BARK, INC. The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto for the year endedMarch 31, 2022 contained in the Annual Report on Form 10-K filed with theSEC onMay 31, 2022 . This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" sections of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to "we", "us", "our", "the Company" and "BARK" are intended to mean the business and operations ofBARK, Inc. and its subsidiaries. The unaudited condensed consolidated financial statements for the three months endedJune 30, 2022 and 2021, respectively, present the financial position and results of operations ofBARK, Inc. and its wholly-owned subsidiaries.
Overview
Founded in 2011, BARK is the world's most dog-centric company, devoted to making dogs happy with the best products, services and content. Our dog-obsessed team applies its data-driven understanding of what makes each dog special by designing playstyle-specific toys, satisfying treats, great food for your dog's breed, effective and easy to use dental care, and dog-first experiences that foster the health and happiness of dogs everywhere. We aim to build lifelong relationships with our customers and their pups in order to drive strong customer retention and lifetime value. BARK loyally serves dogs with themed toys and treats subscriptions,BarkBox and BARK Super Chewer; custom product collections through retail partners, including Target and Amazon; high-quality, nutritious meals made for your breed with BARK Food; and products that meet dogs' dental needs with BARK Bright. As a direct to consumer-first company, our growing data and machine-learning capabilities inform future product development and enable BARK to provide personalized experiences and product offerings for dog parents nationwide. Impact of COVID-19 The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments related to the geographic spread of the disease, the duration and severity of the outbreak, travel restrictions, required social distancing, governmental mandates, business closures or governmental or business disruptions, and the effectiveness of actions taken inthe United States and other countries to prevent, contain and treat the virus and any additional government stimulus programs. These impacts are highly uncertain and cannot be predicted with certainty. As this crisis unfolded, we monitored conditions closely and adapted our operations to meet federal, state and local standards, while continuing to meet the needs of the dogs and dog parents we serve and to ensure the safety and well-being of our team members. While conditions appear to be improving, we are still unable to predict the duration of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and therefore the ultimate impact of the COVID-19 pandemic on our operating results, financial condition and cash flows. As such, risks still remain. In addition, the COVID-19 pandemic has had, and continues to have, an unprecedented and unexpected effect on the global economy, civil society, labor markets, and certain industries. As a result, it is difficult to predict the magnitude or scope of the impact these effects will or may have directly, or indirectly, on our business, operating results and financial condition. We continued to experience increases in inbound freight costs due to the challenges in the current import market, as transpacific ships and trade lanes continue to be overburdened with volume and experience a significant shortage of equipment and capacity due to the COVID-19 pandemic. We expect increased freight costs and supply chain disruptions to continue to impact our business, although we cannot predict the duration or magnitude of such impacts. Please refer to the "Special Note Regarding Forward-Looking Statements" and the "Risk Factors" in this Quarterly Report on Form 10-Q. 18 --------------------------------------------------------------------------------
Key Performance Indicators
We use the following key financial and operating metrics to evaluate our
business and operations, measure our performance, identify trends affecting our
business, project our future performance, and make strategic decisions. These
key financial and operating metrics should be read in conjunction with the
following discussion of our results of operations and financial condition
together with our condensed consolidated financial statements and the related
notes and other financial information included elsewhere in this Quarterly
Report on Form 10-Q.
Three Months Ended
June 30,
2022 2021
Subscription Shipments (in thousands) 3,811 3,608
Active Subscriptions (in thousands) 2,276
1,952
New Subscriptions (in thousands) 259 280 CAC $ 50.80$ 48.36 LTV:CAC 4.5x 5.0x Average Order Value $ 31.07$ 29.21 Subscription Shipments We define Subscription Shipments as the total number of subscription product shipments shipped in a given period. Subscription Shipments does not include gift subscriptions or one-time subscription shipments.
Active Subscriptions
Our ability to expand the number of Active Subscriptions is an indicator of our market penetration and growth. We define Active Subscriptions as the total number of unique product subscriptions with at least one shipment during the last 12 months. Active Subscriptions does not include gift subscriptions or one-time subscription purchases.
New Subscriptions
We define New Subscriptions as the number of unique subscriptions with their first shipment occurring in a period.
