MariaDB plc
MariaDB plc
08/14/2024 | Press release | Distributed by Public on 08/14/2024 14:04
Quarterly Report for Quarter Ending June 30, 2024 (Form 10-Q)
mrdb-20240630
(1)Metrics presented for the period ended June 30, 2023 have been recalculated to reflect the revised metric definition. On October 12, 2023, the Company announced its restructuring plan to focus its attention on its core MariaDB Enterprise Server database product and better align its workforce with the needs of its business. Products not related to the core MariaDB Enterprise Server business, including SkySQL and Xpand, are no longer sold and the Company has implemented a plan to help existing customers migrate off these products. As a result of the restructuring plan, we changed the definition of ARR to exclude revenue from pay-as-you-go customers related to SkySQL and one-year and multi-year contracts relating to SkySQL and Xpand products, to only include revenue from contracts which have a contract start date on or before the ARR measurement date, and to only include revenue for up to 30 days after the subscription end date for a contract for customers who are actively negotiating renewal. As a result of the change in the definition of ARR, the net revenue retention rate as of June 30, 2023 presented above has also been recalculated using ARR under the Company's revised methodology. Customers of our SkySQL and Xpand subscription products have also been removed from our number of customers as of June 30, 2023.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from to
Commission file number 001-41571
________________________________________
MariaDB plc
________________________________________
(Exact name of registrant as specified in its charter)
| Ireland |
N/A
|
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.)
|
|
699 Veterans Blvd
Redwood City, California
|
94063
|
| (Address of Principal Executive Offices) | (Zip Code) |
(855) 562-7423
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Ordinary Shares, nominal value $0.01 per share | MRDB | New York Stock Exchange |
| Warrants, each whole warrant exercisable for one Ordinary Share at an exercise price of $11.50 per share | MRDBW | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. YesxNo o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).YesxNo o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. Refer to the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | o |
Accelerated filer
|
o |
|
Non-accelerated filer
|
x |
Smaller reporting company
|
x |
|
Emerging growth company
|
x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes oNo x
The registrant had outstanding 69,067,030 shares of common stock as of August 9, 2024.
Table of Contents
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Part I - Financial Information
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Item 1.
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Financial Statements (Unaudited)
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6
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Condensed Consolidated Balance Sheets
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7
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Condensed Consolidated Statements of Operations and Comprehensive Loss
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8
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Condensed Consolidated Statements of Stockholders' Deficit
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9
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Condensed Consolidated Statements of Cash Flows
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10
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Notes to Unaudited Condensed Consolidated Financial Statements
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11
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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24
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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36
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Item 4.
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Controls and Procedures
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37
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Part II - Other Information
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Item 1.
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Legal Proceedings
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38
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Item 1A.
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Risk Factors
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38
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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38
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Item 3.
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Defaults Upon Senior Securities
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38
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Item 4.
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Mine Safety Disclosures
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38
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Item 5.
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Other Information
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38
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Item 6.
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Exhibits
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39
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Signatures
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40
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3
Selected Definitions
Unless otherwise stated in this report or the context otherwise requires, reference to:
"Business Combination" means Irish Domestication Merger, the Merger and the other transactions contemplated by the Merger Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Irish Domestication Merger" means the merger of Merger Sub with and into APHC, with APHC continuing as the surviving entity and a wholly owned subsidiary of Mangomill, pursuant to the terms and conditions of the Merger Agreement.
"Irish Takeover Rules" means the Irish Takeover Panel Act 1997, Takeover Rules 2022.
"Legacy MariaDB" means MariaDB Corporation Ab, a Finnish private limited liability company.
"Mangomill" or "Irish Holdco" means, prior to the consummation of the Business Combination, Mangomill plc, an Irish public limited company and wholly owned subsidiary of APHC.
"MariaDB," the "Company," the "Combined Company," "we" or "us" means MariaDB plc and its consolidated subsidiaries after giving effect to the consummation of the Business Combination, unless otherwise indicated.
"Merger" means the merger of Legacy MariaDB with and into Mangomill pursuant to the terms and conditions of the Merger Agreement, which was completed on December 16, 2022.
"Merger Agreement" means the Business Combination Agreement, dated as of January 31, 2022, as amended by Amendment No.1 to Business Combination Agreement dated as of December 9, 2022, by and among APHC, Merger Sub, Mangomill and Legacy MariaDB.
"Merger Sub" means Meridian MergerSub Inc., a Cayman Islands exempted company and wholly owned subsidiary of Mangomill.
"NYSE" Means the New York Stock Exchange, on which the Ordinary Shares and Public Warrants are currently listed.
"Ordinary Shares" means the ordinary shares, nominal value $0.01 per share, of MariaDB plc.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
4
Cautionary Note Regarding Forward-Looking Statements
This report includes expectations, beliefs, projections, estimates, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts and that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act. Forward-looking statements may appear throughout this report, including, but not limited to, Management's Discussion and Analysis of Financial Condition and Results of Operations". The forward-looking statements included in this report include statements regarding our future financial position and operating results, as well as our strategy, future operations, prospects, plans and objectives of management. In some cases, you can identify these forward-looking statements by the use of terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "projects," "anticipates," or the negative version of these words or other comparable words or phrases.
These forward-looking statements are based on management's current expectations, assumptions, hopes, beliefs, intentions, strategies, and plans regarding future events and performance and are based on currently available information as to the outcome and timing of future events and performance. We caution you that these forward-looking statements are subject to risks and uncertainties (including those described in our filings with the Securities and Exchange Commission), most of which are difficult to predict and many of which are beyond our control, incident to our operations.
These forward-looking statements are based on information available as of the date of this report. While our management believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
Current expectations, forecasts and assumptions involve a number of risks and uncertainties. Accordingly, forward-looking statements in this report should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
•our expectations regarding the planned compulsory acquisition by Meridian BidCo LLC ("Bidco") of any outstanding Ordinary Shares not acquired or agreed to be acquired pursuant to the unsolicited offer (the "Offer") by Bidco to purchase all of the issued and to be issued Ordinary Shares of the Company (the "Buy Out"), including the expected timetable for completing the Buy Out, delisting from the NYSE and termination of registration of Ordinary Shares under the Exchange Act;
•our failure to meet the continued listing requirements of the NYSE (or another national securities exchange), which could result in the delisting of our securities, or otherwise our failure to continue listing on NYSE (or another national securities exchange), could limit the value of our securities and liquidity and otherwise negatively impact or business;
•our ability to compete in an increasingly competitive environment, including our ability to effectively evolve our business;
•our ability to retain, recruit and integrate qualified personnel, including officers, directors and other key personnel (including those with public company experience);
•our ability to retain existing customers and their business and attract additional customers and their business;
•any breach of our security measures, or those of our service providers or customers, or if unauthorized parties otherwise obtain access to our or our customers' data or software;
•intellectual property, information technology and privacy requirements that may subject us to unanticipated liabilities;
•our ability to realize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, and our ability to manage our operations, including potential growth and expansion of our business operations and building out controls, effectively;
•our ability to effectively operate as a public company;
•any regulatory actions or litigation (including the claims discussed elsewhere in this report) relating to, among other things, the Business Combination; and
•the other risks and uncertainties set forth in this report in the section titled "Risk Factors".
