DOMO INC
For the period ended Oct 31, 2024. Filed Dec 10, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 31, 2024 · Filed Dec 10, 2024
HUCK$2.75-4.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-31; filed 2024-09-06.
0001505952-24-000054
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-31; filed 2024-12-10.
0001505952-24-000072
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 132 current paragraphs.
84 unchanged; 40 reworded; 8 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 16 previous and 16 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
(4)Includes remeasurement of warrant liability of $456,000 and $33,000 for the three and nine months ended October 31, 2024, respectively. There was no remeasurement of warrant liability during the three and nine months ended October 31, 2023.
Current report
General and administrative expenses increased primarily due to a $0.6 million increase in professional and legal fees, along with a $0.3 million increase in rent expense. These increases were partially offset by a $0.6 million decrease in employee-related costs. Our general and administrative expenses increased as a percentage of revenue from 14% to 15%. We expect general and administrative expense as a percentage of revenue to fluctuate from period to period.
Current report
Loss on extinguishment of debt increased due to a $1.9 million loss on extinguishment as a result of the August 2024 amendment to the credit facility.
Current report
Other expense, net increased primarily due to a $0.5 million loss on warrant liability.
Current report
Discussion of the Nine Months Ended October 31, 2023 and 2024
Current report
Loss on extinguishment of debt increased due to a $1.9 million loss on extinguishment as a result of the August 2024 amendment to the credit facility.
Current report
On September 6, 2024, we entered into a Controlled Equity Offering SM Sales Agreement (Sales Agreement) with Cantor Fitzgerald & Co. (Cantor). Pursuant to the Sales Agreement, we may sell, from time to time up to an aggregate of $150.0 million of our Class B common stock through an “at-the-market” offering defined in Rule 415 under the Securities Act. We will pay Cantor a commission equal to 3.0% of the gross proceeds from the sale of shares of our Class B common stock under the Sales Agreement. The $150.0 million of Class B common stock that may be offered, issued and sold under the Sales Agreement is included in the $300.0 million of securities that may be offered, issued and sold by us under our registration statement on Form S-3 that was effective on September 20, 2024. No shares have been sold pursuant to the Sales Agreement to date.
Current report
In August 2024, we entered into an amendment to the credit facility which refinanced the existing term loans, extended the maturity date from April 1, 2026 to August 19, 2028, revised interest amounts payable in cash and payable in kind, and made certain modifications to the financial covenants. Furthermore, certain lenders participating in the credit facility were paid in full for their portion of the principal, PIK interest, and amendment fee and were replaced by new lenders who refinanced those amounts. We paid and subsequently refinanced the $7.0 million closing fee associated with the credit facility, resulting in no net impact to our cash balance. Additionally, the $5.0 million amendment fee from the August 2020 amendment plus the accrued PIK interest of approximately $2.3 million as of August 2024, totaling $7.3 million, was refinanced as the Second PIK Amendment Fee per the August 2024 amendment. The Second PIK Amendment Fee accrues interest at a rate of 9.5% per year and is due upon maturity, along with the related capitalized interest. Also in conjunction with this amendment, we issued 1,022,918 fully-vested warrants to purchase shares of our Class B common stock. These warrants have an exercise price of $0.01 per share and expire on August 19, 2028.
Removed paragraphs (4)
Previous report
(4)Includes remeasurement of warrant liability of $0.1 million and $(0.4) million for the three and six months ended July 31, 2024.
Previous report
General and administrative expenses increased primarily due to a $2.5 million increase in employee-related costs, driven by stock-based compensation. Additionally, professional and legal fees increased by $2.5 million, primarily due to a $2.4 million insurance reimbursement for legal fees that was realized during the three months ended July 31, 2023. Our general and administrative expenses increased as a percentage of revenue from 11% to 17%.
Previous report
Discussion of the Six Months Ended July 31, 2023 and 2024
Previous report
In August 2024, we entered into an amendment to the credit facility (the “Second Amendment”), which among other things, refinanced certain credit extensions. Pursuant to the Second Amendment, the term loan maturity date was extended to August 19, 2028. Following the Second Amendment, interest that accrues on the outstanding principal of the term loan is due monthly and is based on a floating rate equal to three-month term SOFR (with a floor of 2.5%) plus 3.0% per year. As of the date of the Second Amendment, the interest rate was 8.1%, and in addition to the 8.1% interest rate, a fixed rate equal to 5.0% per year accrues on the outstanding principal of the term loan. This capitalized interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity. In conjunction with this Second Amendment, we issued 1,022,918 fully-vested warrants to purchase Class B common stock. We also paid and subsequently refinanced the $7.0 million closing fee related to the credit facility that came due, resulting in no net impact to our cash balance.
