What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-04 compared with 2022-02-09 · 73 added, 175 removed, 140 unchanged (64% of the section changed)

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interest associated with our long term debt and income taxes.

Highlights from third quarter of fiscal year 2022 included:

• Revenue increased 2% sequentially to $95.3 million and 8% year to date compared to the prior year to $277.6 million.

• We completed the EnCloudEn assets acquisition which will enable us to expand the addressable market for our video surveillance portfolio, offering customers a solution using their server hardware of choice with a flexible subscription-based software model.

• We announced a new collaboration and Remote Editing Solution for Adobe Premiere Pro Users.

• We announced a partnership with IBM on the next generation of LTO technology in which we will collaborate with IBM in its development of LTO-10 tape drives and media in order to accelerate time-to-market, capacity, and performance.

• We were awarded one Platinum and one Gold 'ASTORS' Homeland Security Award from American Security Today.

The Annual 'ASTORS' Awards Program, is specifically designed to honor distinguished government and vendor solutions that deliver enhanced value, benefit, and intelligence to end-users in a variety of government, homeland security, enterprise, and public safety vertical markets.

COVID-19 IMPACT AND ASSOCIATED ACTIONS

Since the beginning of March 2020, COVID-19 has led governments and other authorities around the world, including federal, state and local authorities in the United States, to impose measures intended to reduce its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business limitations and closures (subject to exceptions for essential operations and businesses), quarantines and shelter-in-place orders.

These measures may remain in place for a significant period of time.

In light of these events, we have taken actions to protect the health and safety of our employees while continuing to serve our global customers as an essential business.

We have implemented more thorough sanitation practices as outlined by health organizations and instituted mitigation practices at our locations around the world, including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time, and decreasing employee travel.

We have seen a gradual stabilization in our business during the second half of fiscal 2021 and into fiscal 2022 as customers increasingly adapted to the COVID-19 environment.

However, COVID-19 has caused a significant disruption to the global supply chain, which continues to have a negative impact on our business.

COVID-19 and Macroeconomic Conditions

COVID-19 has caused a significant disruption to the global supply chain, which continues to have a negative impact on our business.

Before the current disruptions in the global supply chain our historical backlog was very limited and typically represented less than 5% of quarterly revenues.

During our third fiscal quarter our backlog grew to $62 million from $50 million at the end of the prior quarter and $30 million as of June 30, 2021.

Approximately $50 million of the ending backlog represented tape products a majority of which is for orders from our hyperscale customers.

This unprecedented backlog is a result of the strong demand we have been seeing across our business but limited by the ongoing supply constraints.

However, in fiscal 2022 continuing into fiscal 2023, our backlog has grown significantly, which has been driven primarily by our receipt of large purchase orders and our inability to satisfy those orders within our typical shipping timeline due to supply chain constraints.

For example, as of June 30, 2022, our backlog was $46.8 million and has increased to $67.2 million as of July 31, 2022.

The changes in our backlog are a result of the timing of receipt of large purchase orders.

We anticipate that supply chain constraints will remain challenging, limiting our ability to ship against all customer demand and recognize a meaningful portion of the current backlog.

We will continue to actively monitor the impact of COVID-19 and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

See “The recent COVID-19 pandemic could adversely affect our business, results of operations and financial condition” in Part II, Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K for more information regarding the risks we face as a result of the COVID-19 pandemic.

In addition, the instability of global economic conditions, inflationary risks, military actions and armed conflicts and associated increased international trade regulations are adding to the uncertainty of our business.

These adverse conditions could result in reductions in sales of our products and subscriptions for our services, longer sales cycles, increased costs to manufacture our products and increased price competition.

Also, certain of our customers and partners have been and others may become credit or cash constrained, making it difficult for them to fulfill their payment obligations to us or require us to extend their payment terms.

Given the dynamic nature of these macroeconomic conditions, we cannot reasonably estimate their full impact on our ongoing business, results of operations and overall financial performance.

We will continue to actively monitor the impact of COVID-19 and global economic conditions and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities.

Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance.

See Part II, Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K for information regarding the risks we face as a result of the COVID-19 pandemic and an uncertain global economy.