Customer Acquisition Cost
Customer Acquisition Cost ("CAC") is a measure of the cost to acquire New
Subscriptions in our Direct to Consumer business segment. This unit economic
metric indicates how effective we are at acquiring each New Subscription. CAC is
a monthly measure defined as media spend in our Direct to Consumer business
segment in the period indicated, divided by total New Subscriptions in such
period. Direct to Consumer media spend is primarily comprised of internet and
social media advertising fees.
Lifetime Value
Lifetime Value ("LTV") is the dollar value of each subscription as measured by the cumulative Direct to Consumer Gross Profit for the average life of the subscription.
Average Order Value
Average Order Value ("AOV") is Direct to Consumer revenue for the period divided by Subscription Shipments for the same period.
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--------------------------------------------------------------------------------Components of Our Results of Operations
We operate with two reportable segments: Direct to Consumer and Commerce, to
reflect the way our chief operating decision maker ("CODM") reviews and assesses
the performance of the business.
Revenue
Direct to Consumer
Direct to Consumer revenue consists of product sales through our monthly subscription boxes, as well as sales through our website, BarkShop.com ("BarkShop"):
Toys and Treats Subscriptions-Our principal revenue generating products consist of a tailored assortment of premium and highly durable toys and treats sold through ourBarkBox and Super Chewer monthly subscriptions.BarkBox and Super Chewer subscription rates vary based on the type of subscription plan selected by the customer, with Super Chewer's price point being slightly higher based on additional costs of the more durable product, but resulting in similar gross margins. Subscription plans are offered as monthly, six month or annual commitments. Subscription revenue is recognized at a point in time as control is transferred to the subscriber upon delivery of each monthly box.
On a monthly basis, toys and treats subscription customers have the option to purchase additional toys, treats, or essential products to add to their respective subscription boxes, through our add to box ("ATB") offering. ATB revenue is recognized at a point in time as control is transferred to the customer upon delivery of goods to the subscriber.
BARK Bright-BARK Bright revenue consists of sales of our health and wellness solutions, with our initial product being a dental solution, sold primarily through monthly subscriptions. Subscription revenue is recognized at a point in time as control is transferred to the subscriber upon delivery of each monthly box. Revenue for BARK Bright sales to retailers and through marketplaces is recognized at a point in time as controls is transferred to the customer upon delivery of goods.. BARK Food-BARK Food revenue consists of sales of personalized and nutritious meals for dogs sold at a meal per day price. Revenue is recognized at a point in time, as control is transferred to the customer upon delivery of goods. BarkShop-BarkShop revenue consists of sales of individual toys, treats and other products through our website, BarkShop. Revenue relating to the sale of goods on BarkShop is recognized at a point in time as control is transferred to the customer upon delivery of goods.
Commerce
We also generate revenue from product sales to retailers and through marketplaces. See below for additional information on each offering.
Retail-Retail revenue consists of sales of individual BARK toys, treats, and BARK Bright health and wellness solutions, mainly through major retailers. Revenue is recognized at a point in time as control is transferred to the customer upon the delivery of goods.
Online Marketplaces-Online marketplaces revenue consists of sales of toys, BARK
Bright health and wellness solutions and BARK Home products sold through major
marketplaces. BARK Home consists of an assortment of proprietary essential
products for daily life, including dog beds, bowls, collars, harnesses and
leashes. Online marketplaces revenue is recognized upon delivery of goods to the
end customer.
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Cost of Revenue
Cost of revenue primarily consists of the purchase price of inventory sold, inbound freight costs associated with inventory, shipping supply costs, and inventory shrinkage costs.
Operating Expenses
Operating expenses consist of general and administrative and advertising and marketing expenses.
General and Administrative General and administrative expenses consist primarily of compensation and benefits costs, including stock-based compensation expense, office expense, including rent, insurance, professional service fees, and other general overhead costs including depreciation and amortization of right-of-use, fixed and intangible assets, account management support teams, and commissions. General and administrative expenses also include fees charged by third parties that provide payment processing services, fulfillment costs, which represent costs incurred in operating and staffing fulfillment and customer service centers, including costs attributable to receiving, inspecting, picking, packaging and preparing customer orders for shipment, outbound freight costs associated with shipping orders to customers, and responding to inquiries from customers.
Advertising and Marketing
Advertising and marketing expense consists primarily of internet advertising, promotional items, agency fees, other marketing costs and compensation and benefits expenses, including stock-based compensation expense, for employees engaged in advertising and marketing.
Interest Expense
Interest expense primarily consists of interest incurred under our line of credit, term loan and convertible promissory notes agreements, and amortization of debt issuance costs.