Reworded paragraphs (40)
Previous wording
Our consumption-based service offering continues to expand. Customers of our consumption-based service have an annual purchase commitment based on an estimated volume of usage, utilizing a tiered pricing structure. Whether it is a consumption-based agreement or an enterprise-wide subscription-based agreement (ELAs) with unlimited users and a data cap, we believe this could increase customer adoption and allow us to better land, expand, and retain customers over the long term, and thereby have a positive impact on sales and marketing productivity. We also believe these have potential to remove many of the barriers of adoption and better align our pricing to the value delivered to our customers. As of the end of our most recent fiscal quarter, more than 45% of our annual recurring revenue (ARR) is on consumption-based agreements or ELAs, and we expect this percentage to increase in future periods. However, we have limited experience with consumption-based agreements and changes in our pricing and subscription models subject us to a number of uncertainties.
Current wording
Our consumption-based service offering continues to expand. Customers of our consumption-based service have an annual purchase commitment based on an estimated volume of usage, utilizing a tiered pricing structure. Whether it is a consumption-based agreement or an enterprise-wide subscription-based agreement (ELAs) with unlimited users and a data cap, we believe this could increase customer adoption and allow us to better land, expand, and retain customers over the long term, and thereby have a positive impact on sales and marketing productivity. We also believe these have potential to remove many of the barriers of adoption and better align our pricing to the value delivered to our customers. As of the end of our most recent fiscal quarter, more than 55% of our annual recurring revenue (ARR) is on consumption-based agreements or ELAs, and we expect this percentage to increase in future periods. However, we have limited experience with consumption-based agreements and changes in our pricing and subscription models subject us to a number of uncertainties.
Previous wording
Remaining performance obligations (RPO) represents the remaining amount of revenue we expect to recognize from existing non-cancelable contracts, whether billed or unbilled. As of July 31, 2023 and 2024, total RPO was $357.6 million and $358.9 million, respectively. The amount of RPO expected to be recognized as revenue in the next twelve months was $232.1 million and $225.4 million as of July 31, 2023 and 2024, respectively.
Current wording
Remaining performance obligations (RPO) represents the remaining amount of revenue we expect to recognize from existing non-cancelable contracts, whether billed or unbilled. As of October 31, 2023 and 2024, total RPO was $367.2 million and $368.2 million, respectively. The amount of RPO expected to be recognized as revenue in the next twelve months was $230.8 million and $220.6 million as of October 31, 2023 and 2024, respectively.
Previous wording
We had total revenue of $79.7 million and $78.4 million for the three months ended July 31, 2023 and 2024, respectively, reflecting a year-over-year decrease of 2%. For the six months ended July 31, 2023 and 2024, we had total revenue of $159.1 million and $158.5 million, respectively. For the six months ended July 31, 2023 and 2024, no single customer accounted for more than 10% of our total revenue, nor did any single organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately. Revenue from customers with billing addresses in the United States comprised 79% and 80% or our total revenue for the three months ended July 31, 2023 and 2024, respectively.
Current wording
We had total revenue of $79.7 million and $79.8 million for the three months ended October 31, 2023 and 2024, respectively. For the nine months ended October 31, 2023 and 2024, we had total revenue of $238.8 million and $238.3 million, respectively. For the nine months ended October 31, 2023 and 2024, no single customer accounted for more than 10% of our total revenue, nor did any single organization when accounting for multiple subsidiaries or divisions which may have been invoiced separately. Revenue from customers with billing addresses in the United States comprised 80% and 79% or our total revenue for the three months ended October 31, 2023 and 2024, respectively.
Previous wording
We have incurred significant net losses since our inception, including net losses of $16.1 million and $19.5 million for the three months ended July 31, 2023 and 2024, respectively, and had an accumulated deficit of $1,451.1 million at July 31, 2024. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.