RESULTS OF OPERATIONS

Three Months Ended December 31, Nine Months Ended December 31,

Three Months Ended June 30,

(in thousands) 2022 2021

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Total operating expenses 41,126 37,334

Income (loss) from operations (7,225) 6,093 (8,218) 6,098

Other expense, net (150) (698) (223) (1,395)

Loss from operations (7,078) (56)

Other income (expense), net 751 (198)

Interest expense (2,091) (3,886)

Loss on debt extinguishment, net — — (4,960) —

Loss on debt extinguishment (1,392) —

Net loss before income taxes (9,810) (4,140)

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(1) Includes stock-based compensation as follows:

Three Months Ended December 31, Nine Months Ended December 31,

Three Months Ended June 30,

(in thousands) 2022 2021

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Total $ 3,069 $ 3,201

Comparison of the Three Months Ended December 31, 2021 and 2020

Three Months Ended December 31,

Comparison of the Three Months Ended June 30, 2022 and 2021

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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Total product revenue 60,211 62 52,131 59 8,080 15

Service revenue 33,162 35 31,169 32 1,993 6

Royalty revenue 3,660 4 3,833 4 (173) (5)

Service and subscription 33,423 34 32,831 37 592 2

Royalty 3,440 4 4,137 5 (697) (17)

Total revenue $ 97,074 100 $ 89,099 101 $ 7,975 9

Product revenue

In the three months ended December 31, 2021, product revenue decreased $4.5 million, or 7%, as compared to the same period in 2020.

Primary storage systems decreased $9.9 million, or 42%, primarily as a result of delayed purchase cycles with some government customers in addition to our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

Secondary storage systems increased $5.3 million, or 21%, driven by higher demand in our hyperscale, backup and archive use cases.

In the three months ended June 30, 2022, product revenue increased $8.1 million, or 15%, as compared to the same period in 2021.

Primary storage systems increased $4.2 million, or 38%, primarily driven from increased sales of our video surveillance solutions.

Secondary storage systems increased $4.8 million, or 17%, driven by higher demand in hyperscale use cases.

Service revenue

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Standard service contracts may be extended or include enhanced service, such as faster service response times.

Service revenue increased 6% in the three months ended December 31, 2021 compared to the same period in 2020 driven partially by growing sales of our recurring software subscription offerings as well as service revenue associated with newly acquired businesses.

Service and subscription revenue increased 2% in the three months ended June 30, 2022 compared to the same period in 2021 driven partially by growing sales of our recurring software subscription offerings as well as service revenue associated with newly acquired businesses.

Royalty revenue

We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium.

Royalty revenue decreased $0.2 million, or 5%, in the three months ended December 31, 2021 compared to the same period in 2020 due to decreased market volume of older generation LTO media.

Royalty revenue decreased $0.7 million, or 17%, in the three months ended June 30, 2022 compared to the same period in 2021 due to decreased market volume of older generation LTO media.

Gross Profit and Margin

Three Months Ended December 31,

Three Months Ended June 30,

(dollars in thousands) 2022 Gross

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margin % $ Change Basis point change

Product gross profit $ 13,404 22.9 $ 19,710 31.3 $ (6,306) (840)

Service gross profit 18,146 54.7 18,736 60.1 (590) (540)

Royalty gross profit 3,660 100.0 3,833 100.0 (173) —

Product $ 12,290 20.4 $ 13,390 25.7 $ (1,100) (530)

Service and subscription 18,318 54.8 19,751 60.2 (1,433) (540)

Royalty 3,440 100.0 4,137 100.0 (697) —

Gross profit $ 34,048 35.1 $ 37,278 41.8 $ (3,230) (670)

Product Gross Margin

Product gross margin decreased 840 basis points for the three months ended December 31, 2021, as compared with the same period in 2020.

This decrease was due primarily to recent cost surges in materials across our global supply chain.

Product gross margin decreased 530 basis points for the three months ended June 30, 2022, as compared with the same period in 2021.

This decrease was due primarily to recent cost increases in materials across our global supply chain.

We expect these cost increases to continue for the foreseeable future and are taking proactive measures to address the impact these cost increases could have on our business in the future.

Service Gross Margin

Service gross margins decreased 540 basis points for the three months ended December 31, 2021, as compared with the same period in 2020.

Service and Subscription Gross Margin

Service and subscription gross margins decreased 540 basis points for the three months ended June 30, 2022, as compared with the same period in 2021.

This was partially driven by cost pressures as a result of certain constraints in the global supply chain.

