You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our unaudited consolidated
financial statements and related notes appearing elsewhere in this Quarterly
Report on Form 10-Q and our financial statements and related notes thereto
included in our Form 10-K for the fiscal year ended January 31, 2021. In
addition to historical financial information, the following discussion and
analysis and information set forth elsewhere in this Quarterly Report on Form
10-Q contain forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results could differ materially from those anticipated
by these forward-looking statements as a result of many factors. We discuss
factors that we believe could cause or contribute to these differences below and
elsewhere in this Quarterly Report on Form 10-Q, including those set forth under
"Risk Factors" and "Special Note Regarding Forward-Looking Statements."
Financial Highlights
•Total revenue increased 45% to $48.3 million in the three months ended
April 30, 2021, compared with $33.4 million in the three months ended April 30,
2020.
•Net loss was $11.0 million in the three months ended April 30, 2021, compared
to $6.1 million in the three months ended April 30, 2020.
•Adjusted EBITDA was positive $0.1 million in the three months ended April 30,
2021, compared to positive $1.5 million in the three months ended April 30,
2020.
•Cash used in operating activities was $5.5 million for the three months ended
April 30, 2021, compared to cash provided by operating activities of $1.9
million for the three months ended April 30, 2020.
•Free cash flow was negative $12.4 million for the three months ended April 30,
2021, compared to negative $1.2 million for the three months ended April 30,
2020.
•Cash and cash equivalents as of April 30, 2021 was $450.7 million, an increase
of $231.9 million compared to January 31, 2021, driven primarily by our
follow-on offering of common stock, which generated net proceeds of
$245.8 million.
For a reconciliation of Adjusted EBITDA to net loss and a reconciliation of free
cash flow to cash (used in) provided by operating activities, and for more
information as to how we define and calculate such measures, see the section
below titled "Non-GAAP financial measures."
Overview
We are a leading provider of comprehensive software solutions that transform the
healthcare experience by engaging patients in their care and enabling healthcare
provider organizations to optimize operational efficiency, improve profitability
and enhance clinical care and safety. As evidenced in industry survey reports
from KLAS, we have been recognized as a leader based on our integration
capabilities with healthcare provider organizations, the broad adoption of our
patient intake functionalities, our response to the COVID-19 pandemic and by
overall client satisfaction. Through the SaaS-based Phreesia Platform, which we
refer to as the Phreesia Platform or our Platform, we offer provider clients a
robust suite of solutions to manage the patient intake process and an integrated
payments solution for secure processing of patient payments. Our Platform also
provides life sciences companies with an engagement channel for targeted and
direct communication with patients.
We serve an array of healthcare provider organizations of all sizes, ranging
from single-specialty practices, which include internal and family medicine,
urology, dermatology, and orthopedics, to large, multi-specialty groups and
health systems. Our life sciences revenue is generated from clients in the
pharmaceutical, biotechnology and medical device industries.
We derive revenue from (i) subscription fees from healthcare provider
organizations for access to the Phreesia Platform and related professional
services fees, (ii) payment processing fees based on levels of patient payment
volume processed through the Phreesia Platform and (iii) fees from life sciences
companies to deliver marketing content to patients using the Phreesia Platform.
We have strong visibility into our business as the majority of our revenue is
derived from recurring subscription fees and re-occurring payment processing
fees.
We market and sell our products and services to provider clients throughout the
United States using a direct sales organization. Our demand generation team
develops content and identifies prospects that our sales development team
researches and qualifies to generate high-grade, actionable sales programs. Our
direct sales force executes on these qualified sales programs, partnering with
client services to ensure prospects are educated on the breadth


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of our capabilities and demonstrable value proposition, with the goal of
attracting and retaining clients and expanding their use of our Platform over
time. Most of our Platform solutions are contracted pursuant to annual,
auto-renewing agreements. Our sales typically involve competitive processes and
sales cycles have, on average, varied in duration from three months to six
months, depending on the size of the potential client. In addition, through
Phreesia University (Phreesia's in-house training program), events, client
conferences and webinars, we help our provider clients optimize their businesses
and, as a result, support client retention.
We also sell products and services to pharmaceutical brands and advertising
agencies through our direct sales and
marketing teams.