5
Part I. Financial Information
Item 1. Financial Statements
INDEX TO THE FINANCIAL STATEMENTS
MARIADB PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
Condensed Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023
|
7
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months and nine months ended June 30, 2024 and 2023
|
8
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Condensed Consolidated Statements of Stockholders' Deficit for the nine months ended June 30, 2024 and 2023
|
9
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Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2024 and 2023
|
10
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|
Notes to Unaudited Condensed Consolidated Financial Statements
|
11
|
6
MariaDB plc
Condensed Consolidated Balance Sheets
(in thousands, except par value and share amounts)
|
June 30, 2024 |
September 30, 2023 |
|||
|
(unaudited)
|
(audited) | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 1,082 | $ | 4,467 |
| Accounts receivable, net | 8,210 | 13,956 | ||
| Prepaids and other current assets | 7,865 | 5,780 | ||
| Total current assets | 17,157 | 24,203 | ||
| Property and equipment, net | - | 232 | ||
| Operating lease right-of-use assets | 31 | 509 | ||
| Other noncurrent assets | 6,414 | 4,848 | ||
| Total assets | $ | 23,602 | $ | 29,792 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||
| Current liabilities: | ||||
| Accounts payable | $ | 9,098 | $ | 4,378 |
| Accrued expenses | 8,588 | 6,450 | ||
| Operating lease liabilities | 34 | 539 | ||
| Debt | 26,333 | 15,855 | ||
| Deferred revenue | 29,842 | 29,828 | ||
| Total current liabilities | 73,895 | 57,050 | ||
| Deferred revenue, net of current | 14,039 | 16,793 | ||
| Warrant liabilities | 2,402 | 1,295 | ||
| Deferred tax liability | - | 173 | ||
| Total liabilities | 90,336 | 75,311 | ||
| Commitments and contingencies (Note 7) | ||||
| Stockholders' Deficit: | ||||
|
Ordinary shares, par value of $0.01 per share; 69,067,030 and 67,713,368 shares issued and outstanding as of June 30, 2024 and September 30, 2023
|
677 | 674 | ||
| Additional paid-in-capital | 214,247 | 213,307 | ||
| Accumulated deficit | (271,174) | (249,380) | ||
| Accumulated other comprehensive loss | (10,484) | (10,120) | ||
| Total stockholders' deficit | (66,734) | (45,519) | ||
| Total liabilities and stockholders' deficit | $ | 23,602 | $ | 29,792 |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
7
MariaDB plc
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Revenue: | ||||||||
| Subscription | $ | 12,403 | $ | 11,539 | $ | 36,875 | $ | 34,837 |
| Services | 1,163 | 1,503 | 3,888 | 4,484 | ||||
| Total revenue | 13,566 | 13,042 | 40,763 | 39,321 | ||||
| Cost of revenue: | ||||||||
| Subscription | 1,291 | 1,822 | 4,466 | 4,957 | ||||
| Services | 1,260 | 1,866 | 3,681 | 5,315 | ||||
| Total cost of revenue | 2,551 | 3,688 | 8,147 | 10,272 | ||||
| Gross profit | 11,015 | 9,354 | 32,616 | 29,049 | ||||
| Operating expenses: | ||||||||
| Research and development | 5,729 | 8,668 | 14,931 | 27,415 | ||||
| Sales and marketing | 4,511 | 6,290 | 13,202 | 20,465 | ||||
| General and administrative | 8,494 | 6,631 | 17,029 | 18,850 | ||||
| Restructuring and other charges | 26 | - | 3,268 | - | ||||
| Gain on divestitures | - | - | (799) | - | ||||
| Total operating expense | 18,760 | 21,589 | 47,631 | 66,730 | ||||
| Loss from operations | (7,745) | (12,235) | (15,015) | (37,681) | ||||
| Other (expense) income: | ||||||||
| Interest expense | (893) | (307) | (5,371) | (821) | ||||
| Change in fair value of warrant liabilities | (976) | 1,807 | (1,146) | 5,835 | ||||
| Other income (expense), net | 107 | 1,077 | (422) | (1,531) | ||||
| Loss before income taxes | (9,507) | (9,658) | (21,954) | (34,198) | ||||
| Income tax (expense) benefit | - | (11) | 160 | (17) | ||||
| Net loss | $ | (9,507) | $ | (9,669) | $ | (21,794) | $ | (34,215) |
| Net loss per share attributable to ordinary shares - basic and diluted | $ | (0.14) | $ | (0.14) | $ | (0.32) | $ | (0.65) |
| Weighted-average shares outstanding - basic and diluted | 68,637,507 | 66,999,987 | 68,031,598 | 52,444,086 | ||||
| Comprehensive Loss: | ||||||||
| Net loss | $ | (9,507) | $ | (9,669) | $ | (21,794) | $ | (34,215) |
| Foreign currency translation adjustment, net of taxes | (45) | (91) | (364) | 576 | ||||
| Unrealized loss from available-for-sale securities, net of taxes | - | - | - | (2,177) | ||||
| Total comprehensive loss | $ | (9,552) | $ | (9,760) | $ | (22,158) | $ | (35,816) |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
8
MariaDB plc
Condensed Consolidated Statements of Stockholders' Deficit
(in thousands, except share amounts)
(unaudited)
| Convertible Preferred Shares | Ordinary Shares |
Additional Paid-In Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
Total Stockholders' Deficit |
|||||||||
| Shares | Amount | Shares | Amount | |||||||||||
| Balance at September 30, 2022 | 183,565,242 | $ | 206,969 | 60,764,711 | $ | - | $ | 11,482 | $ | (9,305) | $ | (197,523) | $ | (195,346) |
| Recapitalization | (141,682,189) | - | (46,900,367) | 139 | (139) | - | - | - | ||||||
| Balance at September 30, 2022 | 41,883,053 | 206,969 | 13,864,344 | 139 | 11,343 | (9,305) | (197,523) | (195,346) | ||||||
| Exercise of share options | - | - | 844,350 | 8 | 176 | - | - | 184 | ||||||
| Issuance of Ordinary Shares as consideration for CubeWerx and Sector 42 acquisition | - | - | 539,233 | 5 | (5) | - | - | - | ||||||
| Exercise of Series C - 2020 Preferred Share Warrants | 539,627 | 3,516 | - | - | - | - | - | - | ||||||
| Preferred shares conversion | (42,422,680) | (210,485) | 42,422,680 | 424 | 210,061 | - | - | 210,485 | ||||||
|
Issuance of Ordinary Shares upon Business Combination including PIPE financing (net of offering costs of $14.9 million)
|
- | - | 8,812,585 | 88 | (10,726) | - | - | (10,638) | ||||||
| Stock-based compensation | - | - | - | - | 616 | - | - | 616 | ||||||
| Other comprehensive loss | - | - | - | - | - | (290) | - | (290) | ||||||
| Net loss | - | - | - | - | - | - | (12,696) | (12,696) | ||||||
| Balance at December 31, 2022 | - | - | 66,483,192 | 664 | 211,465 | (9,595) | (210,219) | (7,685) | ||||||
| Exercise of share options | - | - | 389,593 | 4 | 210 | - | - | 214 | ||||||
| Adjustment to deferred offering costs | - | - | - | - | 337 | - | - | 337 | ||||||
| Share-based compensation | - | - | - | - | 241 | - | - | 241 | ||||||
| Other comprehensive loss | - | - | - | - | - | (1,220) | - | (1,220) | ||||||
| Net loss | - | - | - | - | - | - | (11,850) | (11,850) | ||||||
| Balance at March 31, 2023 | - | $ | - | 66,872,785 | $ | 668 | $ | 212,253 | $ | (10,815) | $ | (222,069) | $ | (19,963) |
| Exercise of share options | - | - | 560,384 | 6 | 277 | - | - | 283 | ||||||