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Operating expenses

Three Months Ended December 31,

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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Total operating expenses $ 41,126 42.4 $ 37,334 41.9 $ 3,792 10

In the three months ended December 31, 2021, research and development expense increased $5.0 million, or 52%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount due to acquisitions occurring during the current fiscal year.

In the three months ended December 31, 2021, sales and marketing expenses increased $1.4 million, or 9%, as compared with the same period in 2020.

In the three months ended June 30, 2022, research and development expense increased $0.8 million, or 7%, as compared with the same period in 2021.

This increase was primarily driven by an increase in personnel costs due to increased headcount from acquisitions.

In the three months ended June 30, 2022, sales and marketing expenses increased $2.0 million, or 14%, as compared with the same period in 2021.

This increase was driven by increased headcount as we invest in strategic areas to accelerate growth.

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Both marketing expense and travel expense have also increased over the prior year as COVID-19 restrictions ease.

In the three months ended December 31, 2021, general and administrative expenses decreased $0.6 million, or 5%, as compared with the same period in 2020.

This decrease was driven by offsets between reduced IT liabilities and increased intangible amortization from recent acquisitions.

The decrease was also partially driven by reduced facilities expenses as we continue to optimize our physical footprint.

In the three months ended December 31, 2021, restructuring expenses increased $0.4 million, or 188%, as compared with the same period in 2020.

The increase was the result of certain strategic restructuring activities.

In the three months ended June 30, 2022, general and administrative expenses increased $0.5 million, or 4%, as compared with the same period in 2021.

This increase was largely driven by increased intangible amortization from recent acquisitions.

In the three months ended June 30, 2022, restructuring expenses increased $0.5 million, or 173%, as compared with the same period in 2021.

The increase was the result of cost reduction initiatives.

Other Income (Expense)

Three Months Ended December 31,

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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Other income (expense) $ 751 1 $ (198) — $ 949 479

The decrease in other income (expense), net during the three months ended June 30, 2022 compared with the same period in 2021 was related primarily to fluctuations in foreign currency exchange rates.

Interest expense

The decrease in other income (expense), net during the three months ended December 31, 2021 compared with the same period in 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the three months ended December 31, 2021, interest expense decreased $5.4 million, or 69%, as compared with the same period in 2020 due to a lower principal balance and a lower effective interest rate on our Term Loan.

Three Months Ended December 31,

(dollars in thousands) 2021 % of

revenue 2020 % of

revenue $ Change % Change

Income tax provision $ 1,254 1 $ 256 1 $ 998 390

The income tax provision for the three months ended December 31, 2021 and 2020is primarily influenced by foreign and state income taxes.

Due to our history of net losses in the United States, the protracted period for utilizing tax attributes in certain foreign jurisdictions, and the difficulty in predicting future results, we believe that we cannot rely on projections of future taxable income to realize most of our deferred tax assets.

Accordingly, we have established a full valuation allowance against our U.S.

and certain foreign net deferred tax assets.

Significant management judgement is required in assessing our ability to realize any future benefit from our net deferred tax assets.

We intend to maintain this valuation allowance until sufficient positive evidence exists to support its reversal.

Our income tax expense recorded in the future will be reduced to the extent that sufficient positive evidence materializes to support a reversal of, or decrease in, our valuation allowance.

Comparison of the Nine Months Ended December 31, 2021 and 2020

Nine Months Ended December 31,

(dollars in thousands) 2021 % of

revenue 2020 % of

revenue $ Change % Change

Product revenue

Primary storage systems 41,787 15 % $ 54,478 21 % $ (12,691) (23) %

Secondary storage systems 85,093 31 62,705 24 22,388 36

Devices and media 38,428 14 36,374 14 2,054 6

Total product revenue $ 165,308 60 % $ 153,557 60 % $ 11,751 8

Service revenue 100,352 36 93,049 36 7,303 8

Royalty revenue 11,963 4 10,543 4 1,420 13

Total revenue $ 277,623 100 % $ 257,149 100 % $ 20,474 8

Product revenue

In the nine months ended December 31, 2021, product revenue increased $11.8 million, or 8%, as compared to the same period in 2020.

Secondary storage systems represented $22.4 million of the increase, driven primarily by a growing customer base in the hyperscale segment.

Devices and media represented $2.1 million of the increase, driven by higher volume of LTO media sold through our high-volume channel partners.