Other Income (Expense), Net
Other income (expense), net, primarily consists of changes in the fair value of our warrant liabilities and loss on extinguishment of debt.
21
--------------------------------------------------------------------------------Results of Operations
We operate in two reportable segments to reflect the way our chief operating
decision maker ("CODM") reviews and assesses the performance of the business.
See Note 2, "Summary of Significant Accounting Policies," in our condensed
consolidated financial statements for the three months ended June 30, 2022 and
2021 included elsewhere in this Quarterly Report on Form 10-Q.
Three Months Ended June 30,
2022 2021 % Change
(in thousands)
Condensed Consolidated Statements of Operation and
Comprehensive Loss Data:
Revenue
Direct to Consumer $ 118,397 $ 105,376 12.4 %
Commerce 12,753 12,230 4.3 %
Total revenue 131,150 117,606 11.5 %
Cost of revenue
Direct to Consumer 47,148 40,819 15.5 %
Commerce 8,188 6,996 17.0 %
Total cost of revenue 55,336 47,815 15.7 %
Gross profit 75,814 69,791 8.6 %
Operating expenses:
General and administrative 79,589 69,471 14.6 %
Advertising and marketing 16,363 17,178 (4.7) %
Total operating expenses 95,952 86,649 10.7 %
Loss from operations (20,138) (16,858) 19.5 %
Interest expense (1,389) (1,561) (11.0) %
Other income (expense), net 6,119 (6,385) N/M
Net Loss before income taxes (15,408) (24,804) (37.9) %
Provision for income taxes - - 0.0 %
Net Loss and comprehensive loss $ (15,408) $ (24,804) (37.9) %
N/M means not meaningful.
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Comparison of the Three Months Ended
Revenue
Three Months Ended
June 30,
2022 2021 $ Change % Change
( in thousands)
Revenue
Direct to Consumer $ 118,397 $ 105,376 $ 13,021 12.4 %
Commerce 12,753 12,230 523 4.3 %
Total revenue $ 131,150 $ 117,606 $ 13,544 11.5 %
Percentage of Revenue
Direct to Consumer 90.3 % 89.6 %
Commerce 9.7 % 10.4 %
Direct to Consumer revenue increased by $13.0 million , or 12.4%, for the three
months ended June 30, 2022 compared to the three months ended June 30, 2021 .
This increase was primarily driven by a 5.6% or 0.2 million increase in
Subscription Shipments, in addition to a 6.4% increase in average order value.
Commerce revenue increased by $0.5 million for the three months ended June 30,
2022 compared to the three months ended June 30, 2021 . This increase was
primarily driven by volume increases amongst existing retailer partners, as well
as the addition of new retail partners since June 30, 2021 .
Gross Profit
Three Months Ended
June 30,
2022 2021 $ Change % Change
( in thousands)
Gross Profit
Direct to Consumer 71,249 64,557 6,692 10.4 %
Commerce 4,565 5,234 (669) (12.8) %
Total gross profit $ 75,814 $ 69,791 $ 6,023 8.6 %Percentage of revenue 57.8 % 59.3 %
Direct to Consumer gross profit increased by$6.7 million while Commerce gross profit decreased by$0.7 million for the three months endedJune 30, 2022 compared to the three months endedJune 30, 2021 . The increase in Direct to Consumer gross profit is primarily due to increased revenue of$13.0 million . The decrease in Commerce gross profit is primarily attributable to increased slotting fees for new retail accounts and higher than average customer chargebacks resulting from supply chain delays.
Gross profit as a percentage of revenue decreased 1.5% for the three months
ended
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--------------------------------------------------------------------------------Operating Expenses
General and Administrative Expense
Three Months Ended June 30,
2022 2021 $ Change % Change
( in thousands)
General and administrative $ 79,589 $ 69,471 $ 10,118 14.6%
Percentage of revenue 60.7 % 59.1 %
General and administrative expense increased by $10.1 million , or 14.6%, for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021 . This increase during the period was primarily due to: increased
fulfillment and shipping costs of $6.9 million attributable to the 5.6% increase
in Subscription Shipments and increased third-party shipping rates; increased
compensation expense of $3.7 million due to an increase in headcount, including
increased total stock-based compensation expense of $1.2 million ; increased
donation expense of $1.4 million ; increased depreciation and amortization
expense of $1.0 million attributable to additional fulfillment centers;
increased software expense of $0.8 million attributable to an increase in
headcount; increased office expenses of $0.6 million ; and increased insurance
expense of $0.4 million . The increase in general and administrative expenses was
offset by a decrease in professional and legal fees of $5.0 million attributable
to costs incurred in the prior year associated with the merger.