| Share-based compensation | - | - | - | - | 724 | - | - | 724 | ||||||
| Other comprehensive loss | - | - | - | - | - | (91) | - | (91) | ||||||
| Net loss | - | - | - | - | - | - | (9,669) | (9,669) | ||||||
| Balance at June 30, 2023 | - | $ | - | 67,433,169 | $ | 674 | $ | 213,254 | $ | (10,906) | $ | (231,738) | $ | (28,716) |
| Balance at September 30, 2023 | - | $ | - | 67,713,368 | $ | 674 | $ | 213,307 | $ | (10,120) | $ | (249,380) | $ | (45,519) |
| Exercise of share options | - | - | 24,016 | - | 11 | - | - | 11 | ||||||
| Vesting of restricted stock units | - | - | 1,250 | - | - | - | - | - | ||||||
| Share-based compensation | - | - | - | - | 13 | - | - | 13 | ||||||
| Other comprehensive loss | - | - | - | - | - | (145) | - | (145) | ||||||
| Net loss | - | - | - | - | - | - | (8,768) | (8,768) | ||||||
| Balance at December 31, 2023 | - | $ | - | 67,738,634 | $ | 674 | $ | 213,331 | $ | (10,265) | $ | (258,148) | $ | (54,408) |
| Exercise of share options | - | - | 108 | - | - | - | - | - | ||||||
| Vesting of restricted stock units | - | - | 10,687 | - | - | - | - | - | ||||||
| Share-based compensation | - | - | - | - | 170 | - | - | 170 | ||||||
| Other comprehensive loss | - | - | - | - | - | (174) | - | (174) | ||||||
| Net loss | - | - | - | - | - | - | (3,519) | (3,519) | ||||||
| Balance at March 31, 2024 | - | $ | - | 67,749,429 | $ | 674 | $ | 213,501 | $ | (10,439) | $ | (261,667) | $ | (57,931) |
| Exercise of share options | - | - | 256,911 | 3 | 450 | - | - | 453 | ||||||
| Vesting of restricted stock units | - | - | 1,060,690 | - | - | - | - | - | ||||||
| Share-based compensation | - | - | - | - | 296 | - | - | 296 | ||||||
| Other comprehensive loss | - | - | - | - | - | (45) | - | (45) | ||||||
| Net loss | - | - | - | - | - | - | (9,507) | (9,507) | ||||||
| Balance at June 30, 2024 | - | $ | - | 69,067,030 | $ | 677 | $ | 214,247 | $ | (10,484) | $ | (271,174) | $ | (66,734) |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
9
MariaDB plc
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended June 30, | ||||
| 2024 | 2023 | |||
| Operating activities: | ||||
| Net loss | $ | (21,794) | $ | (34,215) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||
| Change in allowance for doubtful accounts | 127 | 1,068 | ||
| Depreciation and amortization | 76 | 508 | ||
| Non-cash lease expense | 479 | 355 | ||
| Stock-based compensation | 479 | 1,581 | ||
| Change in fair value of warrant liability | 1,146 | (5,835) | ||
| Loss from disposal of property and equipment | 157 | 175 | ||
| Amortization of deferred commission | 1,434 | 1,306 | ||
| Investment income | - | (925) | ||
| Foreign currency loss, net | 915 | 1,377 | ||
| Non-cash interest expense, including interest expenses associated with debt issuance costs | 3,067 | - | ||
| Restructuring and other charges | 933 | - | ||
| Gain on divestitures | (933) | - | ||
| Deferred income tax | (171) | - | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | 5,672 | (470) | ||
| Other current assets | (3,205) | (1,177) | ||
| Other noncurrent assets | (1,535) | (781) | ||
| Accounts payable and accrued expenses | 6,214 | (1,819) | ||
| Operating lease liability | (506) | (353) | ||
| Deferred revenue | (3,129) | 12,442 | ||
| Net cash used in operating activities | (10,574) | (26,763) | ||
| Investing activities: | ||||
| Purchases of property and equipment | - | (5) | ||
| Acquisition of CubeWerx and Sector 42, net of cash acquired | - | (57) | ||
| Disposal of investments | - | 25,948 | ||
| Net cash provided by investing activities | - | 25,886 | ||
| Financing activities: | ||||
| Proceeds from stock options exercise | 464 | 681 | ||
| Settlement of warrant liabilities | - | (427) | ||
| Proceeds from exercise of warrants | - | 2,867 | ||
| Payment of offering costs related to the Business Combination | - | (5,417) | ||
| Proceeds from the Business Combination | - | 10,509 | ||
| Net proceeds from issuance of promissory note | 24,743 | - | ||
| Repayment of debt | (16,958) | (135) | ||
| Net cash provided by financing activities | 8,249 | 8,078 | ||
| Effect of exchange rate changes on cash and cash equivalents | (1,060) | 903 | ||
| Net (decrease) increase in cash and cash equivalents | (3,385) | 8,104 | ||
| Cash and cash equivalents at beginning of period | 4,467 | 4,756 | ||
| Cash and cash equivalents at end of period | $ | 1,082 | $ | 12,860 |
| Supplemental disclosures of cash flow information: | ||||
| Cash paid for income taxes | $ | - | $ | - |
| Cash paid for interest | $ | 1,111 | $ | 676 |
| Non-cash investing and financing activities: | ||||
| Issuance of Series C Preferred Shares - Exercise of Warrant Liabilities, Fair Value | $ | - | $ | 649 |
| Conversion of Convertible Preferred Shares to Ordinary Shares | $ | - | $ | 210,485 |
| Warrant liabilities assumed in the Business Combination | $ | - | $ | 7,111 |
| Net assets assumed in the Business Combination | $ | - | $ | 883 |
| Reclassification of deferred offering costs related to the Business Combination | $ | - | $ | 9,165 |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
10
MariaDB plc
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Description of Business
Description of Business
MariaDB plc ("MariaDB" or the "Company") provides one of the most popular general purpose relational databases. The Company's operations consist of programming, development and sales of software programs, applications and tools related to enterprise database software. In addition, the Company provides user support, consultation and training for the software, applications, tools, and systems. The Company is active in development of both open source and closed source software.
The Company is headquartered in Redwood City, California and Dublin, Ireland, with operations in other locations including Espoo, Finland, and Sofia, Bulgaria. In August 2024, the Company relocated its corporate headquarters to Milpitas, California.
Liquidity and Going Concern
As of June 30, 2024, the Company had an accumulated deficit of $271.2 million and $1.1 million in cash and cash equivalents. The Company has determined our current cash and cash equivalents will not be sufficient to fund operations (including the repayment of the RP Note and related interest that was due in January 2024 (refer to Note 8, Debt for additional discussion)), for at least 12 months from the date these financial statements were issued (August 14, 2024), raising substantial doubt about our ability to continue as a going concern.
The Company is currently in the process of being acquired and is seeking financing to avoid any potential shortfall of cash and cash equivalents to fund operations, for at least 12 months from the date the financial statements were issued.