Primary storage systems

decreased $12.7 million driven primarily by delayed purchase cycles with some government customers in addition to our transition to a recurring software subscription licensing model which results in a shift from product to services revenue.

Service revenue

We offer a broad range of services including product maintenance, implementation, and training as well as software subscriptions.

Service revenue is primarily comprised of customer field support contracts which provide standard support services for our hardware.

Standard service contracts may be extended or include enhanced service, such as faster service response times.

Service revenue increased $7.3 million, or 8%, in the nine months ended December 31, 2021 compared to the same period in 2020, driven partially by the increase in recurring software subscription revenue.

Growth is also driven by a higher level of installation and professional services attached to our product sales.

Royalty revenue

We receive royalties from third parties that license our LTO media patents through our membership in the LTO consortium.

Royalty revenue increased $1.4 million, or 13%, in the nine months ended December 31, 2021 compared to the same period in 2020 due to higher overall market volume of LTO media.

Gross Profit and Margin

Nine Months Ended December 31,

(dollars in thousands) 2021 Gross

margin % 2020 Gross

margin % $ Change Basis point change

Product gross profit $ 40,326 24.4 % $ 44,866 29.2 % $ (4,540) (480)

Service gross profit 58,588 58.4 56,456 60.7 2,132 (230)

Royalty gross profit 11,963 100.0 10,543 100.0 1,420 —

Gross profit $ 110,877 39.9 % $ 111,865 43.5 % $ (988) (360)

Product Gross Margin

Product gross margin decreased 480 basis points for the nine months ended December 31, 2021, as compared with the same period in 2020.

This decrease was due primarily to recent cost surges in materials across our global supply chain.

Service Gross Margin

Service gross margin decreased 230 basis points for the nine months ended December 31, 2021, as compared with the same period in 2020.

This decrease was primarily due to cost pressures as a result of constraints in the global supply chain.

Royalty Gross Margin

Royalties do not have significant related cost of sales.

Operating expenses

Nine Months Ended December 31,

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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revenue $ Change % Change

Research and development $ 38,287 13.7 % $ 29,983 11.7 % $ 8,304 28 %

Sales and marketing 46,128 16.6 40,019 15.6 6,109 15

General and administrative 33,830 12.2 32,928 12.8 902 3

Restructuring charges 850 0.3 2,837 1.1 (1,987) (70)

Total operating expenses $ 119,095 42.9 % $ 105,767 41.1 % $ 13,328 13

In the nine months ended December 31, 2021, research and development expense increased $8.3 million, or 28%, as compared with the same period in 2020.

This increase was primarily driven by an increase in personnel costs due to increased headcount due to acquisitions occurring during the current fiscal year.

In the nine months ended December 31, 2021, sales and marketing expenses increased $6.1 million, or 15%, as compared with the same period in 2020.

This increase was driven by increased headcount as we invest in strategic areas to accelerate growth.

This increase in headcount includes those employees added through acquisitions over the year.

Both marketing expense and travel expense have also increased over the prior year as COVID-19 restrictions ease.

In the nine months ended December 31, 2021, general and administrative expenses increased $0.9 million, or 3%, as compared with the same period in 2020.

This increase was due primarily to increased legal and other expenses related to our long-term debt amendments and business acquisition related activities.

In the nine months ended December 31, 2021, restructuring expenses decreased $2.0 million, or 70%, as compared with the same period in 2020.

The decrease was the result of a reduction in workforce to improve operational efficiency and rationalize our cost structure in the prior year.

Other Income (Expense)

Nine Months Ended December 31,

Interest expense (2,091) 2 (3,886) 4 1,795 46

In the three months ended June 30, 2022, interest expense decreased $1.8 million, or 46%, as compared with the same period in 2021 due to a lower principal balance and a lower effective interest rate on our Term Loan.

Loss on debt extinguishment

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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revenue $ Change % Change

Other income (expense) $ (223) 0 $ (1,395) (1) % $ 1,172 84 %

Interest expense (9,387) (3) (21,823) (8) 12,436 (57)

Loss on debt extinguishment, net (4,960) (2) — — (4,960) n/a

The change in other income (expense), net during the nine months ended December 31, 2021 and 2020 was related primarily to fluctuations in foreign currency exchange rates.

In the nine months ended December 31, 2021, interest expense decreased $12.4 million, or 57%, as compared with the same period in 2020 due primarily to a lower principal balance and a lower effective interest rate on our Term Loan.