Advertising and Marketing
Three Months Ended June 30,
2022 2021 $ Change % Change
( in thousands)
Advertising and marketing $ 16,363 $ 17,178 $ (815) (4.7)%
Percentage of revenue 12.5 % 14.6 %
Advertising and marketing expense decreased by $0.8 million , or 4.7%, for the
three months ended June 30, 2022 compared to the three months ended June 30,
2021 . The decrease during the period is attributable to a Company reduction in
marketing spend.
Interest Expense
Three Months Ended June 30,
2022 2021 $ Change % Change
( in thousands)
Interest expense $ (1,389) $ (1,561) $ 172 (11.0)%
Percentage of revenue (1.1) % (1.3) %
Interest expense decreased by $0.2 million , or 11.0%, for the three months ended
June 30, 2022 compared to the three months June 30, 2021 . This decrease was due
primarily to lower non-cash interest in connection with our convertible
promissory notes during the the three months ended June 30, 2021 .
24
--------------------------------------------------------------------------------
Other Income (Expense), Net
Three Months Ended June 30,
2022 2021 $ Change % Change
( in thousands)
Other income (expense), net $ 6,119 $ (6,385) $ 12,504 N/M
Percentage of revenue 4.7 % (5.4) %
N/M means not meaningful.
Other income (expense) increased by $12.5 million for the three months ended
June 30, 2022 compared to the three months ended June 30, 2021 . This increase in
other income (expense), net, was primarily due to the $6.0 million of income
compared to $3.9 million expense related to the changes in fair value of our
warrant liabilities during the periods ended June 30, 2022 and June 30, 2021 ,
respectively. Additionally, the Company incurred $2.6 million loss on
extinguishment of debt during the three months ended June 30, 2021 .
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. However, management believes that Adjusted Net Income (Loss), Adjusted Net Income (Loss) Margin, Adjusted Net Income (Loss) Per Common Share, Adjusted EBITDA and Adjusted EBITDA Margin, all non-GAAP financial measures (together the "Non-GAAP Measures"), provide investors with additional useful information in evaluating our performance. We calculate Adjusted Net Income (Loss) as net income (loss), adjusted to exclude: (1) stock-based compensation expense, (2) change in fair value of warrants and derivatives, (3) sales and use tax expense, (4) one-time transaction costs associated with the financing and merger, (5) noncash duplicate rent expense incurred during the relocation of our corporate headquarters, (6) executive transition costs, and (7) loss on extinguishment of debt. We calculate Adjusted Net Income (Loss) Margin by dividing Adjusted Net Income (Loss) for the period by Revenue for the period.
We calculate Adjusted Net Income (Loss) Per Common Share by dividing Adjusted Net Income (Loss) for the period by weighted average common shares used to compute net loss per share attributable to common stockholders for the period.
We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: (1)
interest expense, (2) depreciation and amortization, (3) stock-based
compensation expense, (4) change in fair value of warrants and derivatives, (5)
sales and use tax expense, (6) one-time transaction costs associated with the
financing and merger, (7) noncash duplicate rent expense incurred during the
relocation of our corporate headquarters, (8) executive transition costs, (9)
loss on extinguishment of debt.
We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA for the period
by revenue for the period.
The Non-GAAP Measures are financial measures that are not required by, or
presented in accordance with GAAP. We believe that the Non-GAAP Measures, when
taken together with our financial results presented in accordance with GAAP,
provides meaningful supplemental information regarding our operating performance
and facilitates internal comparisons of our historical operating performance on
a more consistent basis by excluding certain items that may not be indicative of
our business, results of operations or outlook. In particular, we believe that
the use of the Non-GAAP Measures are helpful to our investors as they are
measures used by management in assessing the health of our business, determining
incentive compensation and evaluating our operating performance, as well as for
internal planning and forecasting purposes.