Current wording
We have incurred significant net losses since our inception, including net losses of $16.4 million and $18.8 million for the three months ended October 31, 2023 and 2024, respectively, and had an accumulated deficit of $1,469.9 million at October 31, 2024. We expect to incur losses for the foreseeable future and may not be able to achieve or sustain profitability.
Previous wording
As of July 31, 2024, we had over 2,600 customers. Enterprise customers accounted for 49% and 46% of our revenue for both the three and six months ended July 31, 2023 and 2024, respectively. To drive growth among both our enterprise and corporate customers, we intend to further develop our partner ecosystem by establishing agreements with more software resellers, systems integrators and other partners to provide broader customer and geographic coverage. We believe we are underpenetrated in the overall market and have significant opportunity to expand our customer base over time.
Current wording
As of October 31, 2024, we had over 2,600 customers. Enterprise customers accounted for 49% and 45% of our revenue for both the three and nine months ended October 31, 2023 and 2024, respectively. To drive growth among both our enterprise and corporate customers, we intend to further develop our partner ecosystem by establishing agreements with more software resellers, systems integrators and other partners to provide broader customer and geographic coverage. We believe we are underpenetrated in the overall market and have significant opportunity to expand our customer base over time.
Previous wording
An important metric that we use to evaluate our performance in retaining customers is gross retention rate. We calculate our gross retention rate by taking the dollar amount of annual contract value (ACV) that renews in a given period divided by the ACV that was up for renewal in that same period. The ACV of multi-year contracts is also considered in the calculation based on the period in which the annual anniversary of the contract falls. Our trailing twelve month gross retention rate was 88% and 84% as of July 31, 2023 and 2024, respectively. However, during the three months ended July 31, 2024 we saw a sequential improvement in gross retention, and for our consumption-based cohort, our gross retention is greater than 90%.
Current wording
An important metric that we use to evaluate our performance in retaining customers is gross retention rate. We calculate our gross retention rate by taking the dollar amount of annual contract value (ACV) that renews in a given period divided by the ACV that was up for renewal in that same period. The ACV of multi-year contracts is also considered in the calculation based on the period in which the annual anniversary of the contract falls. Our trailing twelve month gross retention rate was 87% and 84% as of October 31, 2023 and 2024, respectively.
Previous wording
Our gross retention declined in part due to macroeconomic conditions, challenging renewals from customers with COVID-19 use cases of our platform, and one large non-renewal during the three months ended April 30, 2024. As we continue to expand our partner ecosystem and develop methods to encourage wider and more strategic adoptions, we expect that customer retention will increase over the long term. Our ability to successfully upsell and the impact of cancellations may vary from period to period. The extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial subscriptions.
Current wording
Our gross retention declined in part due to macroeconomic conditions, challenging renewals from customers with COVID-19 use cases of our platform, and one large non-renewal in April 2024. As we continue to expand our partner ecosystem and develop methods to encourage wider and more strategic adoptions, we expect that customer retention will increase over the long term. Our ability to successfully upsell and the impact of cancellations may vary from period to period. The extent of this variability depends on a number of factors including the size and timing of upsells and cancellations relative to the initial subscriptions.
Previous wording
Sales and marketing expense as a percentage of total revenue was 52% for the three months ended July 31, 2023 compared to 47% for the three months ended July 31, 2024.
Current wording
Sales and marketing expense as a percentage of total revenue was 51% for the three months ended October 31, 2023 compared to 47% for the three months ended October 31, 2024.
Previous wording
Research and development expense as a percentage of total revenue was 26% for the three months ended July 31, 2023 compared to 28% for the three months ended July 31, 2024.
Current wording
Research and development expense as a percentage of total revenue was 25% for the three months ended October 31, 2023 compared to 27% for the three months ended October 31, 2024.
Previous wording
The following table sets forth our billings for the three and six months ended July 31, 2023 and 2024:
Current wording
The following table sets forth our billings for the three and nine months ended October 31, 2023 and 2024:
Previous wording
We derive our revenue primarily from subscription revenue, which consists of subscription-based agreements and, to a lesser extent, consumption-based agreements for our cloud-based platform. We also sell professional services.
Current wording
We derive our revenue primarily from subscription revenue, which consists of subscription-based agreements and consumption-based agreements for our cloud-based platform. We also sell professional services.
Previous wording
Other expense, net consists primarily of interest expense related to long-term debt. It also includes the effect of exchange rates on foreign currency transaction gains and losses foreign currency gains and losses upon remeasurement of intercompany balances, and interest income. The transactional impacts of foreign currency are recorded as foreign currency losses (gains) in the condensed consolidated statements of operations.
Current wording
Other expense, net consists of loss on extinguishment of debt and other expense, net. Other expense, net consists primarily of interest expense related to long-term debt. It also includes the effect of exchange rates on foreign currency transaction gains and losses foreign currency gains and losses upon remeasurement of intercompany balances, and interest income. The transactional impacts of foreign currency are recorded as foreign currency losses (gains) in the condensed consolidated statements of operations.
Previous wording
(2)Includes amortization of certain intangible assets of $20,000 and $142,000 for the three months ended July 31, 2023 and 2024, respectively, and $40,000 and $284,000 for the six months ended July 31, 2023 and 2024, respectively.
Current wording
(2)Includes amortization of certain intangible assets of $20,000 and $142,000 for the three months ended October 31, 2023 and 2024, respectively, and $60,000 and $426,000 for the nine months ended October 31, 2023 and 2024, respectively.
Previous wording
The decrease in subscription revenue was primarily due to a $4.5 million net decrease from existing customers, partially offset by a $4.2 million increase from new customers. Our total customer count remained flat from July 31, 2023 to July 31, 2024. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. The decrease in professional services and other revenue was primarily due to a lower volume of billable hours delivered during the three months ended July 31, 2024.
Current wording
Subscription revenue remained flat primarily due to a $4.4 million net decrease from existing customers, partially offset by a $4.2 million increase from new customers. Our total customer count remained relatively flat from October 31, 2023 to October 31, 2024. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. Professional services and other revenue remained relatively flat.
Previous wording
The increase in subscription cost of revenue was primarily due to a $1.1 million increase in our third-party web hosting services and amortization related to capitalized software development costs, which increased by $0.6 million.
Current wording
The increase in subscription cost of revenue was primarily due to a $1.2 million increase in our third-party web hosting services and a $0.4 million increase in amortization related to capitalized software development costs.
Previous wording
The decrease in professional services and other cost of revenue was primarily due to a $0.5 million decrease in employee-related costs and a $0.3 million decrease in outsourced services.
Current wording
The decrease in professional services and other cost of revenue was primarily due to a $1.0 million decrease in outsourced services, partially offset by a $0.3 increase in employee-related costs.
Previous wording
Services gross margin declined primarily due to a lower volume of billable hours delivered. We expect the gross margin for professional services to fluctuate from period to period due to changes in the proportion of services provided by third-party consultants, seasonality, and timing of projects with differing margins.
Current wording
Services gross margin improved primarily due to a decrease in outsourced services. We expect the gross margin for professional services to fluctuate from period to period due to changes in the proportion of services provided by third-party consultants, seasonality, and timing of projects with differing margins.
Previous wording
Sales and marketing expenses decreased primarily due to a $3.5 million decrease in employee-related costs, driven by lower headcount, and a $0.4 million decrease in travel expense. Our sales and marketing expense as a percentage of revenue decreased from 52% to 47%. We expect sales and marketing expense as a percentage of revenue to decrease in the long term.
Current wording
Sales and marketing expenses decreased primarily due to a $3.3 million decrease in employee-related costs, driven by lower headcount. Our sales and marketing expense as a percentage of revenue decreased from 51% to 47%. We expect sales and marketing expense as a percentage of revenue to decrease in the long term.
Previous wording
Research and development expenses increased primarily due to a $0.8 million increase in employee-related costs. Capitalized software decreased by $0.4 million, which increases expense. Our research and development costs increased as a percentage of revenue from 26% to 28%. We expect research and development as a percentage of revenue to increase slightly in the near term and remain consistent in the long term.
Current wording
Research and development expenses increased primarily due to a $2.1 million increase in employee-related costs, partially offset by a $0.5 million decrease in contract labor. Our research and development costs increased as a percentage of revenue from 25% to 27%. We expect research and development as a percentage of revenue to increase slightly in the near term and remain consistent in the long term.
Previous wording
Other expense, net decreased primarily due to a $0.4 million decrease in expense related to changes in foreign exchange rates and higher balances of cash denominated in currencies other than the functional currency. We expect interest expense to increase modestly in the near term due to an increasing principal balance. We expect foreign currency gains and losses could become more pronounced due to current market volatility.
Current wording
We expect interest expense to increase modestly in the near term due to an increasing principal balance. We expect foreign currency gains and losses could become more pronounced due to current market volatility.
Previous wording
Income taxes decreased primarily due to decreased state tax expense during the three months ended July 31, 2024. In the long term, we expect income tax expense to increase in conjunction with higher taxable income from our international subsidiaries.
Current wording
Income taxes decreased primarily due to foreign withholding taxes and decreased state tax expense during the three months ended October 31, 2024. In the long term, we expect income tax expense to increase in conjunction with higher taxable income from our international subsidiaries.
Previous wording
The increase in subscription revenue was primarily due to a $3.0 million increase from new customers, partially offset by a $2.3 million net decrease from existing customers. Our total customer count remained relatively flat from July 31, 2023 to July 31, 2024. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. The decrease in professional services and other revenue was primarily due to a lower volume of billable hours delivered during the six months ended July 31, 2024.
Current wording
The increase in subscription revenue was primarily due to a $3.9 million increase from new customers, partially offset by a $3.3 million net decrease from existing customers. Our total customer count remained relatively flat from October 31, 2023 to October 31, 2024. For the purposes of this comparison, new customers are defined as those added since the end of the prior year quarter, and revenue from existing customers is presented net of churn. The decrease in professional services and other revenue was primarily due to a lower volume of billable hours delivered during the nine months ended October 31, 2024.
Previous wording
The increase in cost of subscription revenue was due in part to a $2.4 million increase in expense related to third-party web hosting services. Amortization related to capitalized software development costs increased by $1.2 million.
Current wording
The increase in cost of subscription revenue was due in part to a $3.5 million increase in expense related to third-party web hosting services. Amortization related to capitalized software development costs increased by $1.5 million and employee-related costs increased by $1.2 million.
Previous wording
Cost of professional services and other revenue decreased primarily due to a $1.0 million decrease in employee-related costs.
Current wording
Cost of professional services and other revenue decreased primarily due to a $0.8 million decrease in outsourced services and a $0.7 million decrease in employee-related costs.
Previous wording
Subscription gross margin decreased primarily due to a decline in revenue growth and increased costs related to third-party web hosting services as a result of increased customer data usage. Professional services and other gross margin declined primarily due to a lower volume of billable hours delivered during the six months ended July 31, 2024.
Current wording
Subscription gross margin decreased primarily due to a decline in revenue growth and increased costs related to third-party web hosting services as a result of increased customer data usage. Professional services and other gross margin improved primarily due to a decrease in outsourced services and employee-related costs.
Previous wording
Sales and marketing expenses decreased primarily due to a $6.6 million decrease in employee-related costs, driven by lower headcount.
Current wording
Sales and marketing expenses decreased primarily due to a $9.9 million decrease in employee-related costs, driven by lower headcount and lower stock-based compensation. This was partially offset by a $2.1 million increase in marketing expense.
Previous wording
Research and development expenses increased primarily due to a $0.9 million increase in employee-related costs and a $0.6 million decrease in capitalized software, which increases expense. These were partially offset by a $1.1 million decrease in contract labor.
Current wording
Research and development expenses increased primarily due to a $2.7 million increase in employee-related costs and a $0.8 million decrease in capitalized software, which increases expense. These increases were partially offset by a $1.6 million decrease in contract labor.
Previous wording
General and administrative expenses increased primarily due to a $7.1 million increase in professional and legal fees. This was primarily due to a $2.4 million insurance reimbursement for legal fees that was realized during the six months ended July 31, 2023 plus increased costs related to the amendment to the credit facility that occurred during the six months ended July 31, 2024.
Current wording
General and administrative expenses increased primarily due to a $7.7 million increase in professional and legal fees. This was partially driven by a $2.4 million insurance reimbursement for legal fees that was realized during the nine months ended October 31, 2023 plus uncapitalized costs related to the amendment to the credit facility that occurred during the nine months ended October 31, 2024.
Previous wording
Other expense, net decreased primarily due to a $0.6 million decrease in expense related to changes in foreign exchange rates and higher balances of cash denominated in currencies other than the functional currency.
Current wording
Other expense, net increased primarily due to an increase in interest expense, partially offset by a decrease in expense related to changes in foreign exchange rates and higher balances of cash denominated in currencies other than the functional currency.
