BIGBEAR.AI HOLDINGS, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information that
BigBear.ai Holdings, Inc.("BigBear.ai" or the "Company") management believes is relevant to an assessment and understanding of BigBear.ai'sconsolidated results of operations and financial condition. The following discussion and analysis should be read in conjunction with BigBear.ai'sconsolidated financial statements and notes to those statements included elsewhere in this Quarterly Report on Form 10- Q. Certaininformation contained in this management discussion and analysis includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors. Please see "Cautionary Note Regarding Forward-Looking Statements," and "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2021. Unless the context otherwise requires, all references in this section to the "Company," " BigBear.ai" "we," "us" or "our" refer to BigBear.ai Holdings, Inc.The following discussion and analysis of financial condition and results of operations of BigBear.aiis provided to supplement the consolidated financial statements and the accompanying notes of BigBear.aiincluded elsewhere in this Quarterly Report on Form 10-Q. We intend for this discussion to provide the reader with information to assist in understanding BigBear.ai'sconsolidated financial statements and the accompanying notes, the changes in those financial statements and the accompanying notes from period to period, along with the primary factors that accounted for those changes.
The discussion and analysis of financial condition and results of operations of
•Business Overview: This section provides a general description of
business, our priorities and the trends affecting our industry in order to
provide context for management’s discussion and analysis of our financial
condition and results of operations.
•Recent Developments: This section provides recent developments that we believe
are necessary to understand our financial condition and results of operations.
•Results of Operations: This section provides a discussion of our results of
operations for the three months ended
•Liquidity and Capital Resources: This section provides an analysis of our ability to generate cash and to meet existing or reasonably likely future cash requirements. •Critical Accounting Policies and Estimates: This section discusses the accounting policies and estimates that we consider important to our financial condition and results of operations and that require significant judgment and estimates on the part of management in their application. In addition, our significant accounting policies, including critical accounting policies, are summarized in Note B-Summary of Significant Accounting Policies to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q. Business Overview Our mission is to guide our customers to realize their best possible future by delivering transformative technologies and expert, actionable advice. Through this mission, we seek to empower people to make the right decisions, at the right time, every time. We are a leader in the use of Artificial Intelligence (AI) and Machine Learning (ML) for decision support. We provide our customers with a competitive advantage in a world driven by data that is growing exponentially in terms of volume, variety, and velocity. We believe data - when leveraged effectively - can be a strategic asset for any organization. Through our mission-critical analytics solutions and operational expertise, we help our customers make sense of the world in which they operate, understand how known and previously unforeseen forces impact their operations, and determine which decision and course of action will best achieve their objectives. Our products and services are widely used by government agencies in
the United Statesto support many of the nation's most critical defense and intelligence capabilities. These customers operate in environments of unrivaled scale and complexity, where the cost of a poor decision can be very steep, and the cost of failure devastating. They demand the most sophisticated and capable 23 -------------------------------------------------------------------------------- Table of Contents AI, ML, and predictive analytics solutions available, from a provider who understands their complex operations and can rapidly deploy technology at scale with uncompromising reliability.