The Non-GAAP Measures are presented for supplemental informational purposes
only, have limitations as an analytical tool and should not be considered in
isolation or as a substitute for financial information presented in accordance
with GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the
measures do not properly reflect capital commitments to be paid in the future,
(2) although depreciation and amortization are non-
25
--------------------------------------------------------------------------------
cash charges, the underlying assets may need to be replaced and Adjusted EBITDA
and Adjusted EBITDA Margin do not reflect these capital expenditures, (3)
Adjusted EBITDA and Adjusted EBITDA Margin do not consider the impact of
stock-based compensation expense, which is an ongoing expense for our company
and (4) Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other
non-operating expenses, including interest expense. In addition, our use of the
Non-GAAP Measures may not be comparable to similarly titled measures of other
companies because they may not calculate the Non-GAAP Measures in the same
manner, limiting its usefulness as a comparative measure. Because of these
limitations, when evaluating our performance, you should consider the Non-GAAP
Measures alongside other financial measures, including our net income (loss) and
other results stated in accordance with GAAP.
The following table presents a reconciliation of Adjusted Net Loss to net loss,
the most directly comparable financial measure stated in accordance with GAAP,
and the calculation of net loss margin, Adjusted Net Loss Margin and Adjusted
Net Loss Per Common Share for the periods presented:
Adjusted Net Loss
Three Months Ended
June 30,
2022 2021
(in thousands, except per share data)
Net loss $ (15,408) $ (24,804)
Stock-based compensation expense 4,343 3,098
Change in fair value of warrants and derivatives (5,996) 3,899
Sales and use tax expense (1) (83) -
Transaction costs (2) - 5,198
Loss on extinguishment of debt - 2,598
Executive transition costs (3) 106 -
Duplicate headquarters rent (4) 603 -
Adjusted net loss $ (16,435) $ (10,011)
Net loss margin (11.75) % (21.09) %
Adjusted net loss margin (12.53) % (8.51) %
Adjusted net loss per common share - basic and diluted $ (0.09)
175,491,912 108,762,540
26
--------------------------------------------------------------------------------
The following table presents a reconciliation of Adjusted EBITDA to net loss,
the most directly comparable financial measure stated in accordance with GAAP,
and the calculation of net loss margin and Adjusted EBITDA margin for the
periods presented:
Adjusted EBITDA
Three Months Ended
June 30,
2022 2021
(in thousands)
Net loss $ (15,408) $ (24,804)
Interest expense 1,389 1,561
Depreciation and amortization expense 2,016 844
Stock-based compensation expense 4,343
3,098
Change in fair value of warrants and derivatives (5,996) 3,899 Sales and use tax expense (1)
(83) -
Transaction costs (2) - 5,198
Loss on extinguishment of debt -
2,598
Executive transition costs (3) 106 - Duplicate headquarters rent (4) 603 - Adjusted EBITDA$ (13,030) $ (7,607) Net loss margin (11.75) % (21.09) % Adjusted EBITDA margin (9.94) % (6.47) % (1) Sales and use tax expense relates to recording a liability for sales and use tax we did not collect from our customers. Historically, we had collected state or local sales, use, or other similar taxes in certain jurisdictions in which we only had physical presence. OnJune 21, 2018 , theU.S. Supreme Court decided, inSouth Dakota v. Wayfair, Inc. that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in such jurisdiction. A number of states have positioned themselves to require sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state and accordingly, we recorded a liability in those periods in which we created economic nexus based on each state's requirements. Accordingly, we now collect, remit, and report sales tax in all states that impose a sales tax. (2)Transactions costs represent non-recurring consulting and advisory costs with respect to the merger agreement entered into withNorthern Star Acquisition Corp. onDecember 16, 2020 . (3) Executive transition costs includes recruiting expenses incurred by the Company. (4)Noncash duplicate rent expense incurred during the relocation of our corporate headquarters.
Liquidity and Capital Resources
Since inception, we have funded our operations with proceeds from sales of our capital stock and proceeds from borrowings in addition to cash generated by our operations. As ofJune 30, 2022 , we had cash and cash equivalents of approximately$177.2 million . We expect that our cash and cash equivalents, together with cash provided by our operating activities and proceeds from borrowings (as defined below), will be sufficient to fund our operations for at least the next 12 months. We are required to comply with certain financial and non-financial covenants related to our borrowing agreements, which we expect to be in compliance with during the next 12 months. Our future capital requirements will depend on many factors, including our pace of new and existing customer growth and our investments in partnerships and unexplored channels. We may be required to seek additional equity or debt financing. 27 --------------------------------------------------------------------------------
2025 Convertible Notes
OnNovember 27, 2020 , we issued$75.0 million aggregate principal amount of 2025 Convertible Notes toMagnetar Capital, LLC ("Magnetar"). The Company received net proceeds of approximately$74.7 million from the sale of the 2025 Convertible Notes, after deducting fees and expenses of approximately$0.3 million . The Company recorded the expenses as a discount to the note and will amortize over the term of the note. The 2025 Convertible Notes will mature onDecember 1, 2025 , unless earlier converted, redeemed or repurchased. For a period of one year from the issuance date of the 2025 Convertible Notes, certain funds affiliated withMagnetar Financial LLC (collectively, "Magnetar") may request the Company issue additional notes up to$25.0 million aggregate principal amount. The Company used approximately$27.6 million of the net proceeds from the sale of the 2025 Convertible Notes to repay the outstanding term loans withWestern Alliance Bank and Pinnacle. The 2025 Convertible Notes are governed by the Indenture. The 2025 Convertible Notes bear interest at the annual rate of 5.50%, payable entirely in payment-in-kind annually onDecember 1st of each year commencingDecember 1, 2021 , compounded annually.
If the 2025 Convertible Notes are not converted into common stock by the maturity date, the Company must repay the outstanding principal amount plus accrued interest.
The 2025 Convertible Notes contain call and put options to be settled in cash contingent upon the occurrence of a change of control and a default interest rate increase of 3.0% applicable upon the occurrence of an event of default that when evaluated under the guidance of ASC 815, Derivatives and Hedging, are embedded derivatives requiring bifurcation at fair value. The fair value calculation includes Level 3 inputs including the estimated fair value of the Company's common stock and assumptions regarding the probability that the contingent call or put will be exercised or an event of default will occur. Management determined that the probability that the contingent events will occur was near zero at inception and has remained near zero as ofJune 30, 2022 . Therefore, the Company did not record a derivative liability related to these features atJune 30, 2022 . The Company will assess the probability of occurrence quarterly during the term of the 2025 Convertible Notes.
As of
Western Alliance Bank-Line of Credit and Term Loan
InOctober 2017 , the Company entered into a new loan and security agreement (the "Western Alliance Agreement") and issued a warrant to purchase preferred stock ("Initial Western Alliance Warrant") toWestern Alliance Bank ("Western Alliance "), which provided for a secured revolving line of credit (the "Credit Facility") in an aggregate principal amount of up to$35.0 million with a maturity date ofOctober 12, 2020 . OnDecember 7, 2018 , the Company amended the Western Alliance Agreement, which included the issuance of a warrant to purchase common stock ("Subsequent Western Alliance Warrant") toWestern Alliance . The modification to theWestern Alliance Agreement provided for an additional term loan of$10.0 million at issuance and an incremental seasonal loan of$5.0 million . The seasonal loan matured and was repaid onMarch 31, 2020 . The term loan maturesDecember 31, 2021 . OnJuly 31, 2020 , the Company amended the Western Alliance Agreement and extended the expiration of the warrants toJuly 31, 2030 . The modification to the Western Alliance Agreement amended the maturity date of the Credit Facility toAugust 12, 2021 . OnNovember 27, 2020 , the Company repaid the outstanding$10.0 million principal of the term loan withWestern Alliance Bank , as well as$0.2 million of early repayment fees, using proceeds from the issuance of the 2025 Convertible Notes (the "2025 Convertible Notes"). See further discussion of the 2025 Convertible Notes issuance below. 28
-------------------------------------------------------------------------------- In conjunction with the 2025 Convertible Notes issuance, the Company amended the Western Alliance Agreement to extend the Credit Facility repayment date fromAugust 12, 2021 toDecember 31, 2021 .
On
OnOctober 29, 2021 , the Company andWestern Alliance entered into the eleventh loan and security modification agreement, which increased the sublimit for foreign exchange services and export, import, and standby letters of credit under the Company's existing loan and security agreement withWestern Alliance to$2.7 million . OnMay 27, 2022 , the Company andWestern Alliance entered into the twelfth loan and security modification agreement, which extended the Credit Facility maturity date toJune 30, 2022 . OnJune 30, 2022 , the Company andWestern Alliance entered into the thirteenth loan and security modification agreement, which extended the Credit Facility maturity date toJuly 15, 2022 . OnAugust 3, 2022 , the Company andWestern Alliance entered in the fourteenth loan and security modification agreement, which extended the Credit Facility maturity date toMay 31, 2023 .