Previous wording
Income taxes decreased due to certain tax filings and decreased state tax expense during the six months ended July 31, 2024.
Current wording
Income taxes decreased due to certain tax filings and decreased state tax expense during the nine months ended October 31, 2024.
Previous wording
As of July 31, 2024, we had $55.7 million of cash, cash equivalents, and restricted cash which were held for working capital purposes, of which $3.7 million was restricted cash. Our cash and cash equivalents consist primarily of cash, money market funds, and certificates of deposit. We have a $100 million credit facility, all of which had been drawn as of July 31, 2024.
Current wording
As of October 31, 2024, we had $40.9 million of cash and cash equivalents, which were held for working capital purposes. Our cash and cash equivalents consist primarily of cash and money market funds. We have a $123.0 million credit facility, all of which had been drawn as of October 31, 2024.
Previous wording
The credit facility permits us to incur up to $100 million in term loan borrowings, all of which had been drawn as of July 31, 2024. The credit facility is secured by substantially all of our assets.
Current wording
The credit facility permits us to incur up to approximately $125.3 million in term loan borrowings, all of which had been drawn as of October 31, 2024. The credit facility is secured by substantially all of our assets.
Previous wording
As of July 31, 2024, the term loan maturity date was April 1, 2026 and the term loan had a closing fee of $7.0 million. Additionally, we entered into an amendment in August 2020 that included an amendment fee of $5.0 million, which accrues interest at a rate of 9.5% per year and is due upon maturity. The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest that accrues on the outstanding principal of the term loan is due in cash on a monthly basis, which, as of July 31, 2024, accrued at a floating rate equal to the greater of (1) 7.0% and (2) Adjusted Term SOFR plus 5.5% per year. As of July 31, 2024, Adjusted Term SOFR is defined as the greater of (a) 0.0% and (b) Term SOFR plus 0.26161%. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0% and (2) the Alternate Base Rate plus 2.75% per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5% and (c) Adjusted Term SOFR. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction received by Administrative Agent from three Federal funds brokers. As of July 31, 2024, the interest rate was approximately 11.1%, and in addition to the 11.1% interest rate, a fixed rate equal to 2.5% per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity.
Current wording
The credit facility requires interest-only payments on a portion of the accrued interest until the maturity date. This payable portion of the interest that accrues on the outstanding principal of the term loan is due in cash on a monthly basis, which, as of October 31, 2024, accrued at a floating rate equal to the greater of (1) 8.0% and (2) Adjusted Term SOFR. Adjusted Term SOFR is defined as the greater of (a) 2.5% and (b) Term SOFR. In the event that SOFR is unavailable, interest will accrue at a floating rate equal to the greater of (1) 7.0% and (2) the Alternate Base Rate plus 2.75% per year. The Alternate Base Rate is defined as the greatest of (a) the Prime Rate (b) Federal Funds Effective Rate plus 0.5% and (c) Adjusted Term SOFR plus 1.00%. The Federal Funds Effective rate is defined as the rate published by the Federal Reserve System as the overnight rate, or, if such rate is not so published, the average of the quotations for the day for such transaction received by Administrative Agent from three Federal funds brokers. As of October 31, 2024, the cash interest rate was approximately 8.1%. In addition to the 8.1% cash interest rate, a fixed rate equal to 5.0% per year accrues on the outstanding principal of the term loan. This capitalized portion of the interest is added to the principal amount of the outstanding term loan on a monthly basis and is due upon maturity.
Previous wording
The credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of our capital stock, make certain investments or enter into transactions with affiliates. In addition, we are required to comply with a minimum annualized recurring revenue financial covenant, tested quarterly. The credit facility defines annualized recurring revenue as four times our aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year) less the annual contract value of any customer contracts pursuant to which we were advised during such quarter would not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. We are also required to comply with a minimum trailing 12-month consolidated EBITDA (as defined by the credit facility) covenant, which is tested quarterly, and adhere to a $15.0 million monthly minimum liquidity covenant. Pursuant to the Second Amendment, covenant levels for such minimum annualized recurring revenue financial covenant and such minimum consolidated EBITDA covenant were revised, and the minimum liquidity covenant was modified to a $25.0 million monthly minimum liquidity covenant. Noncompliance with these covenants, or the occurrence of certain other events specified in the credit facility, could result in an event of default under the loan agreement. If an event of default has occurred and we are unable to obtain a waiver, any outstanding principal, interest and fees could become immediately due and payable. We were in compliance with the covenant terms of the credit facility on January 31, 2024 and July 31, 2024.
Current wording
The credit facility contains customary conditions to borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, make material changes to the nature, control or location of the business, merge with or acquire other entities, incur indebtedness or encumbrances, make distributions to holders of our capital stock, make certain investments or enter into transactions with affiliates. In addition, we are required to comply with a minimum annualized recurring revenue financial covenant, tested quarterly. The credit facility defines annualized recurring revenue as four times our aggregate revenue for the immediately preceding quarter (net of recurring discounts and discounts for periods greater than one year) less the annual contract value of any customer contracts pursuant to which we were advised during such quarter would not be renewed at the end of the current term plus the annual contract value of existing customer contract increases during such quarter. We are also required to comply with a minimum trailing 12-month consolidated EBITDA (as defined by the credit facility) covenant, which is tested quarterly, and adhere to a monthly minimum liquidity covenant that requires unrestricted cash on a consolidated basis of $25.0 million deposited in pledged accounts located in the United States. Noncompliance with these covenants, or the occurrence of certain other events specified in the credit facility, could result in an event of default under the loan agreement. If an event of default has occurred and we are unable to obtain a waiver, any outstanding principal, interest and fees could become immediately due and payable. We were in compliance with the covenant terms of the credit facility on January 31, 2024 and October 31, 2024.
Previous wording
Net cash used in operating activities during the six months ended July 31, 2024 consisted of cash outflows of $160.6 million exceeding the $156.3 million collected from customers. Significant components of cash outflows included $89.9 million for personnel costs and $32.5 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services.
Current wording
Net cash used in operating activities during the nine months ended October 31, 2023 consisted of cash outflows of $245.4 million exceeding the $242.5 million collected from customers. Significant components of cash outflows included $136.7 million for personnel costs and $54.4 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services.
Previous wording
Net cash provided by operating activities during the six months ended July 31, 2023 consisted of cash collected from customers of $169.7 million exceeding the cash outflows of $168.2 million. Significant components of cash outflows included $96.4 million for personnel costs and $35.1 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services.
Current wording
Net cash used in operating activities during the nine months ended October 31, 2024 consisted of cash outflows of $254.4 million exceeding the $236.4 million collected from customers. Significant components of cash outflows included $128.3 million for personnel costs and $52.7 million for marketing programs and events, third-party costs to provide our platform and outsourced professional services.
Previous wording
Net cash used in investing activities during the six months ended July 31, 2023 consisted primarily of $4.4 million of capitalized development costs related to internal-use software and $2.1 million of purchased property and equipment.
Current wording
Net cash used in investing activities during the nine months ended October 31, 2023 consisted primarily of $6.6 million of capitalized development costs related to internal-use software and $2.6 million of purchased property and equipment.
Previous wording
Net cash used in investing activities during the six months ended July 31, 2024 consisted primarily of $3.5 million of capitalized development costs related to internal-use software and $1.2 million of purchased property and equipment.
Current wording
Net cash used in investing activities during the nine months ended October 31, 2024 consisted primarily of $5.8 million of capitalized development costs related to internal-use software and $1.4 million of purchased property and equipment.
Previous wording
Net cash provided by financing activities for the six months ended July 31, 2023 consisted primarily of $2.0 million of proceeds from shares issued in connection with our employee stock purchase plan.
Current wording
Net cash provided by financing activities for the nine months ended October 31, 2023 consisted primarily of $3.4 million of proceeds from shares issued in connection with our employee stock purchase plan.
Previous wording
Net cash provided by financing activities for the six months ended July 31, 2024 consisted primarily of $2.8 million of proceeds from short-term payable financing, $1.1 million of proceeds from shares issued in connection with our employee stock purchase plan, offset by $0.2 million used to repurchase shares for tax withholdings on vesting of restricted stock.
Current wording
Net cash provided by financing activities for the nine months ended October 31, 2024 consisted primarily of $52.8 million of debt proceeds, $9.0 million of proceeds from short-term payable financing, and $1.9 million of proceeds from shares issued in connection with our employee stock purchase plan, offset by $53.2 million of repayment of debt and related fees, $4.5 million of payments on short-term payable financing, and $0.5 million used to repurchase shares for tax withholdings on vesting of restricted stock.