The Company's need for additional capital may depend on many factors, including subscription revenue growth rate, subscription renewals, billing timing and frequency, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the need for necessary technology and operating infrastructure to support the business, the introduction of new and enhanced database features and functionality and the continued market adoption of database solutions. The Company is currently seeking additional financing to meet projected working capital and operational requirements. However, such additional financing is subject to market conditions, and is not within the Company's control, and therefore cannot be deemed probable as adequate capital may not be available to the Company when needed or on acceptable terms. There is no assurance that the Company will be successful in raising additional funds. As a result, the Company has concluded that potentially raising funds does not alleviate substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying Unaudited Condensed Consolidated Financial Statements, including the accounts of MariaDB and its wholly-owned subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). All intercompany balances and transactions among have been eliminated in consolidation.
Revenue Recognition
Deferred revenues consist of customer contracts billed or cash received that will be recognized in the future under subscriptions existing at the balance sheet date. The current portion of deferred revenues represents amounts that are expected to be recognized within one year of the balance sheet date. As of June 30, 2024 and September 30, 2023, the balance of deferred revenue was $43.9 million and $46.6 million, respectively, which includes $11.8 million and $12.4 million of refundable customer deposits, respectively.
Revenue recognized during the three months ended June 30, 2024 and 2023 that was included in the deferred revenue beginning balance of each year was $4.8 million and $2.5 million, respectively. Revenue recognized during the nine
11
months ended June 30, 2024 and 2023 that was included in the deferred revenue beginning balance of each year was $23.2 million and $19.2 million, respectively.
Incremental direct costs of obtaining a contract are included in prepaids and other current assets and other noncurrent assets, respectively, in the Unaudited Condensed Consolidated Balance Sheets. The current and noncurrent deferred commissions had a balance of $5.0 million and $5.6 million as of June 30, 2024 and September 30, 2023, respectively.
Concentration of Credit Risk
As of June 30, 2024, two customers accounted for 38.9% of the total balance of accounts receivable, net. As of September 30, 2023, one customer accounted for 10.5% of the total balance of accounts receivable, net. For the three and nine months ended June 30, 2024 and 2023, no customer accounted for more than 10% of the Company's total consolidated revenues.
Fair Value of Financial Instruments
As of June 30, 2024 and September 30, 2023, the carrying value of the Company's financial instruments included in current assets and current liabilities (including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and debt) approximate fair value due to the short-term nature of such items.
Accounts Receivable, Net
Accounts receivable, net was $8.2 million as of June 30, 2024 compared to $14.0 million as of September 30, 2023 as reported on the Unaudited Condensed Consolidated Balance Sheets.
The following table presents the changes in the allowance for credit losses for the nine months ended June 30, 2024 and the year ended September 30, 2023:
|
June 30, 2024 |
September 30, 2023 |
|||
| (in thousands) | ||||
| Balance, beginning of period | $ | 1,386 | $ | 642 |
| Change in provision for credit losses | 127 | 802 | ||
| Less: write-offs, net of recoveries | (778) | (105) | ||
| Foreign currency translation | 192 | 47 | ||
| Balance, end of period | $ | 927 | $ | 1,386 |
The Company started selling certain designated trade account receivables based on factoring arrangements with a well-established factoring company in the current period. Pursuant to the terms of the arrangement, the Company accounts for these transactions in accordance with ASC Topic 860, "Transfers and Servicing". The Company's factor purchases trade accounts receivables on a non-recourse basis and without any further obligations. Trade accounts receivables balances sold are removed from the Unaudited Condensed Consolidated Balance Sheets and cash received is reflected as cash provided by operating activities in the Unaudited Condensed Consolidated Statements of Cash Flows. The difference between the fair value of the Company's trade receivables and the proceeds received is recorded as interest expense in the Company's Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. For the three months ended June 30, 2024, the Company's recognized factoring related interest expense was approximately $0.1 million. For the three months ended June 30, 2024, the Company's gross amount of trade accounts receivables sold was approximately $1.2 million.
Prepaids and Other Current Assets
Prepaid expenses and other current assets totaled $7.9 million and $5.8 million as of June 30, 2024 and September 30, 2023, respectively.
Prepaid expenses totaled $5.9 million and $3.7 million as of June 30, 2024 and September 30, 2023, respectively. Prepaid expenses as of June 30, 2024 were primarily related to deferred legal fees related to the pending sale of the Company
12
(executed on July 23, 2024) and deferred issuance costs in anticipation of additional financings. Prepaid expenses as of September 30, 2023 were primarily related to up-front payments made to third parties in the ordinary course of business.
Other current assets primarily consisted of deferred commissions totaling $1.7 million as of both periods ending June 30, 2024 and September 30, 2023. Other receivables totaled $0.3 million and $0.4 million as of June 30, 2024 and September 30, 2023, respectively.
Note 3. Revenue
Disaggregation of Revenue
The Company believes that the nature, amount, timing and uncertainty of its revenue and cash flows and how they are affected by economic factors is most appropriately depicted through the Company's primary geographical markets.The Company's primary geographical markets are North and South America ("Americas"); Europe, Middle East and Africa ("EMEA"); and Asia Pacific ("APAC").
The following table summarizes the disaggregation of revenue by geography for the three and nine months ended June 30, 2024 and 2023 respectively.
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| (in thousands) | (in thousands) | |||||||
| EMEA | $ | 5,089 | $ | 4,760 | $ | 15,001 | $ | 13,971 |
| Americas | 5,786 | 5,662 | 17,851 | 18,135 | ||||
| APAC | 2,691 | 2,620 | 7,911 | 7,215 | ||||
| Total revenue | $ | 13,566 | $ | 13,042 | $ | 40,763 | $ | 39,321 |
Revenue attributable to the United States comprised 38.7% and 40.6% of the total consolidated revenue for the three months ended June 30, 2024 and 2023, respectively. Revenue attributable to the United States comprised 40.3% and 41.9% of the total revenue for the nine months ended June 30, 2024 and 2023, respectively. No other country outside of the United States comprised more than 10% of revenue for the three and nine months ended June 30, 2024 and 2023. Revenue by location is determined by the billing address of the customer.
Revenue from professional services recognized at a point in time amounted to $0.1 million for both the three months ended June 30, 2024, and 2023. Revenue from professional services recognized over time amounted to $1.1 million and $1.4 million for the three months ended June 30, 2024 and 2023, respectively. Revenue from professional services recognized at a point in time amounted to $0.5 million and $0.4 million and revenue from professional services recognized over time amounted to $3.4 million and $4.1 million for the nine months ended June 30, 2024 and 2023, respectively.
Remaining Performance Obligations
Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered as of the end of the reporting period. Remaining performance obligations estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, adjustments for revenue that have not materialized and adjustments for currency. As of June 30, 2024, approximately $62.9 million of revenue is expected to be recognized from remaining performance obligations. The Company expects to recognize revenue on approximately 47.4% of these remaining performance obligations over the next 12 months. The Company's subscription contracts are recognized ratably over the contract term. Accordingly, the majority of the Company's noncurrent remaining performance obligation is expected to be recognized in the next 13 to 36 months with the remainder recognized thereafter.