April 7, 2022, the Company's subsidiary BigBear.ai, LLC acquired ProModel Corporation(" ProModel Corporation"), a leader in simulation-based predictive and prescriptive analytic software for process improvement enabling organizations to make better decisions, for $16.1 million, subject to certain adjustments. This acquisition complements the Company's previous acquisition of ProModel'sGovernment Services business, ProModel Government Solutions Inc.("ProModel Government Solutions"), which closed on December 21, 2020. The recent acquisition of ProModel Corporationwas funded through a combination of cash on hand and newly issued shares of common stock of the Company. The Company plans to align ProModel Corporationunder its Analytics business segment. For risks related to the transaction, see Item 1A - Risk Factors -Risks Related to Our Business and Industry - We may acquire or invest in companies and technologies, which may divert our management's attention, and result in additional dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or achieve the expected benefits of such acquisitions or investments - included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
COVID-19 Operational Posture and Current Impact
The COVID-19 pandemic continued to cause business impacts in the first quarter of 2022 primarily driven by the emergence of the Omicron variant in late 2021 with a resulting increase in COVID cases in early 2022. During the first quarter of 2022, our performance was adversely affected by supply chain disruptions and delays, as well as labor challenges associated with employee absences, travel restrictions, site access, quarantine restrictions, remote work, and adjusted work schedules. We are actively engaging with our customers and are continuing to take measures to protect the health and safety of our employees by encouraging them to get vaccinated, including booster shots. The ultimate impact of COVID-19 on our operations and financial performance in future periods, including our ability to execute on our customer contracts in the expected timeframe, remains uncertain and will depend on future pandemic-related developments, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants (e.g. Ba.2), the effectiveness and adoption of COVID-19 vaccines and therapeutics, supplier impacts and related government actions to prevent and manage disease spread, including the implementation of any federal, state, local or foreign vaccine mandates, all of which are uncertain and cannot be predicted. The long-term impacts of COVID-19 on government budgets and other funding priorities that impact demand for our solutions are also difficult to predict but could negatively affect our future results and performance.
For additional risks to the corporation related to the COVID-19 pandemic, see
Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended
Components of Results of Operations
We generate revenue by providing our customers with highly customizable solutions and services for data ingestion, data enrichment, data processing, artificial intelligence, machine learning, predictive analytics and predictive visualization. We have a diverse base of customers, including government defense, government intelligence, as well as various commercial enterprises.
Cost of Revenues
Cost of revenues primarily includes salaries, stock-based compensation expense, and benefits for personnel involved in performing the services described above as well as allocated overhead and other direct costs.
We expect that cost of revenues will increase in absolute dollars as our
revenues grow and will vary from period-to-period as a percentage of revenues.
Selling, General and Administrative (“SG&A”)
SG&A expenses include salaries, stock-based compensation expense, and benefits
for personnel involved in our executive,
24 -------------------------------------------------------------------------------- Table of Contents finance, accounting, legal, human resources, and administrative functions, as well as third-party professional services and fees, and allocated overhead. We expect that SG&A expenses will increase in absolute dollars as we hire additional personnel and enhance our systems, processes, and controls to support the growth in our business as well as our increased compliance and reporting requirements as a public company.
Research and Development
Research and development expenses primarily consist of salaries, stock-based compensation expense, and benefits for personnel involved in research and development activities as well as allocated overhead. Research and development expenses are expensed in the period incurred.
We expect research and development expenses to increase in future periods as we
continue to invest in research and development activities to achieve our
operational and commercial goals.
Transaction expenses consist of acquisition costs and other related expenses
incurred in acquiring
We expect to incur acquisition costs and other related expenses periodically in
the future as we continue to seek acquisition opportunities to expand our
Net decrease in fair value of derivatives consists of fair value remeasurements
of private warrants and written put options.
Interest expense consists primarily of interest expense, commitment fees, and
debt issuance cost amortization under our debt agreements.
Income Tax Expense (Benefit)
Income tax expense (benefit) consists of income taxes related to federal and
state jurisdictions in which we conduct business.
We have two operating segments, Cyber & Engineering and Analytics, which were determined based on the manner in which the chief operating decision maker ("CODM"), who is our Chief Executive Officer, manages our operations for purposes of allocating resources and evaluating performance. Various factors, including our organizational and management reporting structure, customer type, economic characteristics, financial metrics and other factors were considered in determining these operating segments. Our operating segments are described below:
Cyber & Engineering
The Cyber & Engineering segment provides high-end technology and management consulting services to its customers. This segment focuses in the areas of cloud engineering and enterprise IT, cybersecurity, computer network operations and wireless, systems engineering, as well as strategy and program planning. The segment's primary solutions relate to the development and deployment of customized solutions in the areas of cloud engineering and IT infrastructure, cybersecurity and computer network operations, data analytics and visualization, and system engineering and program planning.