Since our inception, we have not marketed or sold our products internationally.
Accordingly, all of our revenue from historical periods has come from the United
States, and our current strategy is to continue to focus our sales efforts
within the United States.
Our revenue growth has been primarily organic and reflects our significant
addition of new provider clients and increased revenue from existing clients.
New provider clients are defined as clients that go live in the applicable
period and existing provider clients are defined as clients that go live in any
period before the applicable period.
Recent developments
COVID-19
The impact of the COVID-19 (a novel strain of coronavirus) pandemic has been
widespread and rapidly evolving. Over the last six months, several vaccines for
COVID-19 received FDA approval and are currently being administered across the
country. To date, more than a third of Americans are fully vaccinated against
the virus. Despite the promising vaccination rates and many states' reopening
plans, we believe COVID-19 may continue to impact the normal operations of our
clients, which are primarily healthcare providers. As more individuals are
vaccinated, we expect these impacts to be diminished.

Key Metrics
We regularly review the following key metrics to measure our performance,
identify trends affecting our business, formulate financial projections, make
strategic business decisions and assess working capital needs.

                                                   Three months ended April 30,
                                                        2021                    2020
Key Metrics:
Provider clients (average over period)                1,902

1,632


Average revenue per provider client         $        20,222

$ 16,735





•Provider clients. We define provider clients as the average number of
healthcare provider organizations that generate revenue each month during the
applicable period. In cases where we act as a subcontractor providing
white-label services to our partner's clients, we treat the contractual
relationship as a single provider client. We believe growth in the number of
provider clients is a key indicator of the performance of our business and
depends, in part, on our ability to successfully develop and market our Platform
to healthcare provider organizations that are not yet clients. While growth in
the number of provider clients is an important indicator of expected revenue
growth, it also informs our management of the areas of our business that will
require further investment to support expected future provider client growth.
For example, as the number of provider clients increases, we may need to add to
our customer support team and invest to maintain effectiveness and performance
of our Platform and software for our provider clients and their patients.
•Average revenue per provider client. We define average revenue per provider
client as the total subscription and related services and payment processing
revenue generated from provider clients in a given period divided by the average
number of provider clients that generate revenue each month during that same
period. We are focused on continually delivering value to our provider clients
and believe that our ability to increase average revenue per provider client is
an indicator of the long-term value of the Phreesia platform.



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Additional Information
                                                    Three months ended April 30,
                                                         2021                        2020
Patient payment volume (in millions)       $         701                         $ 454
Payment facilitator volume percentage                 78    %

84 %




•Patient payment volume. We believe that patient payment volume is an indicator
of both the underlying health of our provider clients' businesses and the
continuing shift of healthcare costs to patients. We measure patient payment
volume as the total dollar volume of transactions between our provider clients
and their patients utilizing our payment platform, including via credit and
debit cards that we process as a payment facilitator as well as cash and check
payments and credit and debit transactions for which Phreesia acts as a gateway
to other payment processors.
•Payment facilitator volume percentage. We define payment facilitator volume
percentage as the volume of credit and debit card patient payment volume that we
process as a payment facilitator as a percentage of total patient payment
volume. Payment facilitator volume is a major driver of our payment processing
revenue.
Components of statements of operations
Revenue
We generate revenue primarily from providing an integrated SaaS-based software
and payment platform for the healthcare industry. We derive revenue from
subscription fees and related services generated from our provider clients for
access to the Phreesia Platform, payment processing fees based on the levels of
patient payment volume processed through the Phreesia Platform, and from digital
marketing revenue from life sciences companies to reach, educate and communicate
with patients when they are most receptive and actively seeking care.
Our total revenue consists of the following:
•Subscription and related services. We primarily generate subscription fees from
our provider clients based on the number of providers that subscribe to and
utilize the Phreesia Platform. Our provider clients are typically billed monthly
in arrears, though in some instances, provider clients may opt to be billed
quarterly or annually in advance. Subscription fees are typically auto-debited
from provider clients' accounts every month. As we target and add larger
enterprise provider clients, these clients may choose to contract differently
than our typical per provider subscription model. To the extent we charge in an
alternative manner with larger enterprise provider clients, we expect that such
a pricing model will recur and, combined with our per provider subscription
fees, will increase as a percentage of our total revenue.
•Payment processing fees. We generate revenue from payment processing fees based
on the number of transactions and the levels of patient payment volume processed
on credit and debit cards on the Phreesia Platform through our payment
facilitator model. Payment processing fees are generally calculated as a
percentage of the total transaction dollar value processed and/or a fee per
transaction. Credit and debit patient payment volume processed through our
payment facilitator model represented roughly 78% and 84% of our patient payment
volume in the three months ended April 30, 2021 and 2020, respectively. The
remainder of our patient payment volume is composed of credit and debit
transactions for which Phreesia acts as a gateway to another payment processor,
and cash and check transactions.
•Life sciences. We generate revenue from the sale of digital marketing solutions
to life sciences companies. As we expand our provider client base, we increase
the number of new patients we can reach to deliver targeted marketing content on
behalf of our life sciences clients.
Cost of revenue (excluding depreciation and amortization)
Our cost of revenue primarily consists of personnel costs, including salaries,
benefits, bonuses and stock-based compensation for implementation and technical
support, and costs to verify insurance eligibility and benefits, infrastructure
costs to operate our Platform such as hosting fees and fees paid to various
third-party partners for access to their technology.
Payment processing expense
Payment processing expense consists primarily of interchange fees set by payment
card networks and that are ultimately paid to the card-issuing financial
institution, assessment fees paid to payment card networks, and fees