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Note 4. Warrants
Warrant information in the below table is presented as of June 30, 2024 and September 30, 2023.
|
Warrants Outstanding
|
Fair Value of Warrant Liabilities
|
||||||||
| Warrants |
Number of warrants issued |
Purchase price per share |
June 30, 2024 | September 30, 2023 | June 30, 2024 | September 30, 2023 | |||
| (in thousands) | |||||||||
| Kreos Rollover Warrant | 190,559 | € | 2.28 | 190,559 | 190,559 | $ | 1 | $ | 1 |
| Series C - 2017 | 1,215,345 | € | 0.04 | - | - | - | - | ||
| Series C - 2020 | 786,234 | € | 5.22 | - | - | - | - | ||
| Public Warrants | 8,850,458 | $ | 11.50 | 8,850,458 | 8,850,458 | 1,306 | 709 | ||
| Private Warrants | 7,310,297 | $ | 11.50 | 7,310,297 | 7,310,297 | 1,095 | 585 | ||
| 18,352,893 | 16,351,314 | 16,351,314 | $ | 2,402 | $ | 1,295 |
The following table presents the change in the fair value of warrant liabilities for the nine months ended June 30, 2024:
| Fair Value of Warrant Liabilities | ||
| (in thousands) | ||
| September 30, 2023 | $ | 1,295 |
| Change in fair value | (639) | |
| Foreign currency translation | (10) | |
| December 31, 2023 | 646 | |
| Change in fair value | 809 | |
| Foreign currency translation | (15) | |
| March 31, 2024 | 1,440 | |
| Change in fair value | 976 | |
| Foreign currency translation | (14) | |
| June 30, 2024 | $ | 2,402 |
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The following table presents the change in the fair value of warrant liabilities for the nine months ended June 30, 2023:
| Fair Value of Warrant Liabilities | ||
| (in thousands) | ||
| September 30, 2022 | $ | 1,749 |
| Change in fair value | (1,731) | |
| Warrants assumed in the Business Combination | 7,111 | |
| Settlement of 2017 Series C Warrants put option | (427) | |
| Exercised | (649) | |
| Foreign currency translation | 182 | |
| December 31, 2022 | 6,235 | |
| Change in fair value | (2,297) | |
| Foreign currency translation | (19) | |
| March 31, 2023 | 3,919 | |
| Change in fair value | (1,807) | |
| Foreign currency translation | (6) | |
| June 30, 2023 | $ | 2,106 |
Fair values of the Public and Private Warrants were determined using publicly traded warrant prices at the end of each period. Fair values of the remaining warrants and option rights were determined using the Black-Scholes option-pricing model with the following input assumptions:
| Nine Months Ended June 30, | ||
| 2024 | 2023 | |
| Expected volatility range (weighted average) | 44.07% | 44.07% |
| Dividend yield | 0.00% | 0.00% |
| Risk-free interest rates range (weighted average) | 4.89% | 4.51% |
| Expected term range (weighted average) | 2.63 years | 2.88 years |
Assumptions were weighted by the relative fair value of the instruments. An increase in the expected volatility, risk-free interest rates, and expected term would result in an increase to the estimated value of the warrants while an increase in the dividend yield would result in a decrease to the estimated value of the warrants.
Note 5. Stock-Based Compensation
Legacy MariaDB Stock Option Plans
During the nine months ended June 30, 2023, 65,098 options were granted under the Global Share Option Plan 2017 ("2017 Plan"). No options were granted under the 2017 Plan during the nine months ended June 30, 2024.
No options were granted under the Global Share Option Plan 2017 USA ("2017 US Plan") during the nine months ended June 30, 2024 and 2023.
During the nine months ended June 30, 2023, 58,182 options were granted under the Summer 2022 USA Share Option Plan ("2022 US Plan"). No options were granted under the 2022 US Plan during the nine months ended June 30, 2024.
MariaDB plc 2022 Equity Incentive Plan
During the nine months ended June 30, 2023, 4,976,681 RSUs and 800,000 options were granted under the MariaDB plc 2022 Equity Incentive Plan ("2022 Equity Plan"). During the nine months ended June 30, 2024, 232,900 RSUs were granted under the 2022 Equity Plan. No options were granted under the 2022 Equity Plan during the nine months ended June 30, 2024.
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Stock Options
The following table summarizes stock option activity under the Company's incentive plans for the nine months ended June 30, 2024:
|
Number of Shares |
Weighted Average Exercise Price Per Share |
Weighted- Average Remaining Contractual Life |
Aggregated Intrinsic Value |
|||
| (in years) | (in thousands) | |||||
| Options outstanding, September 30, 2023 | 7,921,300 | $ | 1.28 | |||
| Granted | - | $ | - | |||
| Exercised | (1,084,814) | $ | 0.43 | |||
| Forfeited | (3,196,780) | $ | 1.82 | |||
| Expired | (608,896) | $ | 0.76 | |||
| Options outstanding, June 30, 2024 | 3,030,810 | $ | 1.13 | 6.78 | $ | 180 |
| Options Exercisable, June 30, 2024 | 2,727,669 | $ | 0.90 | 6.69 | $ | 180 |
| Vested and expected to vest after June 30, 2024 | 3,030,810 | $ | 1.13 | 6.78 | $ | 180 |
The total intrinsic value of options exercised during the nine months ended June 30, 2024 was $0.5 million. The aggregate grant date fair value of stock options vested during the nine months ended June 30, 2024 was approximately $0.4 million. As of June 30, 2024, there was approximately $0.1 million of unrecognized stock-based compensation expense related to outstanding stock options granted to employees that is expected to be recognized in the fourth quarter of fiscal year 2024.
Fair Value Valuation Assumptions
The fair value of options granted is estimated at the date of grant using the Black-Scholes option-pricing model with the following input assumptions:
| Nine Months Ended June 30, | ||||
| 2024 | 2023 | |||
|
Range1
|
Weighted Average1
|
Range |
Weighted Average |
|
| Dividend yield (%) |
0% - 0%
|
-% |
0% - 0%
|
0% |
| Expected volatility (%) |
0.00% - 0.00%
|
-% |
43.41% - 47.26%
|
44.86% |
| Risk-free interest rate (%) |
0.00% - 0.00%
|
-% |
3.33% - 3.80%
|
3.39% |
| Expected life of stock options (years) |
0 - 0
|
- |
5.00 - 7.00
|
5.87 |
| Fair value of common stock |
$0.00 - $0.00
|
$- |
$0.72 - $0.72
|
$0.72 |
1 No options were granted during the nine months ended June 30, 2024.
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Restricted Stock Units
The RSUs vest over a four-year period, subject to the holder's continued service through the vesting dates. The following table summarizes RSU activity under the 2022 Equity Incentive Plan for the nine months ended June 30, 2024:
| Number of RSUs | Weighted Average Grant Date Fair Value Per Share | ||
| Unvested outstanding, September 30, 2023 | 4,602,830 | $ | 0.91 |
| Granted | 232,900 | $ | 0.17 |
| Vested | (268,968) | $ | 1.00 |
| Forfeited/canceled | (1,475,739) | $ | 0.84 |
| Unvested outstanding, June 30, 2024 | 3,091,023 | $ | 0.88 |
As of June 30, 2024, there was $1.2 million of unrecognized stock-based compensation expense relating to outstanding RSUs granted to employees, directors, and executives that is expected to be recognized in the fourth quarter of fiscal year 2024.