The Analytics segment provides high-end technology and consulting services to its customers. This segment focuses on the areas of big data computing and analytical solutions, including predictive and prescriptive analytics solutions. The segment's primary solutions assist customers in aggregating, interpreting, and synthesizing data to enable real-time decision-making capabilities. 25
Table of Contents Results of Operations The table below presents our consolidated statements of operations for the following periods: Three Months Ended March 31, 2022 2021 Revenues $ 36,390
$ 35,570Cost of revenues 26,523 25,290 Gross margin 9,867 10,280 Operating expenses: Selling, general and administrative 22,020 10,114 Research and development 2,874 928 Transaction expenses 1,399 - Operating loss (16,426) (762) Net decrease in fair value of derivatives (1,263) - Interest expense 3,555 1,860 Other expense (income) 30 (1) Loss before taxes (18,748) (2,621) Income tax expense (benefit) 77 (184) Net loss $ (18,825) $ (2,437)Revenues Three Months Ended March 31, Change 2022 2021 Amount % Revenues Cyber & Engineering $ 17,333 $ 18,559 $ (1,226)(6.6) % Analytics 19,057 17,011 2,046 12.0 % Total Revenues $ 36,390 $ 35,570 $ 8202.3 % Cyber & Engineering revenues decreased by $1,226during the three months ended March 31, 2022as compared to three months ended March 31, 2021as a result of lower volume on certain customer contracts. Analytics revenues increased by $2,046during the three months ended March 31, 2022as compared to three months ended March 31, 2021, primarily driven by a new contract award to build a prototype solution that was awarded in the second half of 2021. Cost of Revenues Three Months Ended March 31, Change 2022 2021 Amount % Cost of revenues Cyber & Engineering $ 14,048 $ 14,911 $ (863)(5.8) % Analytics 12,475 10,379 2,096 20.2 % Total cost of revenues $ 26,523 $ 25,290 $ 1,2334.9 % Cost of revenues as a percentage of revenues Cyber & Engineering 81 % 80 % Analytics 65 % 61 % Cyber & Engineering cost of revenues as a percentage of Cyber & Engineering revenues increased to 81% for three months ended March 31, 2022as compared to 80% for the three months ended March 31, 2021due to increased use of subcontractors during the three months ended March 31, 2022as compared to the same period in 2021.
Analytics cost of revenues as a percentage of Analytics revenues increased to
65% for the three months ended
26 -------------------------------------------------------------------------------- Table of Contents compared to 61% for the three months ended
March 31, 2021due to lower margins on certain prototype contracts as compared to the same period in 2021. SG&A Three Months Ended March 31, Change 2022 2021 Amount % SG&A $ 22,020 $ 10,114 $ 11,906117.7 % SG&A as a percentage of revenues 61 % 28 % SG&A expenses as a percentage of total revenues for three months ended March 31, 2022increased to 61% as compared to 28% for the three months ended March 31, 2021, which was primarily driven by $3,427investment in commercial start-up costs, $3,071of equity-based compensation cost, $1,346in professional fees and $1,221related to D&O insurance. The increase in SG&A as a percentage of revenues was also driven by increased payroll, information technology and employee recruiting expenses to increase personnel in advance of planned growth in our business as well as our increased compliance and reporting requirements as a public company. Additionally, the increase for the three months ended March 31, 2022includes $703related to capital market advisory fees related to advisors who assisted with the Business Combination and various integration projects and $2,375of non-recurring integration costs to streamline business functions across the Company and realize synergies from our acquisitions. Research and Development Three Months Ended March 31, Change 2022 2021 Amount % Research and development $ 2,874 $ 928 $ 1,946209.7 % Research and development expenses increased by $1,946during the three months ended March 31, 2022as compared to three months ended March 31, 2021. The increase in research and development expenses was driven by increased hiring and headcount in our innovations lab as well as investment in various research projects aimed at continuing to develop and refine our solutions, including enhancing features and functionality, adding new modules, and improving the application of the latest AI/ML technologies in the solutions we deliver to our customers. Transaction Expenses Three Months Ended March 31, 2022 2021 Transaction expenses $ 1,399 $ -