The interest rate for borrowings under the Credit Facility, as amended, is equal
to (i) the greater of the prime rate that is published in the Money Rates
section of
The Credit Facility has a borrowing base subject to an amount equal to eighty percent (80.00%) of the Company's trailing three months of subscription revenue.Western Alliance has a firstpriority perfected security interest in substantially all of the Company's assets, including its rights to its intellectual property.
As of
Under the terms of this Credit Facility, the Company is required to comply with certain financial and nonfinancial covenants, including covenants to maintain certain liquidity amounts, as defined in the amended Western Alliance Agreement. As ofJune 30, 2022 andMarch 31, 2022 , the Company was compliant with its financial covenants. Cash Flows
Comparison of the Three Months Ended
The following table summarizes our cash flows for the three months endedJune 30, 2022 and 2021: Three Months Ended June 30, 2022 2021 (in thousands) Net cash used in by operating activities$ (17,425) $ (61,871) Net cash used in investing activities (4,735) (8,305) Net cash provided by financing activities 1 353,723
Net increase (decrease) in cash and restricted cash
Cash flows used in Operating Activities
Net cash flows in operating activities represent the cash receipts and disbursements related to our activities other than investing and financing activities.
29
--------------------------------------------------------------------------------Net cash flows used in operating activities is derived by adjusting our net loss for:
•non-cash operating items such as depreciation and amortization, stock-based compensation and other non-cash income or expenses;
•changes in operating assets and liabilities reflect timing differences between the receipt and payment of cash associated with transactions.
For the three months endedJune 30, 2022 , net cash used in operating activities was$17.4 million . The$17.4 million of net cash used in operating activities consisted of net loss of$15.4 million adjusted for non-cash charges totaling$2.3 million and a net decrease of$4.3 million in our net operating assets and liabilities. The non-cash charges primarily consisted of$6.0 million for changes in fair value of warrants,$4.3 million for stock based compensation, and$3.3 million for depreciation and amortization. The decrease in our net operating assets and liabilities was driven by the changes in inventory of$5.2 million to support current demand, accounts payable and accrued expenses of$2.5 million related to increased expenditures to support general business growth, as well as the timing of payments, other liabilities of$0.1 million , and prepaid expenses and other current assets of$0.1 million . The decrease in our net operating assets and liabilities was partially offset by the change in deferred revenue of$2.9 million , and accounts receivable of$1.4 million . For the three months endedJune 30, 2021 , net cash used in operating activities was$61.9 million . The$61.9 million of net cash used in operating activities consisted of net loss of$24.8 million adjusted for non-cash charges totaling$10.8 million and a net decrease of$47.9 million in our net operating assets and liabilities. The non-cash charges primarily consisted of$3.9 million for changes in fair value of warrants,$3.1 million for stock based compensation,$2.6 million loss on extinguishment of debt and$0.8 million for depreciation and amortization. The decrease in our net operating assets and liabilities was driven by the changes in inventory of$24.9 million to support current demand, accounts payable and accrued expenses of$13.7 million related to increased expenditures to support general business growth, as well as the timing of payments, other liabilities of$11.9 million , and prepaid expenses and other current assets of$1.3 million . The decrease in our net operating assets and liabilities was partially offset by the change in deferred revenue of$3.5 million , and accounts receivable of$0.8 million .
Cash flows used in Investing Activities
For the three months endedJune 30, 2022 and 2021, net cash used in investing activities was$4.7 million and$8.3 million , respectively, primarily due to capital expenditures.
Cash flows provided by Financing Activities
For the three months ended
For the three months endedJune 30, 2021 , net cash provided by financing activities was$353.7 million , primarily due to proceeds of$227.1 million proceeds from reverse recapitalization and proceeds from the PIPE of$200.0 million . The increase in cash provided by financing activities was partially offset by the repayments of outstanding borrowings on our line of credit of$34.3 million , payments of transaction costs of$24.7 million , payment of deferred underwriting fees$8.9 million , and repayment of the outstanding PPP loan of$5.2 million .
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about 30 --------------------------------------------------------------------------------
items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Except as described in Note 2, "Summary of Significant Accounting Policies - Recent Accounting Pronouncements Adopted," to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our audited consolidated financial statements and notes thereto for the year endedMarch 31, 2022 contained in the Annual Report on Form 10-K filed with theSEC onMay 31, 2022 . 31
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