Total stock-based compensation expense recognized in the Company's Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss is as follows for the periods indicated:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| (in thousands) | (in thousands) | |||||||
| Cost of revenue | $ | 14 | $ | 87 | $ | 111 | $ | 186 |
| Research and development | (94) | 156 | (382) | 535 | ||||
| Sales and marketing | 111 | 75 | 336 | 217 | ||||
| General and administrative | 265 | 406 | 414 | 643 | ||||
| Total stock-based compensation expense | $ | 296 | $ | 724 | $ | 479 | $ | 1,581 |
Note 6. Accrued Expenses
The following represents the components of accrued expenses contained within our Unaudited Condensed Consolidated Balance Sheets as of the end of each period:
| June 30, 2024 | September 30, 2023 | |||
| (in thousands) | ||||
| Accrued payroll and payroll related liabilities | $ | 1,692 | $ | 3,577 |
| Accrued bonuses | 782 | 780 | ||
| Accrued restructuring and other charges | 52 | - | ||
| Taxes payable | 500 | 494 | ||
| Accrued interest expense | 1,094 | - | ||
| Loss related to non-cancelable purchase commitment | 2,600 | - | ||
| Other accrued expenses | 1,868 | 1,599 | ||
| Total accrued expenses | $ | 8,588 | $ | 6,450 |
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Note 7. Commitments and Contingencies
The Company is subject to claims, legal proceedings, governmental actions, and assessments from time to time in the ordinary course of business, including without limitation, actions with respect to intellectual property, employment, regulatory, product liability and contractual matters. In connection with these matters, the Company regularly assesses the probability and amount (or range) of possible issues based on the developments in these matters and more generally the significance of these matters to the Company. A liability is recorded in the accompanying Unaudited Condensed Consolidated Financial Statements if it is determined that it is probable that a loss has been incurred and the amount (or range) of the loss can be reasonably estimated. The Company's management currently does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company's business, financial condition, results of operations or cash flows; provided, however, if any such matters individually or in the aggregate are decided adversely to the Company, then such matters may have a material adverse effect.
In January 2023, MariaDB received a demand letter on behalf of Houlihan Lokey Capital, Inc. ("Houlihan Lokey"), a financial services company that advised Legacy MariaDB in connection with a financing transaction which closed in January 2022, for which that financial services company had provided advisory services and for which MariaDB paid its fee. The demand is for an additional fee based on a de-SPAC transaction which closed in December 2022. On July 11, 2023, Houlihan Lokey filed a lawsuit against the Company in the Supreme Court of the State of New York asserting claims against the Company for breach of contract and unjust enrichment and demand judgment against the Company in an unspecified amount exceeding $6.3 million, plus interest. The Company has answered the complaint and fact and expert discovery have been completed. A note of issue was filed on April 25, 2024, with an updated demand amount of $7.7 million, inclusive of interest. On May 17, 2024, Houlihan Lokey moved for summary judgment on its claim, which is pending before the court. At the current stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of this matter. As of June 30, 2024, the Company accrued $1.0 million in other accrued expenses related to a settlement offer the Company made in this matter.
In February 2023, a second financial services company sent MariaDB an additional invoice for approximately $1.3 million under the same circumstances as described in the matter above. MariaDB denies that it owes any additional fees, and no legal proceedings have been filed by the second financial services company in connection with this fee claim. However, it appears that the updated claim amount asserted by Houlihan Lokey of $7.7 million, discussed above, includes the fee which would be due to the second financial services company. MariaDB intends to defend any legal proceedings that may be filed by the second financial services company.
Note 8. Debt
The components of debt are as follows:
| June 30, 2024 | September 30, 2023 | |||
| (in thousands) | ||||
| RP note | $ | 26,333 | $ | - |
| Term loan | - | 15,855 | ||
| Total | 26,333 | 15,855 | ||
| Less: Current portion | (26,333) | (15,855) | ||
| Long-term debt | $ | - | $ | - |
Loan facility agreement with RP Ventures LLC (Purchased by Meridian Topco LLC)
On October 10, 2023, the Company issued a senior secured promissory note, dated as of October 10, 2023 and amended on January 10, 2024, to RP Ventures in the principal amount of $26.5 million. RP Ventures acted as the initial Agent as defined in the RP Note (in such capacity, the "Agent"). On April 24, 2024, Meridian Topco LLC ("Meridian"), an affiliate of K1 Investment Management, LLC, a Delaware limited liability company ("K1"), purchased from RP Ventures, at a premium, all right, title and interest in, to and under the RP Note (the "RP Note Acquisition"). Further, Meridian Topco LLC became the Successor Agent (as defined in the note).
The proceeds of the RP Note were used by the Company to repay all amounts outstanding under the term loan (the "Term Loan") from European Investment Bank ("EIB"), to pay RP Ventures a nonrefundable funding fee of $132,500, to pay or
18
reimburse RP Ventures and Runa Capital Fund II, L.P. ("Runa") for its out-of-pocket expenses related to the RP Note transaction, and to pay for working capital purposes as approved by the Company's board of directors.
Interest on the RP Note accrued on the principal amount at the rate of ten percent (10%) per annum and was payable commencing on January 1, 2024 and quarterly thereafter in arrears on the first business day of each calendar quarter and on the maturity date, whichever was earlier.
While the RP Note remains outstanding, the note restricts the Company from pursuing or accepting any offer with respect to any recapitalization, reorganization, merger, business combination, purchase, sale, loan, notes issuance, issuance of other indebtedness or other financing or similar transaction, or to any acquisition by any person or group, which would result in any person or group becoming the beneficial owner of 2% or more of any class of equity interests or voting power or consolidated net income, revenue or assets, of the Company, in each case other than with the note holder.
The RP Note contains certain customary representations and warranties and covenants of the Company. In addition, the Company has agreed to, among other things, provide to the note holder certain financial information, maintain minimum aggregate liquidity in an amount to be agreed upon after the Closing Date by the Board and the Agent or Successor Agent, and make disbursements and collect receivables based on budget amounts.
The RP Note limits the ability of the Company to, among other things, (i) incur indebtedness, (ii) create certain liens, (iii) declare or distribute dividends or make certain other restricted payments, (iv) be party to a merger, consolidation, division or other fundamental change, (v) transfer, sell or lease Company assets, (vi) make certain modifications to the Company's organizational documents or indebtedness, (vii) engage in certain transactions with affiliates, (viii) change the Company's business, accounting or reporting practices, name or jurisdiction or organization, (ix) establish new bank accounts, and (x) establish or acquire any subsidiary. In addition, without the Agent or Successor Agent's prior consent, the Company will be restricted in, among other things, taking part in transactions outside of the ordinary course of its existing business, making certain payments, or issuing equity interests.
The RP Note provides for customary events of default, including for, among other things, payment defaults, breach of representations and certain covenants, cross defaults, insolvency, dissolution and bankruptcy, certain judgments against the Company, and material adverse changes. In the case of an event of default, the note holder may demand immediate repayment by the Company of all or part of the amounts outstanding, if any, under the RP Note.
In connection with issuance of the RP Note, the Company and MariaDB USA. Inc. and certain other of the Company's subsidiaries (the "Guarantors") entered into a Guarantee and Collateral Agreement, pursuant to which the Company and each Guarantor pledged substantially all of their respective assets as collateral for the RP Note and each Guarantor guaranteed to the note holder the payment of all obligations arising from the RP Note.