Transaction expenses for the three months ended
acquisition costs and other related expenses incurred in acquiring
The net decrease in fair value of derivatives of
$1,263for the three months ended March 31, 2022consists of fair value remeasurements of written put options and private warrants. The written put option balance was $- as of March 31, 2021. Interest Expense Three Months Ended March 31, Change 2022 2021 Amount % Interest expense $ 3,555 $ 1,860 $ 1,69591.1 % Interest expense increased by $1,695during the three months ended March 31, 2022as compared to three months ended March 31, 2021. The increase in interest expense was primarily driven by the higher principal balance of debt associated with our Convertible Notes as compared to the principal balance of debt under our Antares Capital Credit Facility, which was fully settled and terminated in December 2021in connection with the Business Combination. See the Liquidity and Capital Resources section below for more information. 27 -------------------------------------------------------------------------------- Table of Contents Income Tax Expense (Benefit) Three Months Ended March 31, Change 2022 2021 Amount % Income tax expense (benefit) $ 77 $ (184) $ 261141.8 % Effective tax rate (0.4) % 7.0 % The increase in the effective tax rate for the three months ended March 31, 2022from the three months ended March 31, 2021was primarily due to recognition of a full valuation allowance on the Company's deferred tax balances. The effective tax rate for the three months ended March 31, 2022differs from the U.S.federal income tax rate of 21.0% primarily due to state and local income taxes, and the change in valuation allowance.
more-likely-than-not that substantially all of its deferred tax assets will be
realized in the future, and continues to have a full valuation allowance
established against its deferred tax assets.
Refer to Note H-Income Taxes of the Notes to consolidated financial statements
included in this Quarterly Report on Form 10-Q for more information.
Supplemental Non-GAAP Information
The Company uses Adjusted EBITDA to evaluate its operating performance, generate future operating plans, and make strategic decisions, including those relating to operating expenses and the allocation of internal resources. Adjusted EBITDA is a financial measure not calculated in accordance with GAAP. Adjusted EBITDA is defined as net income (loss) adjusted for interest expense (income), net, income tax expense (benefit), depreciation and amortization, equity-based compensation, net decrease in fair value of derivatives, capital market advisory fees, non-recurring integration costs, commercial start-up costs, and transaction expenses. Non-GAAP financial performance measures are used to supplement the financial information presented on a GAAP basis. This non-GAAP financial measure should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. Because not all companies use identical calculations, our presentation of non-GAAP measures may not be comparable to other similarly titled measures of other companies.
Adjusted EBITDA – Non-GAAP
The following table presents a reconciliation of Adjusted EBITDA to net income
(loss), computed in accordance with GAAP:
Three Months Ended March 31, 2022 2021 Net loss
$ (18,825) $ (2,437)Interest expense 3,555 1,860 Income tax expense (benefit) 77 (184) Depreciation and amortization 1,772 1,921 EBITDA (13,421) 1,160 Adjustments: Equity-based compensation 1 3,858 25 Net decrease in fair value of derivatives 2 (1,263) - Capital market advisory fees 3 703 1,540 Non-recurring integration costs 4 2,375 - Commercial start-up costs 5 3,427 - Transaction expenses 6 1,399 - Adjusted EBITDA $ (2,922) $ 2,725
1 Equity-based compensation includes approximately
2 The decrease in fair value of derivatives primarily relates to the changes in the fair
value of certain Forward Share Purchase Agreements (FPAs) that were entered into prior
to the closing of the Business Combination and were fully settled during the first
quarter of 2022.
3 The Company incurred capital market and advisory fees related to advisors assisting
with the Business Combination.
4 Non-recurring internal integration costs related to the Business Combination.
5 Commercial start-up costs includes certain non-recurring expenses associated with
tailoring the Company’s software products for commercial customers and use cases.
