DOXIMITY, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and accompanying notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K, filed with theSEC onMay 27, 2022 . This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, as described under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled "Risk Factors" or in other parts of this Quarterly Report on Form 10-Q. Our historical results are not necessarily indicative of the results that may be expected for any period in the future, and our interim results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. The last day of our fiscal year isMarch 31st . Our fiscal quarters end onJune 30th ,September 30th ,December 31st , andMarch 31st . Fiscal 2023, our current fiscal year, will end onMarch 31, 2023 .
Overview
We are the leading digital platform forU.S. medical professionals, as measured by the number ofU.S. physician members. Our members include more than 80% of physicians across all 50 states and every medical specialty. Our mission is to help every physician be more productive and provide better care for their patients. We are physicians-first, putting technology to work for doctors instead of the other way around. That guiding principle has enabledDoximity to become an essential and trusted professional platform for physicians. Our cloud-based platform provides our members with tools specifically built for medical professionals, enabling them to collaborate with their colleagues, securely coordinate patient care, conduct virtual patient visits, stay up-to-date with the latest medical news and research, monitor their work schedules, and manage their careers.Doximity membership is free for physicians. Our revenue-generating customers, primarily pharmaceutical manufacturers and healthcare systems, have access to a suite of commercial solutions that benefit from broad physician usage. At the core of our platform is the largest medical professional network in the nation, which creates proximity within our community of doctors and hundreds of thousands of other medical professionals. Verified members can search and connect with colleagues and specialists, which allows them to better coordinate patient care and streamline referrals. Our newsfeed addresses the ever increasing sub-specialization of medical expertise and volume of medical research by delivering news and information that is relevant to each physician's clinical practice. We also support physicians in their day-to-day practice of medicine with mobile-friendly and easy-to-use clinical workflow tools such as voice and video dialer, secure messaging, and digital faxing. Our business model has delivered high revenue growth at scale with profitability. For the three months endedJune 30, 2022 and 2021, we recognized revenue of$90.6 million , and$72.7 million , respectively, representing a year-over-year growth rate of 25%. For the three months endedJune 30, 2022 and 2021, our net income was$22.4 million and$26.3 million and our adjusted EBITDA was$33.5 million and$31.2 million , respectively. We have accomplished this while focusing on our core mission to help every physician be more productive and provide better care for their patients.
Impact of COVID-19
The COVID-19 pandemic has had, and continues to have, a significant impact on theU.S. economy and the markets in which we operate.Doximity has been privileged to play an important role in supporting physicians, medical professionals, and health systems nationwide during this time. Our business has performed strongly, demonstrating the value and effectiveness of our platform to both our members and customers. While certain of the COVID-19 pandemic-related trends underlying our positive performance may not continue after the pandemic eases, we believe that certain key underlying trends have been accelerated and will persist long after the pandemic ends. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business. While the COVID-19 pandemic has not had a material adverse impact on our financial condition and results of operations to date, the extent to which the COVID-19 pandemic or any other pandemic, epidemic, or infectious diseases will impact our business, results of operations and financial condition in the future is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted. For additional information, see "Risk Factors-Risks Related to Our Business-The COVID-19 pandemic and any other future pandemic, epidemic, or outbreak of an infectious disease may adversely affect our business, financial condition, and results of operations." 24
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Key Business and Financial Metrics
We monitor a number of key business and financial metrics to assess the health and success of our business, including:
Customers with Trailing 12-Month Subscription Revenue Greater than$100,000 . The number of customers with trailing 12-month ("TTM"), product revenue greater than$100,000 is calculated by counting the number of customers that contributed more than$100,000 in subscription revenue in the TTM period. The number of customers with TTM subscription-based revenue of at least$100,000 is a key indicator of the scale of our business. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity. The number of customers with at least$100,000 of revenue has grown steadily in recent years as we have engaged new customers and expanded within existing ones. This cohort of customers accounted for approximately 87% of our revenue for the TTM endedJune 30, 2022 .June 30, 2022 2021
Number of customers with at least
_________________________ 1 The metric excludes the impact of the AMiON acquisition, which closed onApril 1, 2022 , including customers of and subscription revenue generated from the AMiON on-call scheduling and messaging application and was immaterial to the periods presented. Net Revenue Retention Rate. Net revenue retention rate is calculated by taking the TTM subscription-based revenue from our customers that had revenue in the prior TTM period and dividing that by the total subscription-based revenue for the prior TTM period. Our net revenue retention rate compares our subscription revenue from the same set of customers across comparable periods, and reflects customer renewals, expansion, contraction, and churn. Our net revenue retention rate is directly tied to our revenue growth rate and thus fluctuates as that growth rate fluctuates. June 30, 2022 2021 Net revenue retention rate 139 % 1 167 % _________________________ 1 The metric excludes the impact of the AMiON acquisition, which closed onApril 1, 2022 , including customers of and subscription revenue generated from the AMiON on-call scheduling and messaging application and was immaterial to the periods presented. Non-GAAP Financial Measures
We use adjusted EBITDA and free cash flow to measure our performance and identify trends, to formulate financial projections, and to make strategic decisions.