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paid to third-party payment processors and gateways. Payment processing expense
may increase as a percentage of payment processing revenue if card networks
raise pricing for interchange and assessment fees or if we reduce pricing to our
clients.
Sales and marketing
Sales and marketing expense consists primarily of personnel costs, including
salaries, benefits, bonuses, stock-based compensation and commission costs for
our sales and marketing personnel. Sales and marketing expense also includes
costs for advertising, promotional and other marketing activities, as well as
certain fees paid to various third-party partners for sales and lead generation.
Advertising is expensed as incurred.
Research and development
Research and development expense consists of costs to develop our products and
services that do not meet the criteria for capitalization as internal-use
software. These costs consist primarily of personnel costs, including salaries,
benefits, bonuses and stock-based compensation for our development personnel.
Research and development expense also includes product management, life sciences
analytics costs, third-party partner fees and third-party consulting fees,
offset by any internal-use software development cost capitalized during the same
period.
General and administrative
General and administrative expense consists primarily of personnel costs,
including salaries, benefits, bonuses and stock-based compensation for our
executive, finance, legal, security, human resources, information technology and
other administrative personnel. General and administrative expense also includes
consulting, legal, security, accounting services and allocated overhead. We
expect general and administrative expense to continue to increase in absolute
dollars as we grow our operations and continue to operate as a public company,
although we expect such expense to begin to decline as a percentage of total
revenue over time.
Depreciation
Depreciation represents depreciation expense for PhreesiaPads and Arrivals
Kiosks, data center and other computer hardware, purchased computer software,
furniture and fixtures and leasehold improvements.
Amortization
Amortization primarily represents amortization of our capitalized internal-use
software related to the Phreesia Platform as well as amortization of acquired
intangible assets.
Other income (expense), net
Our other expense and income line items consist of the following:
•Other income (expense), net. Other income (expense), net consists of foreign
currency-related gains and losses, losses on extinguishment of debt and other
miscellaneous income (expense).
•Interest income. Interest income consists of interest earned on our cash and
cash equivalent balances. Interest income has not been material to our
operations to date.
•Interest expense. Interest expense consists primarily of the interest incurred
on our financing obligations as well as amortization of discounts and deferred
financing costs.
Provision for income taxes
Based upon our cumulative pre-tax losses in recent years and available evidence,
we have determined that it is more likely than not that certain deferred tax
assets as of April 30, 2021 will not be realized in the near term. Consequently,
we have established a valuation allowance against its deferred tax assets that
are not more likely than not to be realized. In future periods, if we conclude
we have future taxable income sufficient to recognize the deferred tax assets,
we may reduce or eliminate the valuation allowance.