6 Transaction expenses related to the acquisition of
ProModel Corporation, which closed on April 7, 2022. 28
Table of Contents Free Cash Flow Free cash flow is defined as net cash provided by (used in) operating activities less capital expenditures. Management believes free cash flow is useful to investors, analysts and others because it provides a meaningful measure of the Company's ability to generate cash and meet its debt obligations.
The table below presents a reconciliation of free cash flow to net cash provided
by (used in) operating activities, computed in accordance with GAAP:
2022 2021 Net cash (used in) provided by operating activities
$ (7,529) $ 893Capital expenditures, net (359) (170) Free cash flow $ (7,888) $ 723
Key Performance Indicators
We view growth in backlog as a key measure of our business growth. Backlog represents the estimated dollar value of contracts that we have been awarded for which work has not yet been performed, and in certain cases, our estimate of known opportunities for future contract awards on customer programs that we are currently supporting. The majority of our historical revenues are derived from contracts with the Federal Government and its various agencies. In accordance with the general procurement practices of the Federal Government, most contracts are not fully funded at the time of contract award. As work under the contract progresses, our customers may add incremental funding up to the initial contract award amount. We generally do not deliver goods and services to our customers in excess of the appropriated contract funding. At the time of award, certain contracts may include options for our customers to procure additional goods and services under the contract. Options do not create enforceable rights and obligations until exercised by our customers and thus we only recognize revenues related to options as each option is exercised. Contracts with such provisions may or may not specify the exact scope, nor corresponding price, associated with options; however, these contracts will generally identify the expected period of performance for each option. In cases where we have negotiated the estimated scope and price of an option in the contract with our customer, we use that information to measure our backlog and we refer to this as Priced Unexercised Options. If a contract does not specify the scope, level-of-effort, or price related to options to procure additional goods and services, we estimate the backlog associated with those options based on our discussions with our customer, our current level of support on the customer's program, and the period of performance for each option that was negotiated in the contract. We refer to this as Unpriced Unexercised Options. Many of the customer programs we support relate to key national security and defense interests. At the end of a contract, our customers may elect to modify our existing contract, in order to extend the period under which we provide additional goods and services or may elect to continue to procure additional goods and services from us under a new contract. If our customer notifies us that a program we currently support will be continuing under a new contract, we estimate the backlog associated with that anticipated future contract ("Anticipated Follow-on Awards") based on the assumption that (i) we are highly likely to be awarded the contract because we are the incumbent, (ii) the program we support is of critical importance to national security and defense, and (iii) that if the contract was awarded to a different party, the transition would be highly disruptive to the achievement of our customer's objectives. For purposes of estimating backlog related to Anticipated Follow-on Awards, we assume that the goods and services that we will deliver under that future contract will be generally similar in scope and pricing compared to our current contract and that our current level of support on the customer program will persist under the new contract. Potential contract awards with existing customers on completely new programs, or with any new customer that we have not worked with historically, would not be included in Anticipated Follow-on Awards as there is far greater uncertainty as to whether those opportunities will be awarded to us. We define backlog in these categories to provide the reader with additional context as to the nature of our backlog and so that the reader can understand the varying degrees of risk, uncertainty, and where applicable, management's estimates and judgements used in determining backlog at the end of a period. The categories of backlog are further defined below. 29 -------------------------------------------------------------------------------- Table of Contents •Funded Backlog. Funded backlog represents the contract value of goods and services to be delivered under existing contracts for which funding is appropriated or otherwise authorized less revenues previously recognized on these contracts.
•Unfunded backlog. Unfunded backlog represents the contract value, or portion
thereof, of goods and services to be delivered under existing contracts for
which funding has not been appropriated or otherwise authorized.
•Priced Unexercised Options: Priced unexercised contract options represent the value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract. For priced unexercised options, we measure backlog based on the corresponding contract values assigned to the options as negotiated in our contract with our customer. •Unpriced Unexercised Options: Unpriced unexercised contract options represent the value of goods and services to be delivered under existing contracts if our customer elects to exercise all of the options available in the contract. For unpriced unexercised options, we estimate backlog generally under the assumption that our current level of support on the contract will persist for each option period. •Anticipated Follow-on Awards: Anticipated Follow-on Awards represents our estimate of the value of goods and services to be delivered under a contract that has not yet been awarded to us, but where we believe we are highly likely to be awarded the contract because we are the incumbent on an ongoing customer program, the program we support is of critical importance to national security, and that if the contract was awarded to a different party, the transition would be highly disruptive to the achievement of our customer's objectives. We estimate backlog related to Anticipated Follow-on Awards based on the assumption that the goods and services that we will deliver under the anticipated future contract will be generally similar in scope and pricing compared to our current contract and that our current level of support on that program will persist under the new contract.
The following table summarizes certain backlog information (in thousands):
March 31, 2022 December 31, 2021 Funded
$ 65,303$ 91,187 Unfunded 70,214 68,203 Priced, unexercised options 150,572 143,969 Unpriced, unexercised options 125,689 119,747 Anticipated follow-on Awards 46,882 42,582 Total backlog $ 458,660$ 465,688
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows provided by our operations and access to existing credit facilities. Our primary short-term cash requirements are to fund payroll obligations, working capital, operating lease obligations, and short-term debt, including current maturities of long-term debt. Working capital requirements can vary significantly from period to period, particularly as a result of the timing of receipts and disbursements related to long-term contracts. Our medium-term to long-term cash requirements are to service and repay debt and to invest in facilities, equipment, technologies, and research and development for growth initiatives. Our ability to fund our cash needs will depend, in part, on our ability to generate cash in the future, which depends on our future financial results. Our future results are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our control. Our future access to, and the availability of credit on acceptable terms and conditions, is impacted by many factors, including capital market liquidity and overall economic conditions. We believe that our cash from operating activities generated from continuing operations during the year, together with the cash on the balance sheet and available borrowings under our existing credit facilities, will be adequate for the next 12 months to meet our anticipated uses of cash flow, including payroll obligations,working capital, operating lease obligations, capital expenditures and debt service costs. While we intend to reduce debt over time using cash provided by operations, we may also attempt to meet long-term debt obligations, if necessary, by obtaining capital from a variety of additional sources or by refinancing existing obligations. These sources include public or private capital markets, bank financings, proceeds from dispositions or other third-party sources. 30
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Our available liquidity consists primarily of available cash and cash
equivalents and available borrowings from our existing credit facilities. The
following table details our available liquidity:
December 31, March 31, 2022 2021 Available cash and cash equivalents
$ 59,978 $ 68,900Available borrowings from our existing credit facilities 50,000 15,000 Total available liquidity $
The following table summarizes our existing credit facilities:
March 31, 2022 December 31, 2021 Convertible Notes
$ 200,000$ 200,000 Bank of America Senior Revolver - - D&O Financing Loan 3,074 4,233 Total debt 203,074 204,233 Less: unamortized issuance costs 9,147 9,636 Total debt, net 193,927 194,597 Less: current portion 3,074 4,233 Long-term debt, net $ 190,853$ 190,364
December 7, 2021, BigBear.aientered into a new senior credit agreement with Bank of America, N.A. (the " Bank of America Credit Agreement"), providing BigBear.aiwith a $50.0 millionsenior secured revolving credit facility (the "Senior Revolver"). Proceeds from the Senior Revolver will be used to fund working capital needs, capital expenditures, and other general corporate purposes. The Senior Revolver matures on December 7, 2025. The Senior Revolver includes borrowing capacity available for letters of credit and for borrowings on same-day notice, referred to as the "swing loans." Any issuance of letters of credit or making of a swing loan will reduce the amount available under the revolving credit facility. BigBear.aimay increase the commitments under the Senior Revolver in an aggregate amount of up to the greater of $18.8 millionor 100% of consolidated adjusted EBITDA plus any additional amounts so long as certain conditions, including compliance with the applicable financial covenants for such period, in each case on a pro forma basis, are satisfied.
financial and other covenants. As of
compliance with the covenant requirements.