The RP Note was initially due on the earlier of (i) January 10, 2024, (ii) the occurrence of a "change of control" (as that term is defined in the RP Note), (iii) the occurrence of any breach of any of the documentation relating to the Company's Term Loan or any demand for repayment of the Term Loan, and (iv) the date on which the RP Note is otherwise declared due and payable pursuant to its terms. On January 10, 2024, MariaDB entered into an amendment (the "First Amendment") of the RP Note. The First Amendment, among and between the Company, RP Ventures, and other note parties to the RP Note, extended (i) the maturity date of the RP Note from January 10, 2024 to January 31, 2024, providing time for the Company to continue to work with parties related to the note holder on a recapitalization structure and (ii) the exclusivity period under the RP Note from January 10, 2024 to January 31, 2024. The Company paid RP Ventures a nonrefundable funding fee of $75,000 relating to the First Amendment.
On January 31, 2024, the RP Note matured. The Company did not pay the outstanding principal, interest, and other applicable fees or charges due and payable on the RP Note. In addition, the Company and the Guarantors under the RP Note failed to comply with certain other obligations under the RP Note. This nonpayment and compliance failure gave rise to events of default under the RP Note. On February 5, 2024, to allow for further negotiations with respect to a transaction to restructure all or any material part of the obligations under the RP Note and any amendment or extension of the RP Note (the "RPV Transaction"), the Company and the Guarantors entered into the Forbearance Agreement with RP Ventures. Pursuant to the Forbearance Agreement, RP Ventures agreed not to exercise its rights and remedies in relation to the defaults under the RP Note identified in the Forbearance Agreement until February 21, 2024, subject to certain limitations and conditions. In addition, the Company agreed to pay RP Ventures a forbearance fee of $100,000 and to reimburse all reasonable and documented fees and out-of-pocket expenses of RP Ventures and any of its directors, officers, employees or agents, including its counsel, consultant and any other advisors, in connection with the Forbearance Agreement, the RP
19
Note, the Guarantee and Collateral Agreement and other related RP Note documents. Under the terms of the Forbearance Agreement, interest on amounts due under the RP Note accrues at the default rate of 2% above the otherwise-applicable non-default interest rate of 10%.
During the three month period ended June 30, 2024, the Company made no principal or interest payments to the note holder. During the nine month period ended June 30, 2024, the Company paid the note holder approximately $2.0 million which included approximately $0.9 million related to principal and approximately $1.1 million of interest. During the three and nine month periods ended June 30, 2024, the Company reborrowed $0.8 million from RP Ventures in accordance with the terms and conditions of the RP Note.
During the three months ended June 30, 2024, the Company incurred cash interest expense of $0.8 million and no non-cash interest expense (amortization of debt issuance cost) on the RP Note.
During the nine months ended June 30, 2024, the Company incurred cash interest expense of $2.2 million and non-cash interest expense (amortization of debt issuance cost) of $3.1 million on the RP Note.
The Company was not in compliance with the covenants of the RP Note as of June 30, 2024.
Loan facility agreement with European Investment Bank
The Term Loan was disbursed on October 11, 2019 and had a maturity date of October 11, 2023, at which time it was fully repaid. The Term Loan accrued interest between 6.0%-9.5% per annum, depending on MariaDB's monthly recurring revenue. The effective interest rate on the Term Loan for the period the Term Loan was outstanding during the quarter ended December 31, 2023 and for the three and nine months ended June 30, 2023 was 6.0%. As of September 30, 2023, the Company was in compliance with its debt covenants for the Term Loan.
The schedule of required principal payments remaining on debt outstanding as of June 30, 2024 is as follows:
| Principal Payments | ||
|
(in thousands)
|
||
| 2024 | $ | 26,333 |
| Total principal payments | $ | 26,333 |
Note 9. Income Taxes
The Company maintains a full valuation allowance against its net deferred tax assets as of June 30, 2024 and September 30, 2023, based on the current assessment that it is not more likely than not these future benefits will be realized before expiration. No material income tax expense or benefit has been recorded given the valuation allowance position and projected taxable losses in the jurisdictions where the Company files income tax returns. The Company has not experienced any significant increases or decreases to its unrecognized tax benefits since September 30, 2023 and does not expect any within the next 12 months.
Note 10. Related-Party Transactions
Sales to and purchases from related parties are made on terms equivalent to those that prevail in arm's length transactions. The Company had related party sales of $0.6 million to a related party shareholder for both the nine months ended June 30, 2024 and 2023. The Company had no accounts receivable from related parties as of both periods ended June 30, 2024 and September 30, 2023.
The Company incurred related party expenses of $0.4 million related to compensation of FTI Consulting, Inc. for Chief Restructuring Officer services and $0.9 million of expenses related to the MariaDB Foundation and other expenses incurred in the ordinary course of business for the nine month period ended June 30, 2024. The Company incurred expenses of $0.3 million related to the MariaDB Foundation and other expenses incurred in the ordinary course of business for the nine month period ended June 30, 2023. The Company had $0.4 million and $0.1 million of accounts payable to FTI Consulting, Inc. and other related parties, respectively, as of June 30, 2024. The Company had no accounts payable to related parties as of September 30, 2023.
20
Outstanding balances are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party trade receivables or payables.
RP Note, First Amendment, Forbearance Agreement, RP Note Acquisition, and Tender Offer
On October 10, 2023, the Company issued the RP Note to RP Ventures, which had an initial maturity date of January 10, 24. On January 10, 2024, the RP Note maturity date was extended to January 31, 2024 pursuant to the First Amendment. On January 31, 2024, the RP Note matured. The Company did not pay the outstanding principal, interest, and other applicable fees or charges due and payable on the RP Note. In addition, the Company and the Guarantors under the RP Note failed to comply with certain other obligations under the RP Note. This nonpayment and compliance failure gave rise to events of default under the RP Note. On February 5, 2024, RP Ventures agreed not to exercise its rights and remedies in relation to the defaults under the RP Note identified in the Forbearance Agreement until February 21, 2024. See Note 8, Debt for additional information and terms of the RP Note, First Amendment, and the Forbearance Agreement.
Pursuant to Board appointment rights granted under the RP Note, RP Ventures appointed two directors, Michael Fanfant and Yakov Zubarev, to the Board on October 10, 2023. Mr. Fanfant and Mr. Zubarev have relationships with RP Ventures or certain Company shareholders and their affiliates. Mr. Fanfant is a shareholder of Runa Capital II (GP), the general partner of Runa Capital Fund II, L.P., and Runa Capital Opportunity I (GP), the general partner of Runa Capital Opportunity Fund I, L.P. and the managing shareholder of Runa Ventures I Limited, which collectively beneficially own more than 5% of the Company's outstanding ordinary shares. Mr. Fanfant has also served as sole member and manager of RP Ventures since June 9, 2023. Mr. Zubarev is the brother of Ilya Zubarev, who is a shareholder in Runa Capital II (GP) and Runa Capital Opportunity I (GP), and one of four members of the investment committee of each of these entities that makes all investment and voting decisions relating to the Company's ordinary shares held by Runa, Runa Capital Opportunity Fund I, L.P. and Runa Ventures I Limited.
On April 24, 2024, Meridian, an affiliate of K1, purchased from RP Ventures, at a premium, all right, title and interest in, to and under the RP Note. Also, on April 24, 2024, Meridian BidCo LLC ("Bidco"), an affiliate of K1, made an unsolicited offer (the "Offer") to purchase all of the issued and to be issued Ordinary Shares of the Company.
Effective immediately following the closing of the RP Note Acquisition, Michael Fanfant and Yakov Zubarev resigned as directors of the Company. Further, K1 appointed two directors, George Mansour and Jordan Wappler, to the Board on April 24, 2024. Mr. Mansour is a Partner at K1 and Mr. Wappler is Senior Vice President and Head of Legal at K1.