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Comparison of results of operations for the three months ended April 30, 2021
and 2020

Revenue (in thousands)
                                                    Three months ended April 30,
(in thousands)                                             2021             2020            $ Change          % Change
Subscription and related services                   $        21,819    $    15,599          $  6,220                      40  %
Payment processing fees                                      16,644         11,707             4,937                      42  %
Life sciences                                                 9,828          6,090             3,738                      61  %
Total revenue                                       $        48,291    $    33,396          $ 14,895                      45  %


•Subscription and related services. Our subscription and related services
revenue from healthcare organizations increased $6.2 million to $21.8 million
for the three months ended April 30, 2021, as compared to $15.6 million for the
three months ended April 30, 2020, primarily due to new provider clients added
in fiscal 2021 as well as expansion of and cross-selling to existing provider
clients.
•Payment processing fees. Our revenue from patient payments processed through
the Phreesia Platform
increased $4.9 million to $16.6 million for the three months ended April 30,
2021, as compared to $11.7 million for the three months ended April 30, 2020.
The increase was due to the addition of new provider clients, expansion of
existing provider clients, as well as the reduced impact of COVID-19, which had
decreased patient visits in the three months ended April 30, 2020.
•Life sciences. Our revenue from life science clients for digital marketing
increased $3.7 million to $9.8 million for the three months ended April 30,
2021, as compared to $6.1 million for the three months ended April 30, 2020, due
to an increase in new digital marketing solutions programs and deeper patient
outreach among the existing programs.

Cost of revenue (excluding depreciation and amortization)


                                                   Three months ended April

30,


(in thousands)                                           2021                   2020              $ Change             % Change
Cost of revenue (excluding depreciation and
amortization)                                      $        8,534          $     4,734          $   3,800                      80  %


Cost of revenue (excluding depreciation and amortization) increased $3.8 million
to $8.5 million for the three months ended April 30, 2021, as compared to $4.7
million for the three months ended April 30, 2020. The increase resulted
primarily from higher headcount and associated compensation cost as well as
increased costs related to the expansion of our data centers, both driven by
customer growth. The timing of investments in headcount and data center costs
occur prior to the recognition of related revenue.
Stock compensation expense included in cost of revenue was $0.4 million and $0.1
million for the three months ended April 30, 2021 and 2020, respectively.

Payment processing expense
                                       Three months ended April 30,
(in thousands)                               2021                   2020        $ Change      % Change
Payment processing expense      $        9,725                    $ 6,848      $  2,877           42  %


Payment processing expense increased $2.9 million to $9.7 million for the three
months ended April 30, 2021, as compared to $6.8 million for the three months
ended April 30, 2020. The increase resulted primarily from an increase in
patient payments processed through the Phreesia Platform driven by an increase
in patient visits over the prior year.



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Sales and marketing
                                 Three months ended April 30,
(in thousands)                        2021                    2020        $ Change      % Change
Sales and marketing      $         15,012                   $ 9,434      $  5,578           59  %


Sales and marketing expense increased $5.6 million to $15.0 million for the
three months ended April 30, 2021, as compared to $9.4 million for the three
months ended April 30, 2020. The increase was primarily attributable to a
$5.4 million increase in total compensation costs driven by the growth in sales
and marketing headcount.
Stock compensation expense included in sales and marketing expense was
$1.6 million and $0.7 million for the three months ended April 30, 2021 and
2020, respectively.

Research and development
                                     Three months ended April 30,
(in thousands)                             2021                   2020        $ Change      % Change
Research and development      $        8,054                    $ 5,005      $  3,049           61  %


Research and development expense increased $3.0 million to $8.1 million for the
three months ended April 30, 2021, as compared to $5.0 million for the three
months ended April 30, 2020. The increase resulted primarily from a $1.6 million
increase in total compensation costs driven by an increase in headcount to
support our product development efforts, as well as a $1.0 million increase in
outside services costs.
Stock compensation expense included in research and development expense was $0.8
million and $0.5 million for the three months ended April 30, 2021 and 2020,
respectively.

General and administrative
                                        Three months ended April 30,
(in thousands)                               2021                    2020        $ Change      % Change
General and administrative      $         12,671                   $ 8,720      $  3,951           45  %


General and administrative expense increased $4.0 million to $12.7 million for
the three months ended April 30, 2021, as compared to $8.7 million for the three
months ended April 30, 2020. The increase resulted primarily from a $3.4 million
increase in total compensation costs driven by an increase in headcount to
support our growth as a public company as well as higher software costs.
Stock compensation expense included in general and administrative expense was
$2.9 million and $1.6 million for the three months ended April 30, 2021 and
2020, respectively.
Depreciation
                           Three months ended April 30,
(in thousands)                   2021                   2020        $ Change      % Change
Depreciation        $        3,297                    $ 2,268      $  1,029           45  %


Depreciation expense increased $1.0 million to $3.3 million for the three months
ended April 30, 2021 as compared to $2.3 million for the three months ended
April 30, 2020. The increase was primarily attributable to higher data center
equipment depreciation.