Adjusted EBITDA
We define adjusted EBITDA as net income before interest, income taxes, depreciation, and amortization, and as further adjusted for acquisition and other related expenses, stock-based compensation expense, change in fair value of contingent earn-out consideration liability, and other income, net. Net income margin represents net income as a percentage of revenue and adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA is a key measure we use to assess our financial performance and
is also used for internal planning and forecasting purposes. We believe adjusted
EBITDA is helpful to investors, analysts, and other interested parties because
it can assist in providing a more consistent and comparable overview of our
operations across our historical financial periods.
Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures and are
presented for supplemental informational purposes only and should not be
considered as alternatives or substitutes to the financial information presented
in accordance with GAAP. These measures have certain limitations in that they do
not include the impact of certain expenses that are reflected in our condensed
consolidated statement of operations that are necessary to run our business.
Other companies, including other companies in our industry, may not use these
measures or may calculate these measures differently than as presented in this
Quarterly Report on Form 10-Q, limiting their usefulness as comparative
measures.
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The following table presents a reconciliation of net income to adjusted EBITDA,
adjusted EBITDA margin, and net income margin (in thousands, except
percentages):
Three Months Ended
June 30,
2022 2021
(unaudited)
Net income $ 22,383 $ 26,322
Adjusted to exclude the following:
Acquisition and other related expenses 30 -
Stock-based compensation 9,506 5,127
Depreciation and amortization 2,370 1,153
Provision for (benefit from) income taxes 103 (1,402)
Change in fair value of contingent earn-out consideration
liability (54) -
Other income, net (804) (45)
Adjusted EBITDA $ 33,534 $ 31,155
Revenue $ 90,639 $ 72,669
Net income margin 25 % 36 %
Adjusted EBITDA margin 37 % 43 %
Free Cash Flow
Free cash flow is a key performance measure that our management uses to assess
our overall performance. We consider free cash flow to be a liquidity measure
that provides useful information to management and investors about the amount of
cash generated by our business that can be used for strategic opportunities,
including investing in our business, making strategic acquisitions, and
strengthening our financial position.
We calculate free cash flow as cash flow from operating activities less purchases of property and equipment and internal-use software development costs.
Although we believe free cash flow is a useful indicator of business
performance, free cash flow is presented for supplemental informational purposes
only and should not be considered a substitute for financial information
presented in accordance with GAAP. Free cash flow has limitations as an
analytical tool, and it should not be considered in isolation or as a substitute
for analysis of other GAAP financial measures, such as net cash provided by
operating activities. Some of the limitations of free cash flow are that it may
not properly reflect future contractual commitments that have not been realized
in the current period. Our free cash flow may not be comparable to similarly
titled measures of other companies because they may not calculate free cash flow
in the same manner as we calculate the measure, limiting its usefulness as a
comparative measure.
The following table presents a reconciliation of our free cash flow to the most
comparable GAAP measure, net cash provided by operating activities, for each of
the periods indicated (in thousands):
Three
Months Ended
2022 2021
Net cash provided by operating activities $ 44,752 $ 33,175
Purchases of property and equipment (710) (41)
Internal-use software development costs (1,415) (771)
Free cash flow $ 42,627 $ 32,363
Other cash flow components:
Net cash used in investing activities $ (41,500) $ (57,423)
Net cash provided by (used in) financing activities $
(5,969)
Components of Results of Operations
Revenue
Marketing Solutions. Our customers purchase a subscription to Marketing Solutions, either directly or through marketing agencies, for the ability to share tailored content on theDoximity platform via a variety of modules for defined time periods. 26
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We generally bill customers a portion of the contract upon contract execution and then bill throughout the remainder of the contract based on various time-based milestones. Generally, we bill in advance of revenue recognition and record unbilled revenue when revenue is recognized in advance of billings. Unbilled revenue is recorded on the condensed consolidated balance sheets within prepaid expenses and other current assets. Subscriptions to Marketing Solutions include the following contractual arrangements: •Subscriptions for specific modules delivered on a monthly basis to a consistent number of targetedDoximity members during the subscription period. Pricing is based on the number and composition of the targetedDoximity members, and on the specific modules purchased. •Integrated subscriptions for a fixed subscription fee that are not tied to a single module, allowing customers to utilize any combination of modules during the subscription period.