Loss on debt extinguishment, net during the nine months ended December 31, 2021 was related to prepayment of our Senior Secured Term Loan that occurred during the period offset by the $10.0 million gain on the forgiveness of the Paycheck Protection Program loan.

Nine Months Ended December 31,

Loss on debt extinguishment (1,392) 1 — — (1,392) n/a

In the three months ended June 30, 2022, loss on debt extinguishment of $1.4 million was related to prepayment of our Term Loan.

Three Months Ended June 30,

(dollars in thousands) 2022 % of

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Income tax provision $ 410 — $ 13 — $ 397 3,054

The income tax provision for the nine months ended December 31, 2021 and 2020 is primarily influenced by foreign and state income taxes.

The income tax provision for the three months ended June 30, 2022 and 2021 is primarily influenced by foreign and state income taxes.

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LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $4.0 million as of December 31, 2021, which consisted primarily of bank deposits and money market accounts.

We consider liquidity in terms of the sufficiency of internal and external cash resources to fund our operating, investing and financing activities.

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Our future liquidity requirements will depend on multiple factors, including our research and development plans and capital asset needs.

We are subject to the risks arising from COVID-19 which have caused substantial financial market volatility and have adversely affected both the U.S.

We are subject to the risks arising from COVID-19 and substantial financial market volatility which have adversely affected both the U.S.

and the global economy.

We believe that these social and economic impacts have had a negative effect on sales due to disruptions in our supply chain and a decline in our customers' ability or willingness to purchase our products and services.

We have also been impacted by significant increases in the procurement cost of certain materials which has negatively impacted our margins.

The extent of the impact will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue.

We expect the impact of COVID-19 to continue to have a significant impact on our liquidity and capital resources.

We are subject to various debt covenants under our Credit Agreements.

We have experienced negative impacts on sales due to global supply chain constraints, inflationary concerns and overall uncertainty in the macroeconomic environment which has resulted in a significant increase in our sales backlog compared to our historical levels.

The extent of the impacts will depend, in part, on how long the negative trends in customer demand and supply chain levels will continue.

We expect the impact of COVID-19 and market instability to continue to have a significant impact on our liquidity and capital resources.

We had cash and cash equivalents of $26.5 million as of June 30, 2022, which consisted primarily of bank deposits and money market accounts.

As of June 30, 2022 we had $11.8 million available to borrow under the PNC Credit Facility.

We are subject to various debt covenants under our debt agreements including a net leverage covenant and a $25 million minimum liquidity covenant .

Our failure to comply with our debt covenants could materially and adversely affect our financial condition and ability to service our obligations.

As of December 31, 2021, we were in compliance with our debt covenants.

However, we believe the challenges that we have experienced in recent periods with our supply chain, including challenges sourcing components for our products and increased costs, will continue to negatively impact our results of operations and liquidity for the foreseeable future.

As a result, we are working with our lenders to address any potential future covenant compliance issues as well as any potential need for additional liquidity.

We believe this is the prudent course to take at this time to address any potential issues as we attempt to work through and address the temporary headwinds from supply chain.

On April 25, 2022, we amended the covenant levels for our financial covenants under our term debt and PNC Credit Facility.

We believe we were in compliance with all covenants under our debt agreements as of the date of filing of this Quarterly Report on Form 10-Q.

For additional information about our debt, see the sections entitled “Risk Factors—Risks Related to Our Business Operations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

On August 5, 2021, we entered into a senior secured term loan to borrow an aggregate of $100.0 million, (the “Term Loan”).

A portion of the proceeds were used to repay in full all outstanding borrowings under the Senior Secured Term Loan.

Borrowings under the Term Loan mature on August 5, 2026.

Principal is payable at a rate per annum equal to (a) 2.5% of the original principal balance thereof during the first year following the closing date of the Term Loan and (b) 5% of the original principal balance thereof thereafter.

Principal and interest payments are payable on a quarterly basis.

Revolving Credit Facility

On September 30, 2021, we amended the PNC Credit Facility.

The amendment, among other things (a) extended the maturity date to August 5, 2026;

(b) reduced the principal amount of the revolving commitments to a maximum amount equal to the lesser of:

(i) $30.0 million or (ii) the amount of the borrowing base, as defined in the PNC Credit agreement;(c) replaced existing debt covenants with net leverage ratio, minimum liquidity and fixed charges coverage ratio covenants;

and, (d) removed the requirement to maintain a $5.0 million restricted cash reserve with PNC.