Amortization
                           Three months ended April 30,
(in thousands)                   2021                   2020        $ Change       % Change
Amortization        $        1,651                    $ 1,353      $     298           22  %


Amortization expense increased $0.3 million to $1.7 million for the three months
ended April 30, 2021, as compared to $1.4 million for the three months ended
April 30, 2020. The increase was primarily driven by increased


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amortization of capitalized internal-use software development costs, as well as
higher amortization of acquired intangible assets.

Other income (expense)
                                                    Three months ended April 30,
(in thousands)                                        2021                  2020              $ Change             % Change
Other income (expense), net                     $          66          $      (715)         $     781                    (109) %


Other income (expense), net changed by $0.8 million to income of less than $0.1
million for the three months ended April 30, 2021 as compared to expense of $0.7
million for the three months ended April 30, 2020, driven by a decrease in
foreign exchange losses.

Interest income (expense)
                                                     Three months ended April 30,
(in thousands)                                         2021                   2020              $ Change             % Change
Interest (expense) income, net                  $          (238)         $      (320)         $      82                     (26) %


Interest expense, net decreased $0.1 million to $0.2 million for the three
months ended April 30, 2021, as compared to $0.3 million for the three months
ended April 30, 2020. The decrease is primarily attributable to lower average
debt balances due to repayment of debt with the proceeds of our equity
offerings.

Provision for income taxes
                                                     Three months ended April 30,
(in thousands)                                         2021                   2020              $ Change             % Change
Provision for income taxes                      $          (149)         $      (111)         $     (38)                     34  %


Provision for income taxes remained consistent at $0.1 million for the three
months ended April 30, 2021, as compared $0.1 million for the three months ended
April 30, 2020. Provision for income taxes relates primarily to utilization of
Canadian net operating loss carryforwards and state income taxes.

Non-GAAP financial measures
Adjusted EBITDA is a supplemental measure of our performance that is not
required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a
measurement of our financial performance under GAAP and should not be considered
as an alternative to net income or loss or any other performance measure derived
in accordance with GAAP, or as an alternative to cash flows from operating
activities as a measure of our liquidity. We define Adjusted EBITDA as net
income or loss before interest expense (income), net, provision for (benefit
from) income taxes, depreciation and amortization, and before stock-based
compensation expense, change in fair value of contingent consideration
liabilities and other (income) expense, net.
We have provided below a reconciliation of Adjusted EBITDA to net loss, the most
directly comparable GAAP financial measure. We have presented Adjusted EBITDA in
the Quarterly Report on Form 10-Q because it is a key measure used by our
management and board of directors to understand and evaluate our core operating
performance and trends, to prepare and approve our annual budget, and to develop
short and long-term operational plans. In particular, we believe that the
exclusion of the amounts eliminated in calculating Adjusted EBITDA can provide a
useful measure for period-to-period comparisons of our core business.
Accordingly, we believe that Adjusted EBITDA provides useful information to
investors and others in understanding and evaluating our operating results in
the same manner as our management and board of directors.
Our use of Adjusted EBITDA has limitations as an analytical tool, and you should
not consider it in isolation or as a substitute for analysis of our financial
results as reported under GAAP. Some of these limitations are as follows:



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•Although depreciation and amortization expense are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future, and
Adjusted EBITDA does not reflect cash capital expenditure requirements for such
replacements or for new capital expenditure requirements;
•Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our
working capital needs; (2) the potentially dilutive impact of non-cash
stock-based compensation; (3) tax payments that may represent a reduction in
cash available to us; or (4) interest expense (income), net; and
•Other companies, including companies in our industry, may calculate Adjusted
EBITDA or similarly titled measures differently, which reduces its usefulness as
a comparative measure.
Because of these and other limitations, you should consider Adjusted EBITDA
along with other GAAP-based financial performance measures, including various
cash flow metrics, net loss, and our GAAP financial results. The following table
presents a reconciliation of Adjusted EBITDA to net loss for each of the periods
indicated:

                                             Three months ended April 30,
(in thousands, unaudited)                         2021

2020


Net loss                              $        (10,974)                $

(6,112)


Interest expense (income), net                     238

320


Provision for income taxes                         149

111


Depreciation and amortization                    4,948

3,621


Stock-based compensation expense                 5,774                    2,872
Other (income) expense, net                        (66)                     715
Adjusted EBITDA                       $             69                 $  1,527


We calculate free cash flow as net cash provided by (used in) operating
activities less capitalized internal-use software development costs and
purchases of property and equipment.
Additionally, free cash flow is a supplemental measure of our performance that
is not required by, or presented in accordance with, GAAP. 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 investments, partnerships and acquisitions and strengthening our
financial position.
The following table presents a reconciliation of free cash flow from net cash
(used in) provided by operating activities, the most directly comparable GAAP
financial measure, for each of the periods indicated:

                                                                         Three months ended April 30,
(in thousands)                                                            2021                    2020
Net cash (used in) provided by operating activities                $         (5,473)         $     1,903
Less:
Capitalized internal-use software                                            (2,916)              (1,160)
Purchases of property and equipment                                          (3,983)              (1,917)
Free cash flow                                                     $        (12,372)         $    (1,174)



Liquidity and capital resources
In April 2021, the Company completed a follow-on offering of its Common Stock.
In connection with this offering, the Company issued and sold 5,175,000 shares
of common stock at an issuance price of $50.00 per share resulting in net
proceeds of $245.8 million, after deducting underwriting discounts and
commissions.

As of April 30, 2021 and January 31, 2021, we had cash and cash equivalents of
$450.7 million and $218.8 million, respectively. Cash and cash equivalents
consist of money market accounts and cash on deposit.
We believe that our existing cash and cash equivalents, along with our available
financial resources from our credit facility, will be sufficient to meet our
needs for at least the next 12 months. Our future capital requirements and the
adequacy of available funds will depend on many factors, including those set
forth under "Risk factors."


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In the event that additional financing is required from outside sources, we may
be unable to raise the funds on acceptable terms, if at all. If we are unable to
raise additional capital when desired, our business, operating results and
financial condition could be adversely affected.
Silicon Valley Bank facility
In February 2019, we entered into a loan and security agreement with Silicon
Valley Bank ("SVB"), (the "First SVB Facility"), which provided for a secured
term loan facility and a revolving credit facility. We borrowed $20.0 million as
a term loan under the facility during fiscal 2020. On May 5, 2020, the Company
entered into a Second Amended and Restated Loan and Security Agreement with SVB
(the "Second SVB Facility"), and transferred the outstanding balance on the
First SVB Facility Term Loan into revolving credit borrowings under the Second
SVB Facility.
The Company repaid the outstanding balance on the Second SVB Facility in January
2021. As of April 30, 2021, the Company has no outstanding balance on the
facility and $50.0 million of available borrowings under the facility.
Borrowings under the Second SVB Facility are payable on May 5, 2025 (the
"Maturity Date"). Borrowings under the Second SVB Facility bear interest, which
is payable monthly, at a floating rate equal to the greater of the bank's prime
rate or 4.5%. The interest rate will be reduced if the Company reaches certain
defined Second SVB Facility Adjusted EBITDA levels. As of April 30, 2021, the
interest rate on the Second SVB Facility was 4.5%. In addition to principal and
interest due under the Second SVB Facility, the Company is required to pay an
annual commitment fee of $0.1 million per year. The first facility fee payment
of $0.1 million was paid during the year ended January 31, 2021.
In the event that the Company terminates the Second SVB Facility prior to the
Maturity Date, the Company will be required to pay a termination fee equal to
$0.2 million plus a percent of total borrowing capacity, both of which are
reduced based on the amount of time elapsed before the termination.
Any Company obligations under the Second SVB Facility are secured by a first
priority security interest in substantially all of the Company's assets, other
than intellectual property. The Second SVB Facility includes a financial
covenant that requires the Company to achieve specified levels of Adjusted
EBITDA, as defined in the Second SVB Facility. This financial covenant will not
be effective if the Company maintains certain levels of liquidity as defined.
The Company was in compliance with all covenants related to the Second SVB
Facility as of April 30, 2021.
The following table summarizes our sources and uses of cash for the three months
ended April 30, 2021 and 2020:
                                                                           Three months ended April 30,
(in thousands)                                                              2021                    2020
Cash (used in) provided by operating activities                      $         (5,473)         $     1,903
Cash used in investing activities                                              (6,899)              (3,077)
Cash provided by financing activities                                         244,271                1,111
Net increase (decrease) in cash and cash equivalents                 $