Unamortized debt issuance costs of
are presented in Other non-current assets.
Refer to Note F-Debt of the Notes to consolidated financial statements included
in this Quarterly Report on Form 10-Q for more information.
Upon consummation of the Merger, the Company issued
$200.0 millionof unsecured convertible notes (the "Convertible Notes") to certain investors. The Convertible Notes bear interest at a rate of 6.0% per annum, payable semi-annually, and not including any interest payments that are settled with the issuance of shares, are convertible into 17,391,304 shares of the Company's common stock at an initial Conversion Price of $11.50. The Conversion Price is subject to adjustments, including but not limited to, a Conversion Rate Reset 180 days after November 30, 2021should certain daily volume-weighted average price thresholds be met. The Convertible Notes mature on December 15, 2026.
The Convertible Notes require the Company to meet certain financial and other
covenants. As of
March 31, 2022, the Company has an outstanding balance of $200.0 millionrelated to the Convertible Notes, which is recorded on the balance sheet net of approximately $9.1 millionof unamortized debt issuance costs. 31
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D&O Financing Loan
December 8, 2021, the Company entered into a $4,233loan (the "D&O Financing Loan") with AFCO Credit Corporationto finance the Company's directors and officers insurance premium. The D&O Financing Loan has an interest rate of 1.50% per annum and a maturity date of December 8, 2022.
The table below summarizes certain information from our consolidated statements
of cash flows for the following periods:
2022 2021 Net cash (used in) provided by operating activities (7,529) 893 Net cash used in investing activities (359) (394) Net cash used in financing activities (102,055) (275)
Net (decrease) increase in cash and cash equivalents and
Cash and cash equivalents and restricted cash at the beginning
169,921 9,704 Cash and cash equivalents and restricted cash at the end of the period
$ 59,978 $ 9,928Operating activities For the three months ended March 31, 2022, net cash used in operating activities was $7,529. Net loss before deducting depreciation, amortization and other non-cash items was $13,761and was further impacted by a favorable change in net working capital of $6,232which contributed to operating cash flows during this period. The favorable change in net working capital was largely driven by an increase in accrued liabilities of $6,307primarily due to increases in accrued interest and accrued transaction expenses, a decrease in accounts receivable of $1,981, and an increase in accounts payable of $1,150. These increases were partially offset by a decrease in contract liabilities of $1,415and an increase in contract assets of $2,306. For the three months ended March 31, 2021, net cash used in operating activities was $893. Net loss before deducting depreciation, amortization and other non-cash items was $550and was further impacted by a favorable change in net working capital of $1,443during this period. The favorable change in net working capital was largely driven by a decrease in contract assets of $897and an increase in accrued liabilities of $2,316. These increases were partially offset by an increase in accounts receivable of $1,442and an increase in prepaid and other current assets of $653.
For the three months ended
For the three months ended
March 31, 2021, net cash used in investing activities was $394, consisting of the purchase of property and equipment of $170and the settlement of escrow amounts related to the acquisition of businesses of $224.
For the three months ended
settlement of the FPAs of
For the three months ended
32 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies and Estimates For the critical accounting estimates used in preparing our consolidated financial statements, we make assumptions and judgments that can have a significant impact on revenue, cost and expenses, and other expense (income), net, in our consolidated statements of operations, as well as, on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe are reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions.
There have been no material changes to the critical accounting policies and
estimates as discussed in Note B-Summary of Significant Accounting Policies of
our Annual Report on Form 10-K for the fiscal year ended
Recent Accounting Pronouncements
See Note B-Summary of Significant Accounting Policies of the consolidated
financial statements included in this Quarterly Report on Form 10-Q for a
discussion of recently issued accounting pronouncements.
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