Paycheck Protection Program Loan

In July 2021, we received notice from PNC that the Paycheck Protection Program Loan and related accrued interest was approved for forgiveness in full by the U.S.

Small Business Administration.

We recorded the amount forgiven as gain on debt extinguishment of $10.0 million in the nine months ended December 31, 2021.

The following table summarizes our consolidated cash flows for the periods indicated.

Nine Months Ended December 31,

Three Months Ended June 30,

(in thousands) 2022 2021

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Cash Used In Operating Activities

Net cash used in operating activities was $26.7 million for the nine months ended December 31, 2021.

This use of cash was primarily attributable to changes in working capital of $24.3 million driven by increases in manufacturing and service part inventories of $13.0 million, a decrease in deferred revenue of $8.6 million and a net change in other assets and liabilities of $12.2 million which includes an increase in prepaid inventory of approximately $5.5 million in order to secure manufacturing materials.

These were partially offset by a decrease in accounts receivable of $7.0 million and a $5.4 million increase in accounts payable.

Net cash used in operating activities was $18.3 million for the three months ended June 30, 2022.

This use of cash was primarily attributable to changes in working capital of $15.6 million driven by a decrease in deferred revenue of $13.6 million.

The decrease in deferred revenue reflects the seasonal nature of service contract renewals.

Net cash used in operating activities was $20.3 million for the nine months ended December 31, 2020.

This use of cash is primarily attributable to changes in working capital of $24.5 million driven by an increase in manufacturing and service inventory of $12.3 million, a decrease in deferred revenue of $9.7 million, and a decrease in accounts payable of $7.0 million.

The decrease in deferred revenue reflects the seasonal nature of service contract renewals which peak in the fourth fiscal quarter.

Net cash used in operating activities was $6.9 million for the three months ended June 30, 2021.

This use of cash is primarily attributable to changes in working capital of $10.0 million driven by an increase in manufacturing and service parts inventories of $4.4 million, an increase in accounts payable, accrued compensation, deferred revenue of $3.2 million, $4.9 million and $6.3 million, respectively, partially offset by a reduction in accounts receivable of $15.2 million.

The decrease in deferred revenue reflects the seasonal nature of service contract renewals.

Cash Used in Investing Activities

Net cash used in investing activities was $11.8 million in the nine months ended December 31, 2021, which was primarily attributable to cash paid for our acquisition of Pivot3 of $5.0 million and capital expenditures of $2.8 million.

Net cash used in investing activities was $7.3 million in the nine months ended December 31, 2020, which included approximately $2.6 million related to the Square Box Systems acquisition and capital expenditures.

Net cash used in investing activities was $5.0 million in the three months ended June 30, 2022, which was primarily attributable to capital expenditures of $3.0 million and a $2.0 million deferred business acquisition payment.

Net cash used in investing activities was $1.2 million in the three months ended June 30, 2021, which included approximately $1.0 million related to capital expenditures.

Cash Provided by Financing Activities

Net cash provided by financing activities was $9.6 million in the nine months ended December 31, 2021, which was related primarily to borrowings under our credit facility, and proceeds from the new Term Loan offset by the repayment in full of the Senior Secured Term Loan.

Net cash provided by financing activities was $32.8 million in the nine months ended December 31, 2020 which included Senior Secured Term Loan borrowings of $19.4 million (net of lender fees of $0.6 million), $10.0 million in borrowings under the Paycheck Protection Program and the net pay-down of our PNC Credit Facility.

Net cash provided by financing activities was $44.6 million in the three months ended June 30, 2022, which was related primarily to $66.3 million of cash received from the Rights Offering of 30 million shares of our common stock offset by a $20 million prepayment of our term debt and a term debt principal amortization payment of $0.6 million

Net cash used in financing activities was $0.5 million in the three months ended June 30, 2021 related to a term debt principal amortization payment.

Commitments and Contingencies

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Historically, payments made by us under these agreements have not had a material impact on our operating results, financial position or cash flows.

We are also subject to ordinary course litigation and potential costs related to our financial statement restatement activities and related legal costs.

We are also subject to ordinary course litigation.

Off Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis