from actual results a reclass may be required for portions of the Tax Receivable Agreement liability between current and long term
The calculation of the Tax Receivable Agreement liability includes a significant amount of judgment related to the timing and amount of Common Units sold or exchanged for shares of Class A Common Stock or cash forecasted operating results of E2open anticipated interest rates used to accrue interest on the liability and the estimated discount rate used in the present value calculation If our assumptions change or we experience significant volatility in our operating results forecast the fair value calculated from one balance sheet period to the next could be materially different
We had public and private placement warrants as well as warrants available under the Forward Purchase Agreement We classify as equity any equity linked contracts that 1 require physical settlement or net share settlement or 2 give us a choice of net cash settlement or settlement in our own shares physical settlement or net share settlement We classify as assets or liabilities any equity linked contracts that 1 require net cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside our control or 2 give the counterparty a choice of net cash settlement or settlement in shares physical settlement or net share settlement
For equity linked contracts that are classified as liabilities we record the fair value of the equity linked contract at each balance sheet date and record the change in the Consolidated Statements of Operations as a gain loss from change in fair value of warrant liability Our public warrant liability is valued using the binomial lattice pricing model Our 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 Our 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 rate expiration dates and risk free rates
The estimates used to calculate the fair value of our warrant liability changes at each balance sheet date are based on our stock price and other assumptions described above If our assumptions change or we experience significant volatility in our stock price or interest rates the fair value calculated from one balance sheet period to the next could be materially different
On March 24 2025 the staff of the NYSE Regulation determined to commence proceedings to delist our warrants ticker symbol ETWO WT from trading on the NYSE pursuant to Section 802 01D of the Listed Company Manual due to minimum trading price requirements and trading of these warrants was immediately suspended Our warrants have an exercise price of 11 50 and expire in February 2026 As of March 25 2025 our warrants began trading on the OTC Markets under the ticker symbol OTC ETWOW As a result any over the counter market quotes reflect inter dealer prices without retail mark ups mark downs or commissions and may not represent actual transactions
The contingent consideration liability is due to the issuance of restricted B 2 common stock and Series 2 RCUs of E2open Holdings as part of the Business Combination These shares and units were issued on a proportional basis to each holder of Class A shares in CCNB1 and Common Units of E2open Holdings
These restricted shares and Common Units are treated as a contingent consideration liability under ASC 805 and valued at fair market value on the acquisition date and will be remeasured at each reporting date and adjusted if necessary Our contingent consideration is valued using a Monte Carlo simulation model The assumptions used in preparing this model includes estimates such as volatility contractual terms discount rates dividend rates dividend yield and risk free interest rates Any change in the fair value of the restricted shares and Common Units from the remeasurement will be recorded in gain loss from change in fair value of contingent consideration on the Consolidated Statements of Operations
The estimates used to calculate the fair value of our contingent consideration changes at each balance sheet date based on our stock price operating results and other assumptions If our assumptions change or we experience significant volatility in our stock price or interest rates the fair value calculated from one balance sheet period to the next could be materially different
We account for income taxes under the asset and liability method Under this method deferred tax assets and liabilities are determined based on differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are measured using the enacted tax rates that are expected to be in effect when the differences reverse The effect on deferred tax assets and liabilities of a change in tax rates is recognized in our Consolidated Statements of Operations in the period that includes the enactment date Valuation allowances are established when necessary to reduce deferred tax assets to an amount that in the opinion of management is more likely than not to be realized
Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of acquired entities We perform a goodwill impairment test annually during the fourth quarter of the fiscal year and more frequently if an event or circumstance indicates that impairment may have occurred Triggering events that may indicate a potential impairment include but are not limited to a significant decline in our stock price macroeconomic conditions our overall financial performance company specific events such as a change in strategy or exiting a portion of the business significant adverse changes in clients demand or business climate and related competitive considerations
Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test The qualitative evaluation is an assessment of factors that includes but is not limited to the triggering events listed above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount If an entity determines that this is the case it is required to perform the quantitative goodwill impairment test to identify the potential goodwill impairment and measure the amount of the goodwill impairment loss to be recognized for the reporting unit if any If an entity determines that the fair value of a reporting unit is greater than its carrying amount the goodwill impairment test is not required
During the third and fourth quarters of fiscal 2025 first and third quarters of fiscal 2024 and second and fourth quarters of fiscal 2023 we experienced a significant decline in the market price of our Class A Common Stock and market capitalization In addition in certain of these quarters we experienced slowing growth and lowered projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in us determining that triggering events occurred and goodwill impairment assessments were performed for the respective quarters
During fiscal 2025 2024 and 2023 the fair value of E2open was calculated using a combination of the discounted cash flow method guideline public company method and guideline transaction method The discounted cash flow method was based on the present value of estimated future cash flows which were based on management s estimates of projected net sales net operating income margins and terminal growth rates taking into consideration market and industry conditions The discount rate used was based on the weighted average cost of capital adjusted for the risk size premium and business specific characteristics related to projected cash flows Under the guideline public company method the fair value was based on our current and forward looking earnings multiples using management s estimate of projected net sales and adjusted EBITDA margins with consideration of market premiums The unobservable inputs used to measure the fair value included projected net sales forecasted adjusted EBITDA margins the weighted average cost of capital the normalized working capital level capital expenditures assumptions profitability projections the determination of appropriate market comparison companies and terminal growth rates Under the guideline transaction method the fair value was based on pricing multiples derived from recently sold companies with similar characteristics to ours taking into consideration management s estimates of projected net sales and operating income margins
In each impairment the approaches generated similar results and indicated that the fair value of E2open s goodwill was less than its carrying amount for both the interim and annual assessments Therefore during fiscal 2025 2024 and 2023 we recognized impairment charges totaling 614 1 million 1 097 7 million and 901 6 million to goodwill respectively Given the ongoing macroeconomic and market uncertainties there is a reasonable possibility that we may recognize future impairment charges related to our goodwill
Any changes to the revenue growth rates net operating income margins forecasted adjusted EBITDA margins discount rate working capital levels capital expenditures or terminal growth rate could produce a materially different fair value for the Company The estimates used in our calculations are subject to change given the inherent uncertainty in predicting future results Additionally the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant As part of the goodwill impairment testing we also consider our market capitalization in assessing the reasonableness of total estimated fair value While we believe such assumptions and estimates are reasonable the actual results may differ materially from the projected amounts
We have intangible assets with both definite and indefinite useful lives Definite lived intangible assets are carried at cost less accumulated amortization and are amortized using the straight line method over their useful lives The straight line method approximates the manner in which cash flows are generated from the intangible assets
Trade names are the only indefinite lived assets that are not subject to amortization We test these indefinite lived intangible assets for impairment on an annual basis during the fourth quarter of the fiscal year or more frequently if an event occurs or circumstances change that indicate that the fair value of an indefinite lived intangible asset could be below its carrying amount We first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the indefinite lived intangible asset is less than its carrying amount If that is the case a quantitative assessment is performed The qualitative impairment test consists of comparing the fair value of the indefinite lived intangible asset determined using the relief from royalty method with its carrying amount An impairment loss would be recognized for the carrying amount in excess of its fair value
The definite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable We estimate the useful lives of our intangible assets and ratably amortize the value over the estimated useful lives of those assets If the estimates of the useful lives should change we will amortize the remaining book value over the remaining useful lives or if an asset is deemed to be impaired a write down of the value of the asset may be required at such time
During the third and fourth quarters of fiscal 2025 and first and third quarters of 2024 we experienced a significant decline in the market price of our Class A Common Stock and market capitalization In addition in certain of these quarters we experienced slowing growth and lowered our projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in us determining that triggering events occurred and indefinite lived intangible asset impairment assessments were performed for the respective quarters
The fair value of the indefinite lived intangible asset was calculated using the relief from royalty payments method which is based on management s estimates of projected net sales and terminal growth rates taking into consideration market and industry conditions The royalty rate used was based on royalty rates of companies with similar characteristics to E2open The discount rate used was based on the weighted average cost of capital adjusted for the risk size premium and business specific characteristics related to projected net sales
The assessments indicated that the fair value of E2open s indefinite lived intangible asset was less than its carrying amount therefore during the fiscal years ended February 28 2025 and February 29 2024 we recognized impairment charges of 18 5 million and 34 0 million to intangible assets net respectively for the indefinite lived trademark trade name respectively Given the ongoing macroeconomic and market uncertainties there is a reasonable possibility that we may recognize future impairments related to our indefinite lived intangible asset
Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain Critical estimates in valuing the intangible assets include but are not limited to forecasts of the expected future cash flows attributable to the respective assets anticipated growth in revenue from the acquired client and product base and the expected use of the acquired assets While we believe such assumptions and estimates are reasonable the actual results may differ materially from the projected amounts
We evaluate the recoverability of our long lived assets which consist principally of property and equipment acquired intangible assets with finite lives and right of use assets whenever events and circumstances indicate that the carrying amount of these assets may not be recoverable Recoverability of an asset is measured by comparing the carrying amount to the expected future undiscounted cash flows that the asset is expected to generate If that review indicates that the carrying amount of the long lived asset is not recoverable an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds its fair value Our estimates of cash flows used to assess impairment are subject to a high degree of judgment and may differ from actual cash flows due to among other things changes in our business plans market conditions operating performance and economic conditions We believe our estimates are reasonable however actual results may differ materially from the projected amounts
We evaluate acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets If the test is met the transaction is accounted for as an asset acquisition If the test is not met further determination is required as to whether or not we have acquired inputs and processes that have the ability to create outputs which would meet the definition of a business Significant judgment is required in the application of the test to determine whether an acquisition is a business combination or an acquisition of assets
We use the acquisition method of accounting for acquired businesses Under the acquisition method our financial statements reflect the operations of an acquired business starting from the completion of the acquisition The assets acquired and liabilities assumed are recorded at their respective estimated fair values at the date of the acquisition Any excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill
We have in the past and may in the future be exposed to certain market risks including interest rate foreign currency exchange and financial instrument risks in the ordinary course of our business Currently these risks are not material to our financial condition or results of operations but they may be in the future
We do not believe that inflation has had a material effect on our business financial condition or results of operations However if our costs were to become subject to significant inflationary pressures we may not be able to fully offset higher costs through price increases and our inability or failure to do so could potentially harm our business financial condition and results of operations
As of February 28 2025 we had 1 056 3 million outstanding under our 2021 Term Loan with a variable interest rate of 7 94 We had no outstanding borrowings under our 2021 Revolving Credit Facility The variable nature of our interest rates on the 2021 Term Loan exposes us to interest rate risk A hypothetical increase or decrease in this variable interest rate by 100 basis points would change our annual future interest expense by approximately 10 6 million as of February 28 2025
In order to effectively mitigate our exposure to increased changes in interest rates we have executed two zero cost interest rate collars during March 2023 Effective March 31 2023 we entered an interest rate collar with a notional amount of 200 0 million and a maturity date of March 31 2026 The executed cap was 4 75 and the floor was 2 57 Effective April 6 2023 an additional interest rate collar was executed with a notional amount of 100 0 million and a maturity date of March 31 2026 The executed cap was 4 50 and the floor was 2 56
We may continue to enter into interest rate collars and enter into interest rate swap agreements to reduce interest rate volatility However we may not maintain interest rate swaps or collars with respect to all of our variable rate debt and any swaps or collars we enter into may not fully mitigate our interest rate risk
Translation adjustments resulting from the process of translating foreign currency balance sheets into U S dollars are reported as a component of accumulated other comprehensive income loss Transaction gains and losses reflected in the functional currencies are charged to income or expense at the time of the transaction
As a result of the BluJay Acquisition our foreign operations have substantially increased resulting in significant revenues assets and liabilities denominated in foreign currencies The currencies of our operations are now the Australia dollar British pound Canadian dollar Danish krone the Euro Hong Kong dollar Indian rupee Malaysia ringgit People s Republic of China renminbi Peruvian sol 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 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 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
Financial instruments that potentially subject us to a concentration of credit risk consist primarily of cash and cash equivalents restricted cash and accounts receivable We deposit cash and cash equivalents with high quality financial institutions Accounts receivable are typically unsecured and are derived from sales of subscriptions and support as well as professional services principally to large creditworthy clients across a wide range of end markets including consumer goods food and beverage retail technology transportation among others Credit risk is concentrated primarily in North America Europe and parts of Asia Our credit risk is limited as no single client represents more than 10 of revenue Revenue generated from the United States represented 85 of total revenue during the fiscal year ended February 28 2025 while no other country represented more than 10 of total revenue We maintain an allowance for estimated credit losses based on management s assessment of the likelihood of collection
We have audited the accompanying consolidated balance sheets of E2open Parent Holdings Inc the Company as of February 28 2025 and February 29 2024 the related consolidated statements of operations comprehensive loss stockholders equity and cash flows for each of the three years in the period ended February 28 2025 and the related notes collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at February 28 2025 and February 29 2024 and the results of its operations and its cash flows for each of the three years in the period ended February 28 2025 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of February 28 2025 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated April 29 2025 expressed an unqualified opinion thereon
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that 1 relate to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matters below providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate
As of February 28 2025 the Company s goodwill balance was 1 214 million As described in Notes 2 and 7 to the consolidated financial statements the Company performs a goodwill impairment test annually during the fourth quarter of the fiscal year and more frequently if an event or circumstance indicates that an impairment may have occurred The Company is comprised of one reporting unit the level at which the goodwill impairment assessment is performed If the carrying value of the reporting unit exceeds its fair value an impairment loss is calculated as the difference between these amounts limited to the amount of goodwill allocated to the reporting unit During the third and fourth quarters of fiscal year 2025 a triggering event occurred related to significant declines in the market price of the Company s Class A Common Stock and market capitalization Reporting unit fair value was estimated by management using market and income approaches During the year ended February 28 2025 the Company recognized goodwill impairment charges totaling 614 million
Auditing the Company s goodwill impairment assessment involves subjective auditor judgment due to the significant estimation required in management s determination of the fair value of the reporting unit and the effort involved with the use of professionals with specialized skill and knowledge The estimates used in the discounted cash flow method are sensitive to significant assumptions including weighted average cost of capital projected revenue growth rates and projected adjusted EBITDA margins These assumptions are forward looking and could be affected by future economic and market conditions
We obtained an understanding evaluated the design and tested the operating effectiveness of relevant internal controls over the Company s goodwill impairment assessment process This included testing controls over the estimation process supporting the measurement of the fair value of the reporting unit including the valuation models and underlying assumptions used to develop the estimate
To test the estimated fair value of the reporting unit with involvement from our specialists we performed audit procedures that included among others evaluating the appropriateness of valuation methods selected and used testing the completeness and accuracy of underlying data used in the methods and evaluating the reasonableness of significant assumptions used by management related to weighted average cost of capital projected revenue growth rates and projected adjusted EBITDA margins For example we compared the significant assumptions used by management to current industry market and economic trends historical results and other relevant factors We also assessed the historical accuracy of management s valuation estimates and performed sensitivity analyses of significant assumptions used to evaluate the change in the fair value of the reporting unit resulting from changes in the significant assumptions
As of February 28 2025 the tax receivable agreement liability was 63 million The Company s operations are currently held in a lower tier partnership E2open Holdings LLC E2open Holdings The Company historically conducted its operations at the partnership level However it underwent a reorganization as part of its initial public offering and it now operates as a public corporation which owns interests in E2open Holdings the Up C Structure When the Company implemented its Up C structure it also put in place a tax receivable agreement in which it agreed to pay continuing members of E2open Holdings for cash tax savings it receives as a result of E2open Holdings unit exchanges Each time a continuing member of E2open Holdings exchanges units with the Company the Company receives an amortizable basis adjustment which increases its basis in the Company and creates future tax deductions The basis adjustments may result in a realized tax benefit and as a result the Company computed a tax receivable agreement liability due to each continuing member of E2open Holdings Significant inputs and assumptions were used to estimate the future expected payments including the timing of realization of the tax benefits
Auditing management s accounting for the tax receivable agreement liability that is measured at fair value on a reoccurring basis is especially challenging and judgmental due to the complex model used to calculate the tax receivable agreement liability and the effort involved with the use of professionals with specialized skill and knowledge The estimate is sensitive to the discount rate utilized which includes forward looking assumptions and could be affected by future economic and market conditions
We obtained an understanding evaluated the design and tested the operating effectiveness of the controls over the Company s tax receivable agreement liability process This included testing controls over the estimation process supporting the recognition and measurement of the tax receivable agreement liability including the underlying assumptions used to develop the estimate
Among other audit procedures performed we involved tax professionals to assist in evaluating the methodologies employed by management in calculating the tax receivable agreement liability including testing unit exchanges We tested the measurement of the tax receivable agreement liability by evaluating the calculation of the liability in accordance with the terms of the agreement With involvement from our specialists we evaluated the appropriateness of the valuation method selected for the discount rate used in the estimate
We have audited E2open Parent Holdings Inc s internal control over financial reporting as of February 28 2025 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework the COSO criteria In our opinion E2open Parent Holdings Inc the Company maintained in all material respects effective internal control over financial reporting as of February 28 2025 based on the COSO criteria
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of February 28 2025 and February 29 2024 the related consolidated statements of operations comprehensive loss stockholders equity and cash flows for each of the three years in the period ended February 28 2025 and the related notes and our report dated April 29 2025 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
CC Neuberger Principal Holdings I CCNB1 was a blank check company incorporated in the Cayman Islands on January 14 2020 for the purpose of effecting a merger share exchange asset acquisition share purchase reorganization or similar business combination with one or more businesses CCNB1 s sponsor was CC Neuberger Principal Holdings I Sponsor LLC a Delaware limited liability company Sponsor CCNB1 became a public company on April 28 2020 through an initial public offering
On February 4 2021 Closing Date CCNB1 and E2open Holdings LLC and its operating subsidiaries E2open Holdings completed a business combination Business Combination contemplated by the definitive Business Combination Agreement entered into on October 14 2020 Business Combination Agreement The Business Combination was accounted for as a business combination under Accounting Standards Codification ASC 805 Business Combination ASC 805 and due to the change in control was accounted for using the acquisition method with CCNB1 as the accounting acquirer and E2open Holdings as the accounting acquiree
In connection with the finalization of the Business Combination CCNB1 changed its name to E2open Parent Holdings Inc the Company or E2open 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 interest in the consolidated financial statements
The Company moved its headquarters from Austin Texas to the Addison Texas office effective September 16 2024 E2open is a world class connected supply chain software platform that enables the largest companies to transform the way they make move and sell goods and services With a cloud native global platform purpose built for modern supply chains E2open connects manufacturing logistics channel and distributing partners as one multi enterprise network E2open s software as a service SaaS platform anticipates disruptions and opportunities to help companies improve efficiency reduce waste and operate sustainably
These consolidated financial statements have been prepared in accordance with U S generally accepted accounting principles U S GAAP The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Investments in other companies are carried at cost All intercompany balances and transactions have been eliminated in consolidation
The preparation of the Company s consolidated financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported results of operations during the reporting period Such management estimates include allowance for credit losses goodwill and other long lived assets estimates of standalone selling price of performance obligations for revenue contracts with multiple performance obligations share based compensation valuation allowances for deferred tax assets and uncertain tax positions tax receivable agreement liability warrants contingent consideration contingencies and the accounting for business combinations These estimates are based on information available as of the date of the consolidated financial statements therefore actual results could differ from management s estimates
The Company operates as one operating segment Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker CODM who the Company has determined is its chief executive officer The CODM evaluates the Company s financial information and performance on a consolidated basis The Company operates with centralized functions and delivers its products in a similar way on an integrated cloud based platform
The Company accounts for business combinations in accordance with ASC 805 and accordingly the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition The excess of the purchase price over the estimated fair values is recorded as goodwill Some changes in the estimated fair values of the net assets recorded for acquisitions that qualify as measurement period adjustments within one year of the date of acquisition will change the amount of the purchase price allocable to goodwill All acquisition costs are expensed as incurred and in process research and development costs if any are recorded at fair value as an indefinite lived intangible asset and assessed for impairment thereafter until completion at which point the asset is amortized over its expected useful life The results of operations of acquired businesses are included in the consolidated financial statements beginning on the acquisition date
Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and cash equivalents restricted cash and accounts receivable The Company deposits cash and cash equivalents with high quality financial institutions Accounts receivable are typically unsecured and derived from sales of subscriptions and support as well as professional services principally to large creditworthy clients across a wide range of end markets including consumer goods food and beverage manufacturing retail technology and transportation among others Credit risk is concentrated primarily in North America Europe and parts of Asia The Company s credit risk is limited as no single client represents more than 10 of revenue Revenue generated from the United States represented 85 of total revenue during the fiscal year ended February 28 2025 while no other country represented more than 10 of total revenue The Company maintains an allowance for estimated credit losses based on management s assessment of the likelihood of collection
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents Cash and cash equivalents are stated at fair value The Company has 8 8 million in certificates of deposits in foreign accounts as of February 28 2025 The Company deposits cash with high credit quality institutions which typically exceed federally insured amounts The Company has not experienced any losses on its deposits
Restricted cash represents client deposits for the incentive payment program associated with the Company s channel shaping application The Company offers services to administer incentive payments to partners on behalf of the Company s clients The Company s clients deposit these funds into a restricted cash account with an offset included as a liability in channel client deposits payable in the Consolidated Balance Sheets
Accounts receivable net consists of accounts receivable and unbilled receivables which the Company collectively refers to as accounts receivable net of an allowance for credit losses Unbilled receivables represent revenue recognized for performance obligations that have been satisfied but for which amounts have not been billed which the Company also refers to as contract assets The Company s payment terms for trade accounts receivable typically require clients to pay within 30 to 90 days from the invoice date
Accounts receivable are initially recorded upon the sale of solutions to clients Credit is granted in the normal course of business without collateral Accounts receivable are stated net of an allowance for credit losses which represent estimated losses resulting from the inability of certain clients to make the required payments When determining the allowance for credit losses the Company takes several factors into consideration including the overall composition of the accounts receivable aging prior history of accounts receivable write offs and experience with specific clients
With the adoption of ASC 326 Financial Instruments Credit Losses the allowance for credit losses represents the best estimate of the lifetime expected credit losses based on client specific information historical loss rates and the impact of current and future conditions which include an assessment of client creditworthiness historical payment experience and the age of outstanding receivables The Company writes off accounts receivable when they are determined to be uncollectible Changes in the allowance for credit losses are recorded as provision for the allowance for expected credit losses and are included in sales and marketing expenses in the Consolidated Statements of Operations The Company evaluates the allowance for credit losses for the entire portfolio of accounts receivable on an aggregate basis due to the similar risk characteristics of its clients and historical loss patterns
Goodwill represents the excess of the purchase price over the estimated fair values of the net tangible and intangible assets of acquired entities The Company performs a goodwill impairment test annually during the fourth quarter of the fiscal year and more frequently if an event or circumstance indicates that an impairment may have occurred Triggering events that may indicate a potential impairment include but are not limited to a significant decline in the Company s stock price macroeconomic conditions the Company s overall financial performance company specific events such as a change in strategy or exiting a portion of the business significant adverse changes in clients demand or business climate and related competitive considerations
Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test The qualitative evaluation is an assessment of factors that includes but is not limited to the triggering events listed above to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount If an entity determines that this is the case it is required to perform the quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit if any If an entity determines that the fair value of a reporting unit is greater than its carrying amount the goodwill impairment test is not required As the Company has only one reporting unit the goodwill impairment assessment is performed at the Company level
The Company has intangible assets with both definite and indefinite useful lives Definite lived intangible assets are carried at cost less accumulated amortization and are amortized using the straight line method over their estimated useful lives The straight line method approximates the manner in which cash flows are generated from the intangible assets
Trade names are the only indefinite lived assets that are not subject to amortization The Company tests these indefinite lived intangible assets for impairment on an annual basis during the fourth quarter of the fiscal year or more frequently if an event occurs or circumstances change that indicate that the fair value of an indefinite lived intangible asset could be below its carrying amount The Company first performs a qualitative assessment to determine whether it is more likely than not that the fair value of the indefinite lived intangible asset is less than its carrying amount If this is the case a quantitative assessment is performed The qualitative impairment test consists of comparing the fair value of the indefinite lived intangible asset determined using the relief from royalty method with its carrying amount An impairment loss would be recognized for the carrying amount in excess of its fair value
Significant judgment is required in estimating the fair value of intangible assets and in assigning their respective useful lives The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain Critical estimates in valuing the intangible assets include but are not limited to forecasts of the expected future cash flows attributable to the respective assets anticipated growth in revenue from the acquired client and product base and the expected use of the acquired assets
Property and equipment are stated at cost Depreciation is computed using the straight line method over the estimated useful lives of the assets generally three to five years Leasehold improvements are amortized using the straight line method over the remaining lease term or the estimated lives of the assets if shorter Upon sale or retirement of assets the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets and any resulting gain or loss is reflected in the Consolidated Statements of Operations
The Company capitalizes certain software development costs incurred during the application development stage Software development costs include salaries and other personnel related costs including employee benefits and bonuses attributed to programmers software engineers and quality control teams working on the Company s software solutions The costs related to software development are included in property and equipment net in the Consolidated Balance Sheets
The Company evaluates the recoverability of its long lived assets which consist principally of property and equipment and acquired intangible assets with finite lives whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable Recoverability of an asset is measured by comparing the carrying amount to the expected future undiscounted cash flows that the asset is expected to generate If that review indicates that the carrying amount of the long lived asset is not recoverable an impairment charge is recorded for the amount by which the carrying amount of the asset exceeds its fair value
Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters and that do not have a readily determinable fair value are measured at cost less impairment and adjusted for qualifying observable price changes The Company s share of income or loss of such companies is not included in the Company s Consolidated Statements of Operations The Company periodically evaluates its investments for impairment due to declines considered to be other than temporary The primary indicators the Company utilizes to identify these events and circumstances are the minority investment s ability to remain in business by evaluating such items as the liquidity and rate of use of cash ability to secure additional funding and value of that additional funding If the Company determines that a decline in fair value is other than temporary then an impairment charge is recorded in other income expense in the Consolidated Statements of Operations and a new basis in the investments is established
Fair value is defined as the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date U S GAAP establishes a three tier fair value hierarchy which prioritizes the inputs used in measuring fair value The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities Level 1 measurements and the lowest priority to unobservable inputs Level 3 measurements
In some circumstances the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy In those instances the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement
The Company accounts for leases in accordance with ASC 842 Leases ASC 842 which requires lessees to recognize lease liabilities and right of use ROU assets on the balance sheet for most operating leases The Company 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 the Company recognizes the lease payments for short term leases on a straight line basis over the lease term
Operating lease liabilities reflect the Company s obligation to make future lease payments for real estate locations Lease terms are comprised of contractual terms Payments are discounted using the rate the Company would pay to borrow amounts equal to the lease payments over the lease term the Company s incremental borrowing rate The Company does not separate lease and non lease components for contracts in which the Company is 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 Consolidated Statements of Operations
The Company entered into a Tax Receivable Agreement with certain selling equity holders of E2open Holdings that requires E2open to pay 85 of the tax savings that are realized because of increases in the tax basis in E2open Holdings assets and certain acquired tax attributes in the Business Combination This increase is either from the sale or exchange of limited liability company interests of E2open Holdings Common Units for shares of Class A common stock or cash as well as from tax benefits attributable to payments under the Tax Receivable Agreement E2open will retain the benefit of the remaining 15 of the cash savings
The Company 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 pursuant to ASC 805 and relevant tax laws The Tax Receivable Agreement liability is revalued at the end of each reporting period with the gain or loss as well as the associated interest reflected in the gain loss from change in tax receivable agreement liability in the Consolidated Statements of Operations Interest accrued on the Tax Receivable Agreement liability at the London Interbank Offered Rate LIBOR plus 100 basis points through June 30 2023 As of July 1 2023 interest will accrue at the Secured Overnight Financing Rate SOFR plus the applicable spread for the quarter In addition under ASC 450 Contingencies any transactions with partnership unit holders after the acquisition date will result in additional Tax Receivable Agreement liabilities which will be recorded on a gross undiscounted basis These transactions such as a conversion of Common Units to Class A common stock result in a change in the Tax Receivable Agreement liability and a charge to equity
The Company has public and private placement warrants as well as warrants available under the Forward Purchase Agreement dated as of April 28 2020 by and between CCNB1 and Neuberger Berman Opportunistic Capital Solutions Master Fund LP The Company classifies as equity any equity linked contracts that 1 require physical settlement or net share settlement or 2 give the Company a choice of net cash settlement or settlement in the Company s own shares physical settlement or net share settlement The Company classifies as assets or liabilities any equity linked contracts that 1 require net cash settlement including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company s control or 2 give the counterparty a choice of net cash settlement or settlement in shares physical settlement or net share settlement
For equity linked contracts that are classified as liabilities the Company records the fair value of the equity linked contracts at each balance sheet date and records the change in the statements of operations as a gain loss from change in fair value of warrant liability The Company s public warrant liability is valued using a binomial lattice pricing model The Company s private placement warrants are valued using a binomial lattice pricing model when the warrants are subject to the make whole table or otherwise are valued using a Black Scholes pricing model The Company s 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 rates
The valuation methodologies for the warrants and forward purchase agreement included in warrant liability include certain significant unobservable inputs resulting in such valuations classified as Level 3 in the fair value measurement hierarchy The Company assumed a volatility based on the implied volatility of the public warrants and the Company s peer group The Company also assumed no dividend payout
The contingent consideration liability is due to the issuance of restricted Series B 2 common stock and Series 2 restricted common units 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
These restricted shares and Common Units are treated as a contingent consideration liability under ASC 805 and valued at fair market value on the acquisition date and remeasured at each reporting date and adjusted if necessary The assumptions used in preparing this model include estimates such as volatility contractual terms discount rates dividend yield and risk free interest rates Any change in the fair value of the restricted shares and Common Units from the remeasurement will be recorded in gain loss from change in fair value of contingent consideration on the Consolidated Statements of Operations
The Company began a self insurance group medical program as of January 1 2022 The program contains individual stop loss thresholds of 175 000 per incident and aggregate stop loss thresholds based upon the average number of employees enrolled in the program throughout the year The amount in excess of the self insured levels is fully insured by third party insurers Liabilities associated with this program are estimated in part by considering historical claims experience and medical cost trends
The Company includes service level commitments to its clients guaranteeing certain levels of uptime reliability and performance and permitting those clients to receive credits in the event that the Company fails to meet those levels To date the Company has not incurred any material costs as a result of such commitments and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements The Company has also agreed to indemnify its directors and executive officers for costs associated with any fees expenses judgments fines and settlement amounts incurred in any action or proceeding to which any of those persons is or is threatened to be made a party by reason of service as a director or officer The Company maintains director and officer insurance coverage that may enable the Company to recover a portion of any future amounts paid The Company s arrangements include provisions indemnifying clients against liabilities if the Company s products infringe a third party s intellectual property rights The Company has not incurred any costs as a result of such indemnifications and has not accrued any liabilities related to such obligations in the accompanying consolidated financial statements
Noncontrolling interest represents the portion of E2open Holdings that the Company controls and consolidates but does not own The Company recognizes each noncontrolling holder s respective share of the estimated fair value of the net assets at the date of formation or acquisition Noncontrolling interest is subsequently adjusted for the noncontrolling holder s share of additional contributions distributions and their share of the net earnings or losses of each respective consolidated entity The Company allocates net income or loss to noncontrolling interest based on the weighted average ownership interest during the period The net income or loss that is not attributable to the Company is reflected in net income loss attributable to noncontrolling interest in the Consolidated Statements of Operations The Company does not recognize a gain or loss on transactions with a consolidated entity in which it does not own 100 of the equity but the Company reflects the difference in cash received or paid from the noncontrolling interest carrying amount as additional paid in capital
Certain limited partnership interests including Common Units are exchangeable into the Company s Class A common stock Class A common stock issued upon exchange of a holder s noncontrolling interest is accounted for at the carrying value of the surrendered limited partnership interest and the difference between the carrying value and the fair value of the Class A common stock issued is recorded to additional paid in capital
Advertising costs include expenses associated with the promotion of the Company s brand products and services to its clients These costs include the new corporate branding in fiscal 2023 digital and social marketing related to the Company s brand and website company store integrated marketing experience on site client meeting and sponsorship of events Advertising costs are expensed as incurred and included in sales and marketing expenses in the Consolidated Statements of Operations Advertising expenses were 8 0 million 10 5 million and 16 2 million for the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively
Acquisition related expenses consist of third party accounting legal investment banking fees severance facility exit costs travel expenses and other expenses incurred solely to prepare for and execute the acquisition and integration of a business Additionally the expenses related to the strategic alternatives review announced in March 2024 are included in acquisition related expenses These costs are expensed as incurred
The Company measures and recognizes compensation expense for all share based awards at fair value over the requisite service period The Company uses the Black Scholes option pricing model or Monte Carlo simulation model to determine the grant date fair value of options For restricted stock grants and certain performance based awards fair value is determined as the average price of the Company s Class A common stock par value 0 0001 per share Class A Common Stock on the date of grant Certain performance based awards are also calculated using the Monte Carlo simulation model The determination of fair value of share based awards on the date of grant using an option pricing model is affected by the stock price as well as by assumptions regarding a number of subjective variables These variables include but are not limited to the expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors
The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior The risk free interest rate is based on the U S Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date Volatility is based on the average of historical and implied volatility of comparable companies from a representative peer group based on industry and market capitalization data as well as the Company s own stock volatility The Company has not historically issued any dividends and does not expect to in the future
All options will be issued on the fifth day following the approval date using the closing stock price on the fifth business day as the exercise price and to calculate the number of options to be issued If the fifth business day following approval falls within four business days before and one business day after the filing or furnishing of a report with the U S Securities and Exchange Commission SEC that contains material non public information MNPI then the options will be granted on the third business day following the release of the MNPI
For performance based awards where the number of shares includes a modifier to determine the number of shares earned at the end of the performance period the number of shares earned will depend on which range the performance attribute falls within over the performance period The performance attributes have been revenue growth bookings and Adjusted EBITDA or a combination thereof The fair value of the performance based shares with the performance attributes is determined using an intrinsic value model or Monte Carlo simulation model In the period it becomes probable that the minimum threshold specified in the performance based award will be achieved the Company recognizes expense for the proportionate share of the total fair value of the award related to the vesting period that has already lapsed The remaining fair value of the award is expensed on a straight line basis over the balance of the vesting period If the Company determines that it is no longer probable that it will achieve the minimum performance threshold specified in the award all previously recognized compensation expense will be reversed in the period such determination is made
For RSUs issued within four business days before and one business day after the filing or furnishing of a report with the SEC that contains MNPI the Company will use a 60 day average stock price to determine the number of shares to issue For RSUs issued outside this window the closing stock price on the date of grant will be used to determine the number of shares to issue
The Company s reporting currency is the U S dollar The functional currency of most of the Company s foreign subsidiaries is the applicable local currency although the Company has several subsidiaries with functional currencies that differ from their local currencies of which the most notable exception is the subsidiary in India whose functional currency is the U S dollar Assets and liabilities are translated into U S dollars at the exchange rate in effect at the consolidated balance sheet date Operating accounts are translated at an average rate of exchange for the respective accounting periods Translation adjustments resulting from the process of translating foreign currency financial statements into U S dollars are reported as a component of accumulated other comprehensive income loss Accumulated foreign currency translation adjustments are reclassified to net income loss when realized upon sale or upon complete or substantially complete liquidation of the investment in the foreign entity
The Company has international operations that expose it to potentially adverse movements in foreign currency exchange rates To reduce the exposure to foreign currency rate changes on forecasted operating expenses the Company enters into hedges in the form of foreign currency forward contracts related to changes in the U S dollar foreign currency relationship The Company does not use foreign currency forward contracts for speculative or trading purposes The Company s foreign currency forward contracts are governed by an International Swaps and Derivatives Association master agreement that generally includes standard netting arrangements
The Company is exposed to credit loss in the event of non performance by counterparties to the foreign currency forward contracts The Company actively monitors its exposure to credit risk enters into foreign exchange forward contracts with high credit quality financial institutions and mitigates credit risk in hedge transactions by permitting net settlement of transactions with the same counterparty The Company has not experienced any instances of non performance by any counterparties
The assets or liabilities associated with the forward contracts are recorded at fair value in prepaid expenses and other current assets other noncurrent assets accounts payable and accrued liabilities or other noncurrent liabilities in the Consolidated Balance Sheets The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for hedge accounting The cash flow impact upon settlement of the derivative contracts will be included in net cash from operating activities in the Consolidated Statements of Cash Flows
To receive hedge accounting treatment all hedging relationships are formally documented at the inception of the hedge and the hedges must be highly effective in offsetting changes in future cash flows on the hedged transactions The related gains or losses resulting from changes in fair value of these hedges are initially reported net of tax as a component of other comprehensive income loss in stockholders equity and reclassified into operating expenses when the hedge is settled
The Company may also enter into foreign exchange forward contracts that are not designated as hedging instruments for accounting purposes Changes in the fair value of the foreign exchange forward contracts not designated as hedging instruments will be reported in net income loss as part of other income expense
The Company is exposed to interest rate risk on its floating rate debt The Company may enter into interest rate collar agreements to effectively mitigate a portion of its exposure to changes in interest rates The principal objective of entering into interest rate collar agreements is to reduce the variability of interest payments associated with the floating rate debt The interest rate collars will be designated as cash flow hedges as they effectively convert the notional value of the Company s variable rate debt to a fixed rate if the variable rate of the Company s debt is outside of the collars floor and ceiling rates including a spread on the underlying debt Changes in the fair value of interest rate collar agreements designated as cash flow hedges will be recorded as a component of accumulated other comprehensive income loss within stockholders equity and settled to interest expense over the term of the contract The Company may also enter into interest rate collar agreements that are not designated as hedging instruments for accounting purposes Changes in the fair value of interest rate collar agreements not designated as hedging instruments will be reported in net earnings loss as part of interest expense
Comprehensive loss includes net loss as well as other changes in stockholders equity that result from transactions and economic events other than those with stockholders The Company s elements of other comprehensive income loss are changes in the fair value of foreign currency forward contracts changes in the fair value of interest rate agreements and cumulative foreign currency translation adjustments
The Company capitalizes underwriting legal and other direct costs incurred related to the issuance of debt which are included in notes payable in the Consolidated Balance Sheets Deferred financing costs related to notes payable are amortized to interest expense over the terms of the related debt using the effective interest method Upon the extinguishment of the related debt any unamortized deferred financing costs are immediately recorded to gain loss on extinguishment of debt
The Company accounts for income taxes under the asset and liability method Under this method deferred tax assets and liabilities are determined based on differences between the consolidated financial statement carrying amounts and tax bases of assets and liabilities and operating loss and tax credit carryforwards and are measured using the enacted tax rates that are expected to be in effect when the differences reverse The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date Valuation allowances are established when necessary to reduce deferred tax assets to an amount that in the opinion of management is more likely than not to be realized
The Company recognizes revenue in accordance with ASC 606 Revenue from Contracts with Customers ASC 606 and all the related amendments The Company generates revenue from the sale of subscriptions and professional services The Company recognizes revenue when the client contract and associated performance obligations have been identified the transaction price has been determined and allocated to the performance obligations in the contract and the performance obligations have been satisfied The Company recognizes revenue net of any taxes collected from clients which are subsequently remitted to governmental authorities
The Company offers cloud based on demand software solutions which enable its clients to have constant access to its solutions without the need to manage and support the software and associated hardware themselves The Company houses the hardware and software in third party facilities and provides its clients with access to software solutions along with data security and storage backup and recovery services and solution support
Professional services and other revenue is derived primarily from fees for enabling services including consulting and deployment services for purchased solutions These services are sold in conjunction with the sale of the Company s solutions The Company provides professional services primarily on a time and materials basis but also on a fixed fee basis Clients are invoiced for professional services either monthly in arrears or as with fixed fee arrangements in advance and upon reaching project milestones Professional services revenue is recognized over time For services that are contracted at a fixed price progress is generally measured based on labor hours incurred as a percentage of the total estimated hours required for complete satisfaction of the related performance obligations For services that are contracted on time and materials or prepaid basis progress is generally based on actual labor hours expended These input methods e g hours incurred or expended and milestone completion are considered a faithful depiction of the Company s efforts to satisfy services contracts as they represent the performance obligation consumed by the client and performed by the Company and therefore reflect the transfer of services to a client under such contracts
The Company enters into arrangements with multiple performance obligations comprising of subscriptions and professional services Arrangements with clients typically do not provide the client with the right to take possession of the software supporting the on demand solutions The Company primarily accounts for subscriptions and professional services revenue as separate units of accounting and allocates revenue to each deliverable in an arrangement based on a standalone selling price The Company evaluates the standalone selling price for each element by considering prices the Company charges for similar offerings size of the order and historical pricing practices Other revenue primarily includes perpetual license fees which are recognized upon delivery to the client
The Company defers and amortizes sales commissions that are incremental and directly related to obtaining client contracts in accordance with ASC 606 and ASC 340 40 Other Assets and Deferred Cost Contracts with Customers ASC 340 40 The Company amortizes sales commissions over the period that products are expected to be delivered to clients including expected renewals The Company determined this period to be four years beginning when costs are incurred Sales commissions that would have an amortization period of less than a year are expensed as incurred to sales and marketing expenses
In March 2020 the Financial Accounting Standards Board FASB issued Accounting Standards Update 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 expedients and exceptions for applying U S GAAP to contracts hedging relationships and other transactions affected by reference rate reform if certain criterion are met On January 7 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 the Company s debt instruments that may be modified as a result of the reference rate reform The optional expedients and exceptions can be applied to contract modifications made until December 31 2024 During fiscal 2024 the Company transitioned its debt instruments from LIBOR to SOFR and its Tax Receivable Agreement liability from LIBOR plus 100 basis points to SOFR plus the applicable spread for the quarter The change in interest rates on the debt and Tax Receivable Agreement liability did not have a material effect on the Company s financial position or results of operations
In November 2023 the FASB issued ASU 2023 07 Segment Reporting Topic 280 Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses ASU 2023 07 expands public entities segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss an amount and description of its composition for other segment items and interim disclosures of a reportable segment s profit or loss and assets All disclosure requirements of ASU 2023 07 are required for entities with a single reportable segment ASU 2023 07 is effective for fiscal years beginning after December 15 2023 and interim periods for fiscal years beginning after December 15 2024 and should be applied on a retrospective basis to all periods presented The Company adopted ASU 2023 07 as of February 28 2025 Additional disclosures were provided in Note 27 Segments and the adoption did not have a material impact on the consolidated financial statements
In December 2023 the FASB issued ASU 2023 09 Income Taxes Topic 740 Improvements to Income Tax Disclosures to enhance income tax information primarily through changes in the rate reconciliation and income taxes paid information ASU 2023 09 also requires income loss from continuing operations before income taxes expense benefit to be separated between domestic and foreign and income tax expense benefit from continuing operations to be separated between federal state and foreign ASU 2023 09 is effective for annual periods beginning after December 15 2024 on a prospective basis Early adoption is permitted The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements or disclosures
In November 2024 the FASB issued ASU 2024 03 Disaggregation of Income Statement Expenses DISE which requires an entity to disclose in the footnotes information at each interim and annual reporting period information about expenses by the nature of the expense Entities are required to include the following relevant expense captions purchase of inventory employee compensation depreciation intangible asset amortization and depreciation depletion and amortization recognized as part of oil and gas producing activities ASU 2024 03 is effective for annual periods beginning after December 15 2026 and interim periods beginning after December 15 2027 on a prospective basis with the option for retrospective application Early adoption is permitted The Company will be required to have additional disclosures but it does not expect the adoption of this standard to have a material impact on the consolidated financial statements or disclosures
On March 2 2022 E2open LLC acquired all of the issued and outstanding membership interests of Logistyx Technologies LLC a private limited liability company which connects top retailers manufacturers and logistics providers to more than 550 in network carriers with strategic parcel shipping and omni channel fulfillment technology Logistyx The purchase price was 185 million with an estimated fair value of 183 4 million including 90 million paid in cash at closing Logistyx Acquisition An additional 95 million which was subject to standard working capital adjustments and other contractual provisions was paid in two installments on May 31 2022 and September 1 2022 The Company had the option to finance the remaining payments at its discretion through cash or a combination of cash and Class A Common Stock The May 31 2022 payment of 37 4 million was paid in cash
On September 1 2022 E2open LLC made a cash payment of 54 0 million to Logistyx as the final installment payment for the Logistyx Acquisition which reflected a working capital adjustment of 3 6 million The Logistyx sellers disputed the working capital adjustment pursuant to the terms of the Membership Interest Purchase Agreement During October 2022 the parties agreed to a working capital adjustment of 2 6 million The additional 1 1 million payment for working capital was made to Logistyx on December 5 2022
The Company incurred 4 1 million 0 7 million as of February 28 2022 of expenses directly related to the Logistyx Acquisition through February 28 2023 which are included in acquisition related expense in the Condensed Consolidated Statements of Operations Included in these expenses were 1 6 million acquisition related advisory fees which were incurred on March 2 2022 At the closing of the Logistyx Acquisition E2open LLC paid 0 5 million of acquisition related advisory fees and other expenses related to the Logistyx Acquisition on behalf of Logistyx These expenses were part of the purchase price consideration and not recognized as expense in E2open LLC s or Logistyx s Condensed Consolidated Statements of Operations
The acquisition in September 2021 of BluJay TopCo Limited a private limited liability company which owned BluJay Solutions a cloud based logistics execution platform company BluJay resulted in related party relationships between the Company and BluJay and its subsidiaries BluJay Sellers A continued affiliation exists as certain BluJay Sellers have the option to have one member on E2open s board of directors
The Company entered into the Investor Rights Agreement with the completion of the Business Combination The director appointment rights under the Investor Rights Agreement will terminate as to a party when such party together with its permitted transferees has less than certain ownership thresholds with respect to the affiliates of Insight Partners the greater of 33 of the economic interests in the Company that such affiliates of Insight Partners owned immediately after the Closing Date and 2 of the Company s voting securities and with respect to CC Capital on behalf of the Sponsor less than 17 of the economic interests in the Company that it owned immediately after the Closing Date Insight Partners is the predecessor controlling unitholder of E2open Holdings and represents entities affiliated with Insight Venture Management LLC The registration rights in the Investor Rights Agreement will terminate as to each holder of the Company s shares of common stock when such holder ceases to hold any of the Company s common stock or securities exercisable or exchangeable for the Company s common stock
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 Holdings Private Limited Temasek The Investor Rights Agreement provides Francisco Partners and Temasek the right to nominate one member each to the Company s board of directors Mr Deep Shah nominated by Francisco Partners and Mr Martin Fichtner nominated by Temasek became directors on September 1 2021 Mr Shah resigned from the board of directors on February 7 2024 and was not replaced as the board of directors decreased the size of the board to eight members on February 8 2024 Francisco Partners has retained the right to appoint a director at a future date
The Company tests goodwill for impairment on an annual basis during the fourth quarter or whenever events or changes occur that would more likely than not reduce the fair value of a reporting unit below its carrying value between annual impairment tests As the Company has only one reporting unit any goodwill impairment assessment is performed at the Company level
During the third and fourth quarters of fiscal 2025 first and third quarters of fiscal 2024 and second and fourth quarters of fiscal 2023 the Company experience a significant decline in the market price of its Class A Common Stock and market capitalization In additional in certain of these quarters the Company experienced slowing growth and lowered projections due to lower than anticipated new bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in the Company determining that triggering events occurred and goodwill impairment assessments were performed for the respective quarters
During fiscal 2025 2024 and 2023 the fair value of E2open was calculated using a combination of the discounted cash flow method guideline public company method and guideline transaction method The discounted cash flow method was based on the present value of estimated future cash flows which were based on management s estimates of projected net sales net operating income margins and terminal growth rates taking into consideration market and industry conditions The discount rate used was based on the weighted average cost of capital adjusted for the risk size premium and business specific characteristics related to projected cash flows Under the guideline public company method the fair value was based on the Company s current and forward looking earnings multiples using management s estimates of projected net sales and adjusted EBITDA margins with consideration of market premiums The unobservable inputs used to measure the fair value included projected net sales forecasted adjusted EBITDA margins weighted average cost of capital normalized working capital level capital expenditures assumptions profitability projections determination of appropriate market comparison companies and terminal growth rates Under the guideline transaction method the fair value was based on pricing multiples derived from recently sold companies with similar characteristics to E2open taking into consideration management s estimates of projected net sales and net operating income margins
In each impairment these approaches generated similar results and indicated that the fair value of E2open s goodwill was less than its carrying amounts Therefore during the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 the Company recognized impairment charges of 614 1 million 1 097 7 million and 901 6 million respectively Given the ongoing macroeconomic and market uncertainties there is a reasonable possibility that the Company may recognize future impairment charges related to its goodwill
The Company tests its indefinite lived intangible asset for impairment on an annual basis or whenever events or changes occur that would more likely than not reduce the fair value of the indefinite lived intangible asset below its carrying value between annual impairment tests As the Company has only one reporting unit any indefinite lived intangible asset assessment is performed at the Company level
During the third and fourth quarters of fiscal 2025 and first and third quarters of fiscal 2024 the Company experienced a significant decline in the market price of its Class A Common Stock and market capitalization In addition in certain of these quarters the Company experienced slowing growth and lowered projections due to lower than anticipated net bookings lower revenue higher than expected churn and macroeconomic impacts These factors resulted in the Company determining that triggering events occurred and indefinite lived intangible asset impairment assessments were performed for the respective quarters
The fair value of the indefinite lived intangible asset was calculated using the relief from royalty payments method which is based on management s estimates of projected net sales and terminal growth rates taking into consideration market and industry conditions The royalty rate used was based on royalty rates of companies with similar characteristics to E2open The discount rate used was based on the weighted average cost of capital adjusted for the risk size premium and business specific characteristics related to projected net sales
The assessments indicated that the fair value of the Company s indefinite lived intangible asset was less than its carrying amount therefore during the fiscal year ended February 28 2025 and February 29 2024 the Company recognized an impairment charge of 18 5 million and 34 0 million to intangible assets net for the indefinite lived trademark trade name respectively Given the ongoing macroeconomic and market uncertainties there is a reasonable possibility that the Company may recognize future impairment charges related to its indefinite lived intangible asset
Amortization of intangible assets is recorded in cost of revenue and operating expenses in the Consolidated Statements of Operations The Company recorded amortization expense related to intangible assets of 148 1 million 178 9 million and 181 3 million for the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively
This minority investment does not have a readily determinable fair value therefore the Company elected the measurement alternative for its minority investment The investment is measured at cost less impairment and adjusted for qualifying observable price changes and recorded in other noncurrent assets in the Consolidated Balance Sheets
The Company regularly evaluates the carrying value of its investment for impairment and whether any events or circumstances are identified that would significantly harm the fair value of the investment In the event a decline in fair value is less than the investment s carrying value the Company will record an impairment charge in other income expense in the Consolidated Statements of Operations
During the fourth quarter of fiscal 2025 the Company determined that there was substantial doubt about the private firm s ability to continue as a going concern As a result the Company determined that its investment had no value and should be fully impaired as of February 28 2025 This resulted in a 5 5 million impairment which was reflected in the impairment of cost method investment of the Consolidated Statements of Operations
The Tax Receivable Agreement will continue until all such tax benefits have been utilized or expired unless E2open Holdings exercises its right to terminate the Tax Receivable Agreement for an amount representing the present value of anticipated future tax benefits under the Tax Receivable Agreement or certain other accelerated events occur
Quarterly tax distributions will be paid to the holders of Common Units on a pro rata basis based upon an agreed upon formula related to the taxable income of E2open Holdings allocable to holders of Common Units Generally these tax distributions will be computed based on the taxable income of E2open Holdings allocable to each holder of Common Units based on certain assumptions multiplied by an assumed tax rate equal to the highest effective marginal combined U S federal state and local income tax rate prescribed for a U S corporation organized under the laws of the State of Delaware taking into account all jurisdictions in which the Company is required to file income tax returns together with the relevant apportionment information and the character of E2open Holdings income subject to various adjustments
Significant inputs and assumptions were used to estimate the future expected payments including the timing of the realization of the tax benefits a tax rate of 24 1 and an imputed rate of 7 based on the Company s cost of debt plus an incremental premium at the closing of the Business Combination 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 E2open Holdings were to exercise its right to terminate the Tax Receivable Agreement or certain other acceleration events occur E2open Holdings will be required to make immediate cash payments Such cash payments would 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 would be calculated based on certain assumptions including that E2open Holdings has 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 E2open Holdings will be required to make will generally reduce the amount of the overall cash flow that might have otherwise been available but the Company expects the cash tax savings it will realize from the utilization of the related tax benefits will exceed the amount of any required payments
The Tax Receivable Agreement liability was 63 4 million and 69 7 million as of February 28 2025 and February 29 2024 respectively which represents the current and long term portion of the liability The current portion of the Tax Receivable Agreement liability was 4 2 million and 1 8 million as of February 28 2025 and February 29 2024 respectively The determination of current and long term portion is based on management s estimate of taxable income for the fiscal year and the determination that a Tax Receivable Agreement payment is due and payable within the next twelve months
The tax rate used in the calculation was 23 8 and 23 7 as of February 28 2025 and February 29 2024 respectively The discount rate used for the ASC 805 calculation was 9 2 and 9 0 as of February 28 2025 and February 29 2024 respectively based on the cost of debt plus an incremental premium During the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 a gain of 5 6 million gain of 2 2 million and loss of 2 9 million respectively was recorded as a change in the Tax Receivable Agreement liability related to the ASC 805 discounted liability During the fiscal years ended February 28 2025 and February 29 2024 the Tax Receivable Agreement liability under ASC 450 increased by 1 1 million and 2 2 million respectively related to exchanges of Common Units for Class A Common Stock with a corresponding charge to equity
In February 2021 E2open LLC a subsidiary of the Company 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 with a 15 0 million letter of credit sublimit In September 2021 the Credit Agreement was amended to include a 380 0 million incremental term loan an increase in the letter of credit sublimit from 15 0 million to 30 0 million and an increase in the 2021 Revolving Credit Facility from 75 0 million to 155 0 million In April 2022 the Credit Agreement was amended to include a 190 0 million incremental term loan
The 2021 Revolving Credit Facility will mature on February 4 2026 E2open LLC can request increases in the revolving commitments and additional term loan facilities in minimum amounts of 2 0 million for each facility Principal payments are due on the Credit Agreement the last day of February May August and November commencing August 2021 The Credit Agreement was payable in quarterly installments of 2 7 million The Credit Agreement is payable in full on February 4 2028
The interest rates applicable to borrowings under the Credit Agreement are at E2open LLC s option either 1 a base rate which is equal to the greater of a the Prime rate b the Federal Reserve Bank of New York rate plus 0 5 and c the adjusted Eurocurrency Rate for a one month interest period plus 1 or 2 the adjusted Eurocurrency rate equal to the adjusted Eurocurrency rate for the applicable interest period multiplied by the statutory reserve rate plus in the case of each of clauses 1 and 2 the Applicable Rate The Applicable Rate 1 for base rate term loans ranges from 2 25 to 2 50 per annum 2 for base rate revolving loans ranges from 1 50 to 2 00 per annum 3 for Eurodollar term loans ranges from 3 25 to 3 50 per annum and 4 for Eurodollar revolving loans ranges from 2 50 to 3 00 per annum in each case based on the first lien leverage ratio E2open LLC will pay a commitment fee during the term of the Credit Agreement ranging from 0 25 to 0 375 per annum of the average daily undrawn portion of the revolving commitments based on the First Lien Leverage Ratio which represents the ratio of the Company s secured consolidated total indebtedness to the Company s consolidated EBITDA as specified in the Credit Agreement
Beginning July 1 2023 the Eurocurrency Rate ceased to be applicable and was replaced by the SOFR Rate The adjusted SOFR Rate shall be the SOFR Rate plus 0 11448 for a one month interest rate loan 0 26161 for a three month interest rate loan and 0 42826 for a six month interest rate loan The Applicable Rate for SOFR Rate term loans shall range from 3 25 to 3 50 and revolving loans shall range from 2 50 to 3 00 based on the first lien leverage ratio The Company can also borrow using a Sterling Overnight Index Average SONIA rate The Applicable Rate for SONIA rate revolving loans shall range from 2 50 to 3 00
The Credit Agreement may be repaid in whole or in part at any time and from time to time without any other premium or penalty and any amounts repaid under the revolving credit facility may be reborrowed Mandatory prepayments are required in connection with 1 certain dispositions of assets or the occurrence of other Casualty Events in each case to the extent the proceeds of such dispositions exceed certain individual and aggregate thresholds and are not reinvested 2 unpermitted debt transactions and 3 excess cash flow in excess of 10 0 million
The Credit Agreement is guaranteed by E2open Intermediate LLC a subsidiary of the Company 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 defaults representations and warranties as well as affirmative and negative covenants
E2open Parent Holdings Inc is a holding company with no other operations cash flows material assets or liabilities other than its equity interest in E2open Holdings LLC E2open Holdings LLC is a holding company which has an equity interest in E2open Intermediate LLC the guarantor and E2open LLC the borrower
As of February 28 2025 and February 29 2024 there were 1 056 3 million and 1 067 2 million outstanding under the 2021 Term Loan respectively at an interest rate of 7 94 and 8 95 respectively The interest rates on the 2021 Term Loan were based on SOFR plus 350 basis points There were no outstanding borrowings no letters of credit and 155 0 million available borrowing capacity under the 2021 Revolving Credit Facility as of February 28 2025 and February 29 2024
During the years ended February 28 2025 February 29 2024 and February 28 2023 the Company recognized 98 8 million 101 6 million and 70 8 million respectively of interest expense related to its outstanding debt in the Consolidated Statements of Operations including the amortization of deferred financing fees
The contingent consideration liability is due to the issuance of Series B 2 common stock and Series 2 RCUs of E2open Holdings as part of the Business Combination These shares and units were issued on a proportional basis to each holder of Class A shares in CCNB1 and Common Units of E2open Holdings These restricted shares and Common Units are treated as a contingent consideration liability under ASC 805 and valued at fair market value The contingent consideration liability was recorded at fair value on the acquisition date and is remeasured at each reporting date and adjusted if necessary Any gain or loss recognized from the remeasurement is recorded in gain loss from change in fair value of contingent consideration on the Consolidated Statements of Operations as a nonoperating income expense as the change in fair value is not part of the Company s core operating activities
The contingent consideration liability was 5 1 million and 18 0 million as of February 28 2025 and February 29 2024 respectively The fair value remeasurements resulted in a gain of 12 9 million 11 5 million and 16 0 million for the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively
Except as required by law the holders of the Class B common stock are not entitled to any voting rights with respect to such Class B common stock Dividends and other distributions will be declared simultaneously with any dividend on shares of Class A Common Stock and ratably for the holders of Class B common stock provided that no such dividends will be paid on any share of Class B common stock until the conversion of such share into Class A Common Stock if any at which time all accrued dividends will be paid
In the event of any voluntary or involuntary liquidation dissolution or winding up of the Company s affairs the holders of Class B common stock are not entitled to receive any assets of the Company other than to the extent such liquidation dissolution or winding up constitutes a conversion event as defined in the Sponsor Side Letter Agreement in which case such Class B common stock shall in accordance with the certificate of incorporation automatically convert to Class A Common Stock and the holders of such resulting Class A Common Stock shall be treated as a holder of Class A Common Stock
There were 3 372 184 shares of Series B 2 common stock outstanding as of February 28 2025 and February 29 2024 The Series B 2 common stock will automatically convert into Class A Common Stock on a one to one basis upon the occurrence of the first day on which the 20 day volume weighted average price 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 If any of the Series B 2 common stock does not vest on or before the 10 year anniversary of the Closing Date such common stock will be canceled for no consideration
There were 2 627 724 shares of Series 2 RCUs outstanding as of February 28 2025 and February 29 2024 Similar to the Series B 2 common stock 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 the Company or 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
The Company s foreign exchange forward contracts are designed and qualify as cash flow hedges The contracts currently hedge the U S dollar Indian rupee relationship with the duration of these forward contracts ranging from one month to 24 months at inception These contracts cover a portion of the Company s spend in Indian rupees The Company has not hedged its exposure to revenue or expenses in other currencies
The Company s exposure to the market gains or losses will vary over time as a function of currency exchange rates The amounts ultimately realized upon settlement of these financial instruments together with the gains and losses on the underlying exposures will depend on actual market conditions during the remaining life of the instruments
The Company reports its foreign exchange forward contract assets and liabilities on a net basis in the Consolidated Balance Sheets when a master netting arrangement exists between it and the counterparty to the contract A standard master netting agreement exists between the Company and the counterparty to the foreign exchange forward contract entered into in August 2022 The agreement allowed for multiple transaction payment netting and none of the netting arrangements involved collateral
The Company s interest rate collar agreements Collars are designed and qualify as cash flow hedges The Collars help manage the Company s exposure to fluctuations in interest rates on the variable rate debt on a portion of the 2021 Term Loan Changes in the fair value of the Collars designated as cash flow hedges will be recorded as a component of accumulated other comprehensive income loss within stockholders equity and settled to interest expense over the term of the contracts
On March 17 2023 the Company entered into a Collar effective March 31 2023 with a notional amount of 200 0 million and a maturity date of March 31 2026 The executed cap was 4 75 and the floor was 2 57 On March 24 2023 an additional Collar was executed effective April 6 2023 with a notional amount of 100 0 million and a maturity date of March 31 2026 The executed cap was 4 50 and the floor was 2 56 For both Collars the cap and floor interest rates were based on LIBOR through July 31 2023 and SOFR beginning July 31 2023 through the respective maturity dates The structure of the Collars is such that the Company receives an incremental amount if the Collar index exceeds the cap rate Conversely the Company pays an incremental amount if the Collar index falls below the floor rate No payments are required if the Collar index falls between the cap and floor rates
As of February 29 2024 the amounts related to the Collars were recorded in prepaid expenses and other current assets and other noncurrent assets on the Consolidated Balance Sheets As of February 28 2025 the amounts related to the Collars were recorded accounts payable and accrued liabilities and other noncurrent liabilities on the Consolidated Balance Sheets
The Company reports its Collar assets and liabilities on a net basis in the Condensed Consolidated Balance Sheets when a master netting arrangement exists between the Company and the counterparty to the contract A standard master netting agreement exists with the counterparty to the Collars The agreement allows for multiple transaction payment netting and none of the netting arrangements involve collateral
The Company s financial instruments include cash and cash equivalents investments accounts receivable net notes receivable accounts payable notes payable and financing lease obligations Accounts receivable net notes receivable and accounts payable are stated at their carrying value which approximates fair value due to their short maturity The Company measures its cash equivalents and investments at fair value based on an exchange or exit price which represents the amount that would be received for an asset sale or an exit price or paid to transfer a liability in an orderly transaction between knowledgeable and willing market participants Certificates of deposit are valued at original cost plus accrued interest which approximates fair value The Company estimates 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 February 28 2025 and February 29 2024 the fair value of the cash and cash equivalents restricted cash certificates of deposit notes payable and financing lease obligations approximates their recorded values
Observable inputs are based on market data obtained from independent sources Unobservable inputs reflect the Company s assessment of the assumptions market participants would use to value certain financial instruments This hierarchy requires the Company to use observable market data when available and to minimize the use of unobservable inputs when determining fair value
Cash settled restricted stock units RSUs form part of the Company s compensation program The fair value of these awards is determined using the closing stock price of the Class A Common Stock on the last day of each balance sheet date which is considered an observable quoted market price in active markets Level 1
The Company s Tax Receivable Agreement liability is measured under both ASC 805 at fair value on a recurring basis using significant unobservable inputs Level 3 and ASC 450 at book value The following table provides a reconciliation of the portion of the Tax Receivable Agreement liability measured at fair value under Level 3
The fair values of the Company s Level 1 financial instruments which are traded in active markets are based on quoted market prices for identical instruments The fair values of the Company s Level 2 financial instruments are based on daily market foreign currency rates interest rate curves and quoted market prices for comparable instruments or model driven valuations using observable market data or inputs corroborated by observable market data
The Company s contingent consideration is valued using a Monte Carlo simulation model The assumptions used in preparing this model include estimates such as volatility contractual terms discount rates dividend yield and risk free interest rates This valuation model uses unobservable market input and therefore the liability is classified as Level 3
The Company s public warrants are valued using active market quoted prices which are Level 1 inputs The private placement warrants are valued using a binominal pricing model when the warrants are subject to the make whole table or otherwise are valued using a Black Scholes pricing model The 5 000 000 redeemable warrants purchased pursuant to the Forward Purchase Agreement 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 inputs and therefore the liability is classified as both Level 1 and Level 3
Revenues by geography are determined based on the region of the Company s contracting entity which may be different than the region of the client Americas revenue attributed to the United States was 85 84 and 83 during the years ended February 28 2025 February 29 2024 and February 28 2023 respectively No other country represented more than 10 of total revenue during these periods
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts where the client is not committed The client is not considered committed when they are able to terminate for convenience without payment of a substantive penalty under the contract Additionally as a practical expedient of ASC 606 the Company has not disclosed the value of unsatisfied performance obligations for contracts with an original expected length of one year or less As of February 28 2025 and February 29 2024 approximately 968 6 million and 863 1 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 primarily represent revenues recognized for performance obligations that have been satisfied but for which amounts have not been billed Contract assets were 18 3 million and 23 9 million as of February 28 2025 and February 29 2024 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 the Company performs under the contract Deferred revenue was 218 3 million and 215 2 million as of February 28 2025 and February 29 2024 respectively Revenue recognized during the fiscal year ended February 28 2025 included in deferred revenue on the Consolidated Balance Sheets as of February 29 2024 was 203 4 million
With the adoption of ASC 606 and ASC 340 40 in March 2019 the Company began deferring and amortizing sales commissions that are incremental and directly related to obtaining client contracts Amortization expense of 9 8 million 6 3 million and 4 1 million was recorded in sales and marketing expenses in the Consolidated Statements of Operations for the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 respectively Sales commissions that would have an amortization period of less than one year are expensed as incurred in sales and marketing expenses As of February 28 2025 and February 29 2024 the Company had a total of 31 0 million and 21 4 million of capitalized sales commissions included in prepaid expenses and other current assets and other noncurrent assets in the Consolidated Balance Sheets respectively
As of February 28 2025 and February 29 2024 there were an aggregate of 29 079 872 warrants outstanding Each warrant entitles its holders to purchase one share of Class A Common Stock at an exercise price of 11 50 per share The warrants expire five years after the Closing Date or earlier upon redemption or liquidation The warrants are currently exercisable and redeemable 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 the Company s Sponsor or its permitted transferees The warrants were recorded as a liability in warrant liability on the Consolidated Balance Sheets with a balance of 0 6 million and 14 7 million as of February 28 2025 and February 29 2024 respectively During the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 a gain of 14 1 million 14 9 million and 37 5 million was recognized in gain from change in fair value of the warrant liability in the Condensed Consolidated Statements of Operations respectively
The Company is authorized to issue 2 500 000 000 Class A common stock with a par value of 0 0001 per share Holders of the Company s Class A Common Stock are entitled to one vote for each share As of February 28 2025 and February 29 2024 there were 310 098 908 and 306 237 585 shares of Class A Common Stock issued respectively and 309 922 254 and 306 060 931 shares of Class A Common Stock outstanding respectively
The Company is authorized to issue 42 747 890 Class V common stock with a par value of 0 0001 per share These shares have no economic value but entitle the holder to one vote per share As of February 28 2025 and February 29 2024 there were 30 692 235 and 31 225 604 shares of Class V Common Stock issued and outstanding respectively and 12 055 655 and 11 522 286 shares of Class V Common Stock held in treasury respectively
Noncontrolling interest represents the portion of E2open Holdings that the Company controls and consolidates but does not own As of February 28 2025 and February 29 2024 the noncontrolling interest represents a 9 0 and 9 3 ownership in E2open Holdings respectively As part of the Business Combination E2open Parent Holdings Inc became the owner of E2open Holdings along with the existing owners of E2open Holdings through Common Unit ownership The existing owners of E2open Holdings are shown as noncontrolling interest on the Consolidated Balance Sheets and their portion of the net income loss of E2open Holdings is shown as net income loss attributable to noncontrolling interest on the Consolidated Statements of Operations
Generally Common Units participate in net income or loss allocations and distributions and entitle their holder to the right subject to the terms set forth in the Third Amended and Restated Limited Liability Company Agreement of E2open LLC Third Company Agreement to require E2open Holdings to redeem all or a portion of the Common Units held by such participant At the Company s option it may satisfy this redemption with cash or by exchanging Class V Common Stock for Class A Common Stock on a one for one basis
The Third Company Agreement contains provisions which require that a one to one ratio be maintained between the interests the Company holds in E2open Holdings and the Company s outstanding common stock subject to certain exceptions including in respect of management equity which has not been settled in the Company s common stock Additionally there are certain restrictions on the transfer of Common Units as specified in the Third Company Agreement
During the fiscal year ended February 28 2025 there were 533 369 Common Units converted into Class A Common Stock with a value of 2 3 million based off the 5 day VWAP During the fiscal year ended February 29 2024 1 766 403 Common Units were converted into Class A Common Stock with a value of 7 5 million based off the 5 day VWAP This activity resulted in a decrease to noncontrolling interest of 2 3 million and 7 5 million during the fiscal years ended February 28 2025 and February 29 2024 respectively
Basic earnings per share is calculated as net loss available to common stockholders divided by the weighted average number of shares of common stock outstanding during the applicable period Diluted earnings per share is computed by using the basic earnings per share plus any dilutive securities outstanding during the period using the if converted method except when the effect is anti dilutive The following is a reconciliation of the denominators of the basic and diluted per share computations for net loss
Potential common shares are shares that would be issued upon exercise or conversion of shares under the Company s share based compensation plans and upon exercise of warrants that are excluded from the computation of diluted earnings per common share when the effect would be anti dilutive All potential common shares are anti dilutive in periods of net loss available to common stockholders
The E2open Parent Holdings Inc 2021 Omnibus Incentive Plan as Amended and Restated 2021 Incentive Plan allows the Company to make equity and equity based incentive awards to officers employees directors and consultants There were 15 000 000 shares of Class A Common Stock reserved for issuance under the 2021 Incentive Plan as of February 28 2022 The evergreen provision of the 2021 Incentive Plan provides for an annual automatic increase to the number of shares of Class A Common Stock available under the plan As of March 1 2022 2023 and 2024 an additional 4 849 684 7 304 646 and 12 301 706 shares were reserved for issuance under the evergreen provision respectively Shares issued under the 2021 Incentive Plan 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 See Note 30 Subsequent Events for information about additional shares reserved as part of the evergreen provision of the 2021 Incentive Plan
During fiscal 2023 and 2024 the board of directors approved a company wide share based compensation program under the 2021 Incentive Plan where all eligible employees received annual stock awards as part of their annual compensation package Future awards under this program are at the discretion of the board of directors and are not guaranteed for any fiscal year
Options are either performance based or time based The fiscal 2022 options were performance based and measured based on obtaining an organic revenue growth target over a one year period The fiscal 2023 options were performance based and measured based on obtaining organic revenue growth adjusted EBITDA and net booking targets over a one year period A quarter of all the options vest at the end of the performance period and the remaining options vest equally over the following three years The fiscal 2024 options were time based with one third of the options vesting at the end of the first year with the remaining options vesting ratably each quarter over the remaining two years For fiscal 2025 the only options granted were the two awards described below
The Company s executive officers and senior management are granted these performance based and time based options The performance target is set at 100 at the date of grant and the probability of meeting the performance target is remeasured each quarter over the performance period and adjusted if needed The performance target for the options granted during May 2021 was finalized in April 2022 above 100 The performance target for the options granted in May 2022 was finalized in April 2023 below 100 The performance target for the options granted in May 2023 was finalized in April 2024 below 100
In February 2024 Mr Andrew Appel Chief Executive Officer CEO was awarded performance based options with a market condition based on the closing price of the Company s stock for 20 days out of 30 consecutive trading days during the performance period The performance period will be for the three years of the grant and be measured at each vesting period The performance based options will time vest up to one third after the first year and up to one twelfth each of the following seven quarters with the remaining earned shares vesting on the third anniversary of the grant
The RSUs are either performance based or time based These awards are recorded as equity awards within the Consolidated Statements of Stockholders Equity The fiscal 2022 performance based RSUs were measured based on obtaining an organic revenue growth target over a one year period The fiscal 2023 performance based RSUs were measured based on obtaining organic revenue growth adjusted EBITDA and net bookings targets over a one year period The fiscal 2024 performance based RSUs were measured based on obtaining organic constant currency subscriptions revenue growth constant currency adjusted EBITDA and net bookings targets over a one year period The fiscal 2025 performance based RSUs are measured based on obtaining an organic subscription revenue growth and constant currency adjusted EBITDA targets over a one year period
The performance target is set at 100 at the date of grant and the probability of meeting the performance target is remeasured each quarter over the performance period and adjusted if needed The performance target for the performance based RSUs granted during May 2021 was finalized in April 2022 above 100 The performance target for the performance based RSUs granted in May 2022 was finalized in April 2023 below 100 The performance target for the performance based RSUs granted in May 2023 was finalized in April 2024 with actual results below 100 The performance target for the performance based RSUs granted in May 2024 was finalized in April 2025 with actual results below 100
The time based RSUs for executive officers senior management and employees granted during fiscal 2022 and 2023 vest ratably over a three year period Beginning in fiscal 2024 the time based RSUs for executive officers senior management and employees will vest one third at the end of the first year and then ratably each quarter over the remaining two years The time based RSUs for non employee directors of the Company s board of directors have a one year vesting period
On February 12 2024 Mr Appel was awarded performance based RSUs with a market condition based on the closing price of the Company s stock for 20 days out of 30 consecutive trading days during the performance period The stock hurdles range from 3 50 to 15 00 with 3 50 generating an 8 attainment and 15 00 producing a 200 attainment The performance period will be for the three years of the grant and be measured at each vesting period On the first anniversary of the grant Mr Appel achieved a stock hurdle of 4 50 per share generating an attainment of 25 or 375 000 shares These shares will vest one third on the first anniversary of the grant and quarterly thereafter with the full 375 000 shares vested on the third anniversary of the grant Additional performance hurdles will be determined each quarter over the remainder of the three year performance period
If there is a change in control the award will immediately vest under the performance condition based upon the appropriate stock hurdle and automatically time vest The vested RSU will be paid in the form of cash and or equity in a ratio substantially similar to the ratio received by the other shareholders in connection with the change in control Additionally the cash portion of the award will be equal to at least 50 As this award has a redemption feature for the change in control and cash value component it is recorded as redeemable share based awards on the Consolidated Balance Sheets
Mr Appel was also awarded time based RSUs that vest one third after the first year and vest ratably each quarter over the remaining two years If there is a change in control the award will immediately vest and be paid in the form of cash and or equity in a ratio substantially similar to the ratio received by the other shareholders in connection with the change in control Additionally the cash portion of the award will be equal to at least 50 As this award has a redemption feature for the change in control and cash value component it is recorded as redeemable share based awards on the Consolidated Balance Sheets
The amount presented in the mezzanine as redeemable share based awards will be the redemption amount as of the grant date multiplied by the portion of the requisite service period that has elapsed The redemption amount is based on the number of shares that would vest if a change in control occurred at the grant date multiplied by the grant date stock price Once the RSUs have vested the associated redemption value will be reclassified from the redeemable share based award to additional paid in capital on the Consolidated Balance Sheets
Restricted stock awards RSA are time based and granted to participants with the associated Class A Common Stock issued on the day of grant The Class A Common Stock is issued with restrictions and voting rights When the applicable vesting terms have been met the restrictions are removed from the Class A Common Stock
For employees based in China they are awarded cash settled RSUs The cash settled RSUs issued in fiscal 2023 vest ratable over a three year period Beginning in fiscal 2024 the cash settled RSUs vest one third at the end of the first year and then ratable each quarter over the remaining two years The cash settled RSUs must be settled in cash and are accounted for as liability type awards The fair value of these cash settled RSUs equals the value of the Class A Common Stock on the date of grant and is remeasured at the end of each reporting period at fair value The change in fair value is recorded in share based compensation expense in the Consolidated Statements of Operations The liability for the cash settled RSUs was negligible as of February 28 2025 and February 29 2024 and is included in accounts payable and accrued liabilities in the Consolidated Balance Sheets As of February 28 2025 and February 29 2024 there were 25 971 and 37 479 unvested cash settled RSUs
The Company s former Chief Financial Officer entered into a Transition Agreement in which all of his outstanding stock awards accelerated vesting to August 31 2022 Additionally the exercise period for his options was extended from 90 days to one year with exercises permitted through August 31 2023 All of the options expired unexercised as of August 31 2023
In accordance with the executive plan the Company s former Chief Executive Officer s options time based RSUs and performance based RSUs were prorated as of his vest date October 11 2023 resulting in 134 920 options and 147 606 time based and performance based RSUs vesting The 2024 fiscal year performance based RSUs remained unvested until the performance metrics were determined in April 2024 below 100 at which point 21 630 awards accelerated and vested All of the options expired as of January 8 2024
With the departure of the Company s former Chief Operating Officer COO a Release and Non Competition Agreement Separation Agreement was entered in which the former COO provided transition services through December 31 2023 Transition Period As a result of the former COO s departure his options time based RSUs and performance based RSUs were prorated as of December 31 2023 resulting in 189 039 options and 187 325 time based and performance based RSUs vesting as of December 31 2023 The 2024 fiscal year performance based RSUs remained unvested until the performance metrics were determined in April 2024 below 100 at which point 19 227 awards accelerated and vested All of the options expired as of March 30 2024
With the departure of the Company s former Executive Vice President and General Counsel a Separation and Release Agreement was entered into under which the General Counsel provided transition services through May 31 2024 As a result of the General Counsel s departure a portion of her options time based RSUs and performance based RSUs were accelerated to June 10 2024 resulting in 9 121 options and 204 511 time based and performance based RSUs vesting as of June 10 2024 All of the options expired as of September 9 2024
As of February 28 2025 there was 6 5 million of unrecognized compensation cost related to unvested options The aggregate intrinsic value of outstanding and exercisable stock option awards was zero as of February 28 2025 since the Company s Class A Common Stock price was less than the exercise price of the stock options awards
As of February 28 2025 there was 46 0 million of unrecognized compensation cost related to unvested RSUs The aggregate intrinsic value of outstanding RSUs was 40 3 million as of February 28 2025 which is the outstanding RSUs valued at the closing price of the Company s Class A Common Stock on February 28 2025
As of February 28 2025 there was less than 0 1 million of unrecognized compensation cost related to unvested cash settled RSUs The aggregate intrinsic value of the cash settled RSUs was 0 1 million as of February 28 2025 which is the outstanding cash settled RSUs valued at the closing price of our Class A Common Stock on February 28 2025
Expected Term The expected term represents the weighted average period the share based awards are expected to remain outstanding and is calculated using the simplified method as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patters and post vesting employment termination behavior The simplified method calculates the expected term as the midpoint between the vesting date and the contractual expiration date of the option
The Company leases its primary office space under non cancelable operating leases with various expiration dates through September 2031 Many of the leases have an option to be extended from two to five years and several of the leases give the Company the right to early termination with proper notification Additionally the Company has subleased three of its office leases as of February 28 2025
Several of the operating lease agreements require the Company to provide security deposits As of February 28 2025 and February 29 2024 lease deposits were 3 1 million and 3 4 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 Consolidated Balance Sheets
During the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 the Company incurred 0 6 million 0 7 million and 4 1 million impairments on its operating lease ROU assets and leasehold improvements respectively due to vacating one five and seven locations respectively The impairments were recorded in general and administrative expenses in the Consolidated Statements of Operations
During the fiscal year ended February 28 2025 the Company terminated an operating lease as of March 2025 with an original lease expiration date of July 2028 The Company incurred an early termination fee of 0 6 million and recognized a 0 1 million gain on the write off of the remaining ROU asset and liability beyond March 2025 ROU impairments were taken on this lease during August 2022 and 2023 During the fiscal year ended February 29 2024 the Company terminated an operating lease early with a lease expiration date of February 2026 The Company paid an early termination fee of 0 2 million and recognized a 0 2 million gain on the write off of the remaining ROU asset and liability An ROU impairment was taken on this lease during August 2022
The Company purchases equipment under non cancelable financing lease arrangements related to software and computer equipment which have various expiration dates through November 2028 The Company has the right to purchase the software and computer equipment anytime during the lease or upon lease completion
The E2open 401 k Plan allows eligible employees to either make pre tax 401 k or after tax Roth 401 k contributions These defined contribution plans are sponsored by the Company and provide a variety of investment options The Company matches 50 of the first 6 an employee contributes to these plans Effective January 1 2023 the Company match is made each payroll period For prior years for an employee to be eligible for the matching contribution the employee had to be actively employed on December 31 to receive the matching contribution for the year As a result of this change two years of the Company match were made during the year ended February 29 2024 The Company made matching contributions of 3 7 million 7 0 million and 2 4 million during the fiscal years ended February 28 2025 February 29 2024 and February 28 2023 The matching contribution related to the year February 28 2023 was made in April 2023 in the amount of 3 5 million During the years ended February 28 2025 February 29 2024 and February 28 2023 expense related to the defined contribution plans was 3 8 million 4 0 million and 4 7 million respectively
As a result of the Business Combination the Company acquired a controlling interest in E2open Holdings which is treated as a partnership for U S federal and most applicable state and local income tax purposes As a partnership E2open Holdings is not itself subject to U S federal and certain state and local income taxes Any taxable income or loss generated by E2open Holdings is passed through to and included in the taxable income or loss of its partners including the Company following the Business Combination on a pro rata basis The Company s U S federal and state income tax benefits relate to the Company s wholly owned U S corporate subsidiaries that are consolidated for U S GAAP purposes but separately taxed for U S federal and state income tax purposes as corporations as well as the Company s allocable share of any taxable income of E2open Holdings following the Business Combination Additionally the Company owns foreign subsidiaries that file and pay income taxes in their local jurisdiction The Company has elected to record Global Intangible Low Taxed Income tax as a period cost
As of each of the periods presented above the Company did not provide deferred income taxes on the outside book tax differences of its foreign subsidiaries or any undistributed retained earnings which are indefinitely reinvested including those earnings previously subject to income taxes in the U S The reversal of these temporary differences or distributions could result in additional tax however it is not practicable to estimate the amount of any unrecognized deferred income tax liabilities at this time
The increase of 125 7 million in the deferred tax asset for the fiscal year ended February 28 2025 was primarily due to the impact of the goodwill impairment on the outside basis in the investment in the partnership The 157 4 million increase in the valuation allowance was primarily due to an increase in the net deferred tax asset from the change in the outside basis in the investment in the partnership and additional interest expense carryforward which are fully covered by a valuation allowance This was offset by tax basis increases caused by nondeductible research costs amortization and share based compensation
ASC 740 Income Taxes ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not Realization of deferred tax assets is dependent upon generating sufficient taxable income ability to carryback losses offsetting deferred tax liabilities and availability of tax planning strategies
During the fiscal year ended February 28 2025 the valuation allowance had a net increase of 157 4 million primarily due to an increase in the net deferred tax asset from the change in the outside basis in the investment in the partnership and additional interest expense carryforward which are fully covered by a valuation allowance This was offset by tax basis increases caused by nondeductible research costs amortization and share based compensation During the fiscal year ended February 29 2024 the valuation allowance had a net increase of 195 0 million primarily due to a legal entity restructuring which generated a net capital loss carryforward of 129 5 million and an increase in interest expense carryforward of 23 6 million offset by the reduction in the net deferred tax liability from the change in the outside basis in the investment in the partnership which includes 9 4 million for the vesting of restricted stock awards in additional paid in capital in fiscal 2024 During the fiscal year ended February 28 2023 the valuation allowance had a net decrease of 18 6 million primarily due to a U S legal entity restructuring offset by an increase for restrictions on interest limitations in the United Kingdom
As of February 28 2025 the Company had net operating loss NOL carryforwards for federal state and foreign income tax purposes of approximately 257 0 million 193 5 million post apportionment pre tax and 63 6 million respectively As a result of the Tax Cuts and Jobs Act TCJA NOLs of 137 1 million can be carried forward indefinitely Pre TCJA NOLs will begin to expire in fiscal 2027 The foreign net operating loss carryforwards are derived from multiple tax jurisdictions and will begin to expire during fiscal 2026 As of February 28 2025 the Company had tax credits of approximately 7 4 million to reduce federal income taxes The majority are U S research tax credits Federal credit carryforwards expire beginning in 2026
IRC Section 382 imposes limitations on a corporation s ability to utilize its NOLs if the corporation experiences an ownership change as defined in Section 382 Based upon an analysis performed utilization of the U S federal NOLs research and development credits and foreign tax credits in future periods will be subject to an annual limitation under IRC Section 382 As noted above as of February 28 2025 federal NOL carryforwards and tax credits before any Section 382 limitations were approximately 257 0 million and 7 4 million respectively Of these amounts approximately 92 3 million and 1 1 million will expire unused due to Section 382 Accordingly the Company has reduced the deferred tax assets based upon the anticipated federal attributes that are expected to expire unutilized due to the annual limitation
As of February 28 2025 and February 29 2024 total gross unrecognized tax benefits were 4 0 million and 2 5 million respectively Approximately 3 1 million of the unrecognized tax benefits as of February 28 2025 if recognized would have an impact on the Company s effective tax rate The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense As of February 28 2025 and February 29 2024 the total amount of gross interest and penalties accrued was 0 1 million and 0 2 million respectively which was classified as other noncurrent liabilities in the Consolidated Balance Sheets
Management believes that it has adequately provided for any adjustments that may result from tax examinations However the outcome of tax audits cannot be predicted with certainty Should any issues addressed in the tax audits be resolved in a manner not consistent with management s expectations the Company could be required to adjust the provision for income tax in the period such resolution occurs Although the timing of the resolution and or closure of audits is highly uncertain the Company does not believe it is reasonably possible that the unrecognized tax benefits will materially change in the next 12 months
The Company is subject to taxation in the U S various states and foreign jurisdictions The Company has several individual filing groups in the U S some of which have NOLs dating back to 2015 and earlier Fiscal 2021 through 2024 generally remain open to examination by the taxing jurisdictions to which the Company is subject However carry forward attributes that were generated in tax years prior to fiscal 2020 may be adjusted upon examination by the tax authorities until the statute of limitations closes for the tax year in which the carryforward attributes are utilized
The Organisation for Economic Co operation and Development OECD announced the Inclusive Framework on Base Erosion Profit Sharing Framework which agreed to a two pillar solution to address tax challenges arising from digitalization of the global economy Under pillar two the Framework provides for a global minimum tax rate of 15 calculated on a country by country basis The Framework must now be implemented by the OECD members who have agreed to the plan effective in 2024 Numerous countries have enacted legislation to adopt the Framework with a subset of the rules effective January 1 2024 and the remaining rules effective January 1 2025 or in later periods E2open does not anticipate the Framework will have a material impact on its financial statements largely driven by not meeting the revenue threshold of 750 million Euro for pillar two to apply E2open will continue to evaluate and monitor this position as further guidance is made available including refining its analysis as appropriate
The Company s chief operating decision maker the CODM who is the Company s CEO manages the business makes operating decisions and evaluates operating performance on a consolidated basis The Company consists of one operating segment providing a cloud based end to end supply chain software platform and related professional services for its clients The Company operates with centralized functions and delivers its products through one platform
The CODM assesses performance based on revenue cost of revenue and significant expense categories as reported in the Consolidated Statements of Operations Assets are measured based on total assets as reported on the Consolidated Balance Sheets Total expenditures for additions to long lived assets are reported as capital expenditures on the Consolidated Statements of Cash Flows The CODM uses revenue categories and cost of revenue excluding the amortization of acquired intangible assets as reported on the Consolidated Statements of Operations to evaluate performance and allocate resources
The CODM evaluates profitability excluding acquisition related expenses goodwill impairment intangible asset impairment impairment of cost method investment interest and other expenses net gain loss from change in tax receivable agreement liability gain from change in fair value of warrant liability and gain from change in fair value of contingent consideration as reported on the Consolidated Statements of Operations as well as depreciation and amortization and share based compensation as reported on the Consolidated Statements of Cash Flows The CODM manages the business using consolidated expense information as well as regularly provided budget or forecasted expense information for the single operating segment
On December 27 2024 the Company entered into a Master Service Agreement MSA with a third party which will provide certain global business services transformation advisory services and digital solutions for the Company in an effort to drive long term transformation and efficiencies for its internal processes The term of the agreement is seven years The MSA can be terminated after twelve months with at least 180 days notice and payment of the applicable termination fee which can range from 2 5 million to 17 0 million depending upon the reason and timing of the termination
In 2014 Kewill Inc Kewill a predecessor of BluJay entered into a software licensing and service contract with a customer that resulted in a dispute over Kewill s performance under the agreement In June 2020 prior to the Company s acquisition of BluJay the customer filed suit BluJay and its external counsel considered the claims meritless and intended to file a counter claim for delinquent uncollected receivables At the time of the BluJay Acquisition in September 2021 an allowance for credit losses was recorded against the uncollected receivables from this customer No further accrual was established for this litigation at the time of the acquisition or in subsequent periods through the first quarter of fiscal 2024 as in management s judgment which was based on the advice of external legal counsel the claims were without merit Any loss beyond the uncollected receivables was considered remote and the maximum exposure was believed to be immaterial In February 2022 consistent with the related contractual terms the case moved to binding arbitration Upon conclusion of the arbitration proceedings in August 2023 the arbitrator ruled against BluJay On September 14 2023 the parties agreed to a settlement for 17 8 million which resolved the matter and released the Company from all alleged claims The settlement was paid on September 20 2023
From time to time the Company is subject to contingencies that arise in the ordinary course of business The Company records 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 The Company does not currently believe the resolution of any such contingencies will have a material adverse effect upon the Company s Consolidated Balance Sheets Statements of Operations or Statements of Cash Flows
On March 24 2025 the staff of the NYSE Regulation determined to commence proceedings to delist the Company s warrants ticker symbol ETWO WT from trading on the NYSE pursuant to Section 802 01D of the Listed Company Manual due to minimum trading price requirements and trading of these warrants was immediately suspended The Company s warrants have an exercise price of 11 50 and expire in February 2026 As of March 25 2025 the Company s warrants began trading on the OTC Markets under the ticker symbol OTC ETWOW As a result any over the counter market quotes reflect inter dealer prices without retail mark ups mark downs or commissions and may not represent actual transactions
On April 18 2025 the Company signed an amendment to the Credit Agreement to extend the maturity date of the 2021 Revolving Credit Facility to February 4 2028 to coincide with the maturity date of the 2021 Term Loan Additionally the availability under the 2021 Revolving Credit Facility decreased from 155 0 million to 123 8 million
We have disclosure controls and procedures in place to ensure that information required to be disclosed in our reports filed or submitted under the Securities and Exchange Act of 1934 as amended Exchange Act is recorded processed summarized and reported within the time periods specified in the SEC s rules and forms These controls and procedures are accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer to allow timely decisions regarding required disclosure
Under the supervision and with the participation of management including our Chief Executive Officer and Chief Financial Officer we performed an evaluation of the design and operation of our disclosure controls and procedures as defined in Rules 13a 15 e and 15d 15 e under the Exchange Act as of February 28 2025 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 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 Annual Report our disclosure controls and procedures were effective
There have not been any changes in our internal controls over financial reporting during the quarter ended February 28 2025 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting We review our disclosure controls and procedures which may include internal controls over financial reporting on an ongoing basis From time to time management makes changes to enhance the effectiveness of these controls and ensure that they continue to meet the needs of our business over time
Management is responsible for designing implementing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a 15 f or 15d 15 f of the Exchange Act Our management assessed the effectiveness of our internal control over financial reporting as of February 28 2025 based on the criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO Based on this assessment management concluded that as of February 28 2025 our internal control over financial reporting was effective
Management including our Chief Executive Officer and Chief Financial Officer does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors or fraud A control system no matter how well designed and operated can provide only reasonable not absolute assurance that the objectives of the control system are met Therefore the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs Due to the inherent limitations in all control systems no evaluations of controls can provide absolute assurance that all control issues and instances of fraud if any within will be detected by us
The information required by this Item 10 will be contained in our definitive proxy statement to be filed with the SEC in connection with our 2024 Annual Meeting of Stockholders Proxy Statement which is expected to be filed no later than 120 days after the end of our fiscal year ended February 28 2025 and is incorporated herein by reference
Third Amended and Restated Limited Liability Company Agreement of E2open Holdings LLC dated as of February 4 2021 by and among E2open Parent Holdings Inc and each other person who is or at any time becomes a member of E2open Holdings LLC incorporated by reference to Exhibit 10 1 of E2open Parent Holdings Inc s Form 8 K File No 001 39272 filed with the SEC on February 10 2021
Tax Receivable Agreement dated of February 4 2021 by and among E2open Parent Holdings Inc Insight E2open Aggregator LLC as the Tax Receivable Agreement party representative and each other person who is or at any time becomes a party thereto 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 February 10 2021
Letter Agreement re Forward Purchase by and between CC Neuberger Principal Holdings I and Neuberger Berman Opportunistic Capital Solutions Master Fund L P dated as of October 14 2020 incorporated by reference to Exhibit 10 2 of CCNB1 s Form 8 K A File No 001 39272 filed with the SEC on October 15 2020
Sponsor Side Letter by and among Sponsor Eva F Huston Keith W Abell CC NB Sponsor I Holdings LLC a Delaware limited liability company Neuberger Berman Opportunistic Capital Solutions Master Fund LP a Cayman Islands exempted company and CC Neuberger Principal Holdings I incorporated by reference to Exhibit 10 4 of CCNB1 s Form 8 K A File No 001 39272 filed with the SEC on October 15 2020
Credit Agreement dated as of February 4 2021 by and among E2open LLC the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent incorporated by reference to Exhibit 10 6 of E2open Parent Holdings Inc s Form 8 K File No 001 39272 filed with the SEC on February 10 2021
Amendment No 1 to the Credit Agreement dated as of June 18 2021 by and among E2open LLC the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent incorporated by reference to Exhibit 10 2 of E2open Parent Holdings Inc s Form 10 Q File No 001 39272 filed with the SEC on July 14 2021
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 2 2021
Amendment No 4 to Credit Agreement dated June 16 2023 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 1 to Form 8 K File No 001 39272 filed with the SEC on June 21 2023
Amendment No 5 to Credit Agreement and Agency Resignation and Appointment dated April 18 2025 by and among E2open Intermediate LLC E2open LLC Goldman Sachs Bank USA USB and Stamford Branch and the financial institutions parties thereto as lenders and issuing banks incorporated by reference to Exhibit 10 1 to Form 8 K A Amendment No 1 filed with the SEC on April 28 2025

Company Name	E2open Parent Holdings, Inc. Vist SEC web-site
Category	SERVICES-COMPUTER PROCESSING & DATA PREPARATION
Trading Symbol	ETWO