For these subscription-based contractual arrangements, we recognize revenue over time as control of the service is transferred to the customer.
Hiring Solutions. We provide customers access to our platform which enables them to post job openings or deliver a fixed number of monthly messages to our network of medical professionals. Hiring Solutions contracts are noncancellable and customers are billed in annual, quarterly, or monthly installments in advance of the service period, and revenue is recognized ratably over the contractual term. Through our acquisition of Curative Talent, completed in fiscal 2021, we also generate revenue from temporary and permanent medical recruiting services which we charge on an hourly-fee, and retainer and placement-fee basis, respectively. Revenue for temporary placement services is recognized net of third-party contractor fees. For the three months endedJune 30, 2022 and 2021, the revenue from temporary and permanent medical recruiting services was not significant to our total revenue. For a description of our revenue accounting policies, see Note 2-Summary of Significant Accounting Policies included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 and filed with theSEC onMay 27, 2022 . Cost of Revenue Cost of revenue is primarily comprised of expenses related to cloud hosting, personnel-related expenses for our customer success team, costs for third-party platform access, software services and contractors, and other services used in connection with the delivery and support of our platform. Our cost of revenue also includes the amortization of internal-use software development costs and deferred contract costs, editorial and other content-related expenses, and allocated overhead. Cost of revenue is also driven by the growth of our member network and utilization of our telehealth tools. We intend to continue to invest additional resources in our cloud infrastructure and our customer support organizations to support the growth of our business and expect these expenses to increase on an absolute dollar basis.
Gross Profit and Gross Margin
Gross profit is total revenue less total cost of revenue. Gross margin is gross profit expressed as a percentage of total revenue. Gross profit and gross margin has been and will continue to be affected by a number of factors, including the timing of our acquisition of new customers and sales of additional solutions to existing customers, the timing and extent of our investments in our operations, cloud hosting costs, growth in our customer success team, and the timing of amortization of internal-use software development costs. We expect our gross margin to remain relatively steady over the near term, although our quarterly gross margin is expected to fluctuate from period to period depending on the interplay of these and other factors.
Operating Expenses
Our operating expenses consist of research and development, sales and marketing, and general and administrative expenses.
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Research and Development
Research and development expense is primarily comprised of personnel-related expenses associated with our engineering and product teams who are responsible for building new products and improving existing products. Research and development expense also includes costs for third-party services and contractors, information technology and software-related costs, and allocated overhead. Other than internal-use software development costs that qualify for capitalization, research and development costs are expensed as incurred. We expect research and development expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.
Sales and Marketing
Sales and marketing expense is primarily comprised of personnel-related expenses, sales incentive compensation, travel, and other event expenses. Sales and marketing expense also includes costs for third-party services and contractors, information technology and software-related costs, allocated overhead, amortization of intangible assets, and change in fair value of contingent earn-out consideration liability. We capitalize the sales incentive compensation that are considered to be incremental and recoverable costs of obtaining a contract with a customer. These sales compensation are amortized over the period of benefit. We expect sales and marketing expense to increase and to be our largest expense on an absolute basis.
General and Administrative
General and administrative expense is primarily comprised of personnel-related expenses associated with our executive, finance, legal, human resources, information technology, and facilities employees. General and administrative expense includes fees for third-party legal and accounting services, insurance expense, information technology and software-related costs, and allocated overhead. We expect that general and administrative expense will increase on an absolute dollar basis as we incur compliance costs associated with being a publicly-traded company, including legal, audit, and consulting fees.
Other Income, Net
Other income, net consists primarily of administrative fees and penalties and interest income earned on our cash equivalents and marketable securities.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists primarily of income taxes inU.S. federal, state, and local jurisdictions in which we conduct business. We calculate income taxes in interim periods by applying an estimated annual effective tax rate to income before income taxes and by calculating the tax effect of discrete items recognized during the period. Our effective income tax rate generally differs from theU.S. statutory tax rate of 21.0% primarily due toU.S. federal and state research and development tax credits, state income taxes, and stock-based compensation related tax benefits. 28
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Results of Operations
The following tables set forth our condensed consolidated results of operations data and such data as a percentage of revenue for the periods presented.
Three Months Ended June 30,
2022 2021
(in thousands)
Revenue $ 90,639 $ 72,669
Cost of revenue(1) 13,077 7,986
Gross profit 77,562 64,683
Operating expenses:
Research and development(1) 19,022 13,241
Sales and marketing(1) 28,134 19,371
General and administrative(1) 8,724 7,196
Total operating expenses 55,880 39,808
Income from operations 21,682 24,875
Other income, net 804 45
Income before income taxes 22,486 24,920
Provision for (benefit from) income taxes 103 (1,402)
Net income $ 22,383 $ 26,322
_______________
(1)Costs and expenses include stock-based compensation expenses as follows:
Three Months Ended June 30,
2022 2021
(in thousands)
Cost of revenue $ 2,122 $ 268
Research and development 2,552 970
Sales and marketing 3,074 1,028
General and administrative 1,758 2,861
Total stock-based compensation expense $ 9,506 $ 5,127
Three Months Ended June 30,
2022 2021
(percentages of revenue)
Revenue 100 % 100 %
Cost of revenue 14 11
Gross profit 86 89
Operating expenses:
Research and development 21 18
Sales and marketing 31 27
General and administrative 10 10
Total operating expenses 62 55
Income from operations 24 34
Other income, net 1 -
Income before income taxes 25 34
Provision for (benefit from) income taxes - (2)
Net income 25 % 36 %
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Comparison of the three months ended
Revenue
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Revenue $ 90,639 $ 72,669 $ 17,970 25 %
Revenue for the three months ended June 30, 2022 increased $18.0 million as
compared to the same period in 2021. The increase was primarily driven by a
$15.3 million increase in subscription revenue. Of the increase in subscription
revenue, $7.4 million was driven by the addition of new subscription customers1
and $7.9 million was due to the expansion of existing customers. The expansion
of existing customers was primarily driven by average revenue per existing
Marketing Solutions customer increasing by 20% as a result of adding new brands
and service lines, growing existing brands and service lines, and upselling
additional modules. Approximately 92% of our revenue for the three months ended
June 30, 2022 was derived from subscription customers. The remaining increase in
revenue was driven by an increase in medical recruiting services.
Cost of revenue, gross profit and gross margin
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Cost of revenue $ 13,077 $ 7,986 $ 5,091 64 %
Gross profit $ 77,562 $ 64,683 $ 12,879 20 %
Gross margin 86 % 89 %
Cost of revenue for the three months ended June 30, 2022 increased $5.1 million
as compared to the same period in 2021. The increase was due to a $1.8 million
increase in personnel-related costs as a result of headcount growth of
approximately 38%, and a $2.1 million increase in expense related to the U.S.
News partnership, of which $1.3 million related to the U.S. News Warrant granted
in October 2021 . In addition, there was an increase of $0.4 million in
stock-based compensation expense due to headcount growth and awards granted with
higher weighted-average grant date fair values since the first quarter of the
prior fiscal year.
The gross margin for the three months ended June 30, 2022 decreased primarily
due to headcount growth and expenses related to our U.S. News partnership,
offset by growth in revenues.
Operating Expenses
Research and development
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Research and development $ 19,022 $ 13,241 $ 5,781 44 %
Research and development expense for the three months ended June 30, 2022
increased $5.8 million as compared to the same period in 2021. The increase in
research and development expense was primarily driven by a $3.1 million increase
in personnel-related costs as a result of headcount growth of approximately 21%.
The increase was also driven by a $1.6 million increase in stock-based
compensation expense, primarily due to headcount growth and awards granted with
higher weighted-average grant date fair values since the first quarter of the
prior fiscal year. In addition, there was a $1.2 million increase in employee
events and travel-related expenses due to a return to limited in-person events.
1 We define new subscription customers as revenue generating subscription
customers in the current fiscal period who did not contribute any revenue for
the same period in the prior fiscal year. This also includes inorganic revenue
from the acquisition of AMiON, which closed on April 1, 2022 .
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Sales and marketing
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Sales and marketing $ 28,134 $ 19,371 $ 8,763 45 %
Sales and marketing expense for the three months ended June 30, 2022 increased
$8.8 million as compared to the same period in 2021. The increase in sales and
marketing expense was a result of the growth in our business, primarily driven
by a $2.8 million increase in personnel-related costs due to headcount growth of
approximately 22%. The increase was also driven by a $2.0 million increase in
stock-based compensation, primarily due to headcount increase and awards granted
with increased weighted-average grant date fair values since the first quarter
of the prior fiscal year. Additionally, there was a $1.1 million increase for
in-person trade shows and conferences, advertising and other marketing expenses,
a $1.0 million increase in employee events and related travel expenses as we
resumed limited in-person events, a $0.8 million increase in amortization
expense related to the intangible assets acquired in connection with the AMiON
acquisition, and a $0.6 million increase in commissions and incentive
compensation driven by an increase in sales activity.
General and administrative
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
General and administrative $ 8,724 $ 7,196 $ 1,528 21 %
General and administrative expense for the three months ended June 30, 2022
increased $1.5 million as compared to the same period in 2021. The increase in
general and administrative expense was primarily driven by a $1.5 million
increase in insurance, accounting, legal, and other services as we incurred
additional expenses as a result of becoming a public company, and a $0.6 million
increase in personnel-related costs due to headcount growth of approximately
33%. In addition, there was a $1.1 million decrease in stock-based compensation,
primarily due to lower expense from certain performance-based awards, offset by
higher expense from headcount growth and awards granted with higher weighted
average grant-date fair value since the first quarter of fiscal 2022.
Other income, net
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Other income, net $ 804 $ 45 $ 759 1687 %
Other income, net for the three months ended
Provision for (benefit from) income taxes
Three Months Ended June 30, Change
2022 2021 $ %
(in thousands, except percentages)
Provision for (benefit from) income taxes $ 103 $ (1,402) $ 1,505 NM
___________________
NM: Percentage not meaningful.
For the three months endedJune 30, 2022 , we had income tax expense of$0.1 million as compared to an income tax benefit of$1.4 million for the three months endedJune 30, 2021 . This change was primarily driven by decreased tax deductions from stock option activities, offset in part by increased federal and state research and development tax credits. 31
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Liquidity and Capital Resources
Since inception, we have financed operations primarily through proceeds received from sales of equity securities and payments received from our customers. As ofJune 30, 2022 , our principal sources of liquidity were cash and cash equivalents and marketable securities of$776.3 million . Our marketable securities consist ofU.S. government and agency securities, corporate notes and bonds, commercial paper, asset-backed securities, and sovereign bonds.
In
OnMay 12, 2022 , the Company's board of directors authorized a program to repurchase up to$70 million of the Company's Class A common stock for a period of 12 months. During the three months endedJune 30, 2022 the Company repurchased and retired 273,746 shares of Class A common stock for an aggregate purchase price of$8.9 million . As ofJune 30, 2022 ,$61.1 million remained available and authorized for repurchases.
We believe that our existing cash and cash equivalents and marketable securities will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
Our future capital requirements will depend on many factors, including our
revenue growth rate, the timing and the amount of cash received from customers,
the expansion of sales and marketing activities, the timing of share
repurchases, and the timing and extent of spending to support research and
development efforts. Further, we may in the future enter into arrangements to
acquire or invest in businesses and technologies. We may be required to seek
additional equity or debt financing. In the event that additional financing is
required from outside sources, we may not be able to raise it on terms
acceptable to us or at all. If we are unable to raise additional capital when
desired, our business, financial condition, and results of operations could be
adversely affected.
For further details regarding our cash requirements from noncancelable operating
lease obligations and other contractual commitments, see Note 12-Commitments and
Contingencies and Note 13-Leases included in Part I, Item 1 of this Quarterly
Report on Form 10-Q.
Cash Flows
Three Months Ended June 30,
2022 2021
(in thousands)
Net cash provided by operating activities $ 44,752 $ 33,175
Net cash used in investing activities $ (41,500) $ (57,423)
Net cash provided by (used in) financing activities $
(5,969)
Net cash provided by operating activities
Cash provided by operating activities was$44.8 million for the three months endedJune 30, 2022 . This consisted of net income of$22.4 million , adjusted for non-cash items of$16.6 million and a net inflow from operating assets and liabilities of$5.8 million . Non-cash items primarily consisted of stock-based compensation expense of$9.5 million , amortization of deferred contract costs of$2.8 million , depreciation and amortization expense of$2.4 million , and amortization of the premium on marketable securities of$1.5 million . The net inflow from operating assets and liabilities was driven by$5.5 million decrease in accounts receivable due to the timing of collections, a$6.2 million increase in deferred revenue due to the timing of customer billings and program launches, and a$1.2 million decrease in prepaid expenses and other assets. These increases were partially offset by a decrease of$6.1 million in accounts payable, accrued expenses, and other liabilities, which was primarily a result of the timing of$6.3 million commissions and rebate liabilities payments, offset by a$1.2 million increase in employee contributions under the employee stock purchase plan. Cash provided by operating activities was$33.2 million for the three months endedJune 30, 2021 . This consisted of net income of$26.3 million , adjusted for non-cash items of$10.0 million and a net outflow from operating assets and liabilities of$3.1 million . Non-cash items primarily consisted of stock-based compensation expense of$5.1 million , amortization of deferred contract costs of$3.2 million , and depreciation and amortization expense of$1.2 million . The net outflow from operating assets and liabilities was primarily driven by an increase of$2.9 million in prepaid expenses and other assets due to an increase in prepaid taxes, a decrease of$2.3 million in accounts payable, accrued expenses, and other liabilities, which was 32
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primarily a result of a decrease in accrued commissions, and an increase of
Net cash used in investing activities
Cash used in investing activities was$41.5 million for the three months endedJune 30, 2022 , which primarily consisted of$53.5 million paid for the acquisition of AMiON,$8.9 million of marketable securities purchases, and$1.4 million for internal-use software development costs, partially offset by proceeds from the sale of marketable securities of$14.7 million and proceeds from the maturities of marketable securities of$8.3 million .
Cash used in investing activities was
Net cash provided by (used in) financing activities
Cash used in financing activities was$6.0 million for the three months endedJune 30, 2022 , which primarily consisted of common stock repurchases of$8.9 million , partially offset by$3.0 million of proceeds from the exercise of stock options and common stock warrants. Cash provided by financing activities was$552.2 million for the three months endedJune 30, 2021 , which primarily consisted of$553.9 million of proceeds from the issuance of common stock upon our initial public offering after deducting underwriting fees and commissions, and$2.7 million of proceeds from the exercise of stock options. These proceeds were partially offset by common stock repurchases of$2.7 million and$1.8 million in payments for deferred offering costs.
Off Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of our financial statements also requires us to make estimates and assumptions that affect the amounts stated in the condensed consolidated financial statements and accompanying notes. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results could differ significantly from the estimates made by management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
Business Combinations
The results of businesses acquired in business combinations are included in our
condensed consolidated financial statements from the date of the acquisition.
Purchase accounting results in assets and liabilities of an acquired business
being recorded at their estimated fair values on the acquisition date. Any
excess consideration over the fair value of assets acquired and liabilities
assumed is recognized as goodwill. The purchase price allocation process
requires management to make significant judgment and estimates, including the
selection of valuation methodologies, estimates of future expected cash flows,
future revenue growth, margins, customer retention rates, technology life,
royalty rates, expected use of acquired assets, and discount rates. These
factors are also considered in determining the useful life of the acquired
intangible assets. These estimates are based in part on historical experience,
market conditions and information obtained from management of the acquired
companies and are inherently uncertain. We engage the assistance of valuation
specialists in concluding on fair value measurements in connection with
determining fair values of assets acquired and liabilities assumed in business
combinations.
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Contingent earn-out consideration payable in cash arising from business combinations is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. Changes in fair value are recorded in sales and marketing expenses in the condensed consolidated statements of operations. Determining the fair value of the contingent earn-out consideration each period requires management to make assumptions and judgments. These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent consideration could have been materially different from the amounts recorded. The significant inputs used in the fair value measurement of the contingent earn-out consideration liability are the discount rate, and the timing and amounts of the future payments, which are based upon estimates of future achievement of the performance metrics. Transaction-related costs incurred by the Company are expensed as incurred and are included in general and administrative expenses in the Company's condensed consolidated statements of operations. There have been no other material changes to our critical accounting policies and estimates as compared to those described in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K for the fiscal year endedMarch 31, 2022 and filed with theSEC onMay 27, 2022 .
Recent Accounting Pronouncements
Refer to Note 2-Summary of Significant Accounting Policies included in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Jumpstart Our Business Startups Act of 2012
We are an emerging growth company, as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act for the adoption of certain accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
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