231,899 $ (63)




Operating activities
The primary source of cash from operating activities is cash received from our
customers. The primary uses of cash
for operating activities are for payroll, payments to suppliers and employees,
payments for operating leases, as well as cash paid for interest on our
borrowings and finance leases and cash paid for various sales, property and
income
taxes.
During the three months ended April 30, 2021, cash used in operating activities
was $5.5 million, as our cash paid to employees and suppliers exceeded our cash
received from customers in connection with our normal operations.
During the three months ended April 30, 2020, cash provided by operating
activities was $1.9 million, as our cash received from customers exceeded cash
paid to employees and suppliers in connection with our normal operations.
Investing activities
During the three months ended April 30, 2021, cash used in investing activities
was $6.9 million, principally resulting from capital expenditures, the majority
of which consisted of $4.0 million of purchases of property and equipment
including hardware used by clients and the purchase of data center equipment, as
well as capitalized internal-use software costs of $2.9 million.


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During the three months ended April 30, 2020, cash used in investing activities
was $3.1 million, principally resulting from capital expenditures for purchases
of property and equipment of $1.9 million and capitalized internal-use software
of $1.2 million.
Financing activities
During the three months ended April 30, 2021, net cash provided by financing
activities was $244.3 million, consisting of $245.8 million in proceeds from the
April 2021 offering of our common stock, net of underwriters' discounts and
commissions, and $1.4 million in proceeds from the issuance of common stock upon
the exercise of stock options, partially offset by $1.1 million used for
treasury stock to satisfy tax withholdings on stock compensation awards, $1.1
million used for principal payments on finance leases and $0.7 million used for
loan facility fee payments.
During the three months ended April 30, 2020, net cash provided by financing
activities was $1.1 million, consisting of $1.7 million in proceeds from the
issuance of common stock upon the exercise of stock options, offset by
$0.6 million in finance lease and loan facility fee payments.
Contractual obligations and commitments

Our principal commitments consist of finance lease and operating lease
obligations, as well as debt obligations, interest on debt and purchase
obligations. During the three months ended April 30, 2021, our finance lease
obligations decreased by $0.8 million due to $1.1 million of principal payments
offset by $0.2 million of new finance leases. Our debt obligations decreased due
to $0.7 million of principal payments.
                                                          Payments due by period
                                                Less than                                       More than
(in thousands)                     Total          1 year        1-3 years       4-5 years        5 years
Finance lease obligations        $  9,328      $    3,050      $    5,792      $      486      $       -
Operating lease obligations         2,973             940           1,981              52              -
Long-term debt obligations            781             506             275               -              -
Interest on long-term debt             59              45              14               -              -
Purchase obligations                  440             440               -               -              -
Total                            $ 13,581      $    4,981      $    8,062      $      538      $       -





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Critical accounting policies and estimates
Our unaudited consolidated financial statements are prepared in accordance with
GAAP regarding interim financial reporting. The preparation of our unaudited
consolidated financial statements and related disclosures requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
costs and expenses, and the disclosure of contingent assets and liabilities in
our financial statements. We base our estimates on historical experience, known
trends and events and various other factors that we believe are reasonable under
the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. We evaluate our estimates and assumptions on an
ongoing basis. Our actual results may differ from these estimates under
different assumptions or conditions.
There have been no significant changes in our critical accounting policies and
estimates during the three months ended April 30, 2021 as compared to the
critical accounting policies and estimates described in our Annual Report on
Form 10-K for the fiscal year ended January 31, 2021.
Recent accounting pronouncements
See Note 3 to our unaudited financial statements included in Part I, Item 1 of
this Quarterly Report on Form 10-Q for a discussion of recent accounting
pronouncements.
Off-balance sheet arrangements
As of April 30, 2021 and January 31, 2021, we did not have any relationships
with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.

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