During the three month period ended June 30, 2024, the Company made no principal or interest payments to the note holder. During the nine month period ended June 30, 2024, the Company paid RP Ventures approximately $2.0 million, which included approximately $0.9 million related to principal and approximately $1.1 million of interest.
Note 11. Net Loss Per Share
The following potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because the impact of including them would have been anti-dilutive:
| Three and Nine Months Ended June 30, | ||
| 2024 | 2023 | |
| Warrants | 16,351,314 | 16,351,314 |
| Stock options | 3,030,810 | 8,087,207 |
| Restricted stock units | 3,091,023 | 4,762,595 |
| Total | 22,473,147 | 29,201,116 |
Warrant, stock option and share information is presented in the table above and its accompanying paragraphs as of June 30, 2024 and 2023, as applicable.
21
Note 12. Accumulated Other Comprehensive Loss
The following summarizes accumulated other comprehensive loss for the nine months ended June 30, 2024 and 2023:
|
Foreign Currency Translation |
Net Unrealized Gain (Loss) on Securities |
Accumulated Other Comprehensive Income (Loss) |
||||
| Balance at September 30, 2022 | $ | (11,482) | $ | 2,177 | $ | (9,305) |
| Other comprehensive income before reclassifications | 1,887 | - | 1,887 | |||
| Amounts reclassified from accumulated other comprehensive net loss | - | (2,177) | (2,177) | |||
| Net current period other comprehensive income (loss) | 1,887 | (2,177) | (290) | |||
| Balance at December 31, 2022 | (9,595) | - | (9,595) | |||
| Other comprehensive loss | (1,220) | - | (1,220) | |||
| Net current period other comprehensive loss | (1,220) | - | (1,220) | |||
| Balance at March 31, 2023 | (10,815) | - | (10,815) | |||
| Other comprehensive loss | (91) | - | (91) | |||
| Net current period other comprehensive loss | (91) | - | (91) | |||
| Balance at June 30, 2023 | $ | (10,906) | $ | - | $ | (10,906) |
| Balance at September 30, 2023 | $ | (10,120) | $ | - | $ | (10,120) |
| Other comprehensive loss | (145) | - | (145) | |||
| Net current period other comprehensive loss | (145) | - | (145) | |||
| Balance at December 31, 2023 | (10,265) | - | (10,265) | |||
| Other comprehensive loss | (174) | - | (174) | |||
| Net current period other comprehensive loss | (174) | - | (174) | |||
| Balance at March 31, 2024 | (10,439) | - | (10,439) | |||
| Other comprehensive loss | (45) | - | (45) | |||
| Net current period other comprehensive loss | (45) | - | (45) | |||
| Balance at June 30, 2024 | $ | (10,484) | $ | - | $ | (10,484) |
Note 13. Restructuring and other charges
On October 12, 2023, the Company announced its plan to better align its workforce with the needs of its business and to reduce the Company's operating costs. The plan included a reduction of the Company's workforce by approximately 84 individuals. During the three months ended March 31, 2024, the Company recorded an additional restructuring charge of approximately $0.5 million related to a reduction of the workforce of approximately 12 individuals. The total restructuring charge for the nine months ended June 30, 2024 was approximately $3.3 million, which was related primarily to headcount. The Company's restructuring was substantially completed in the third quarter of fiscal 2024.
The following table presents the changes in accrued restructuring and other charges for the nine months ended June 30, 2024:
| June 30, 2024 | ||
| (in thousands) | ||
| Balance, beginning of period | $ | - |
| Net charges | 3,268 | |
| Cash payments | (3,216) | |
| Balance, end of period | $ | 52 |
22
Note 14. Divestitures
SkySQL
On November 17, 2023, the Company entered into an Asset Purchase Agreement ("APA") by and among MariaDB plc, MariaDB USA, Inc. and SkyDB, Inc. ("Sky"), completing the divestiture of the SkySQL business. Under the terms of the APA, Sky purchased all of the intellectual property, technology, operational contracts and other assets related to the SkySQL business in exchange for: (a) a to-be issued minority equity interest of ten (10%) percent of the common equity of Sky upon a third-party financing of Sky; and (b) the release and extinguishment of severance obligations for certain former Company employees who chose to become employees of Sky. All parties to the APA are subject to non-competition and non-solicitation covenants for twelve months following the effective date of the APA. Under the revenue sharing and customer transition provisions of the APA, the Company is entitled to 30% of the net revenues of any assigned customer agreement.
The Company will have no seat on the Board of Directors or any significant influence over Sky's' financial or operational decisions. The minority interest in Sky is considered immaterial to the financial statements.
The net book value of the assets related to the Sky business were all previously written off as a result of the annual goodwill impairment analysis as of September 30, 2023. In the three month period ended December 31, 2023, the Company reported a gain on the divestiture of the business of approximately $0.9 million related to the release and extinguishment of severance obligations for certain former Company employees who chose to become employees of Sky.
The divestiture did not represent a strategic shift; therefore the operating results of SkySQL did not qualify for reporting as discontinued operations.
CubeWerx
On December 30, 2023, the Company agreed to sell, assign and transfer all of the purchased contracts, intellectual property and servers/hardware of its Canadian subsidiary for a nominal amount of consideration.
As part of the divestiture, the Company is legally obligated to provide the buyer with a loan of approximately $0.6 million. The loan is interest bearing and matures in July 2029.
The Company is also required to subscribe to 10% ownership of the buyer's newly formed company. The investment will be considered immaterial to the Company's financial statements. The Company will have no seat on the Board of Directors or any significant influence over its financial or operational decisions.
The assets of the divested business were all previously written off as a result of the annual goodwill impairment analysis as of September 30, 2023. No gain or loss was reported on the sale of the company. The divestiture did not represent a strategic shift; therefore the operating results of the divested company did not qualify as discontinued operations.
Note 15. Subsequent Events
Tender Offer - Expiration and Acceptance
On April 24, 2024, Meridian BidCo LLC ("Bidco"), an affiliate of K1, made an unsolicited offer (the "Offer") to purchase all of the issued and to be issued Ordinary Shares of the Company. As of 5:00 p.m. (New York City time) on July 23, 2024 (the "Expiration Time"), all remaining conditions to the Offer were satisfied, fulfilled or, to the extent permitted, waived. Accordingly, Bidco announced that the Offer became unconditional in all respects and was now closed to further acceptances with effect from the Expiration Time.
For acceptances that had been received which were valid and complete in all respects and not properly withdrawn prior to the Expiration Time, the cash consideration payable was settled in accordance with the terms of the Offer on July 25, 2024.
Bidco now intends to apply the provisions of Sections 456 to 460 of the Companies Act 2014 to acquire compulsorily, on the same terms as the Offer, any outstanding Ordinary Shares not acquired or agreed to be acquired pursuant to the Offer. On July 26, 2024, Bidco sent compulsory acquisition notices (the "Notices") to those Company shareholders who did not accept the Offer (the "Non-Assenting Shareholders"). Following the expiration of 30 calendar days from the date of the Notices, which is expected to be August 25, 2024, unless a Non-Assenting Shareholder has applied to the Irish High Court and the Irish High Court orders otherwise, the Ordinary Shares held by Non-Assenting Shareholders will be acquired compulsorily by Bidco (without any action on the part of such shareholders) on the same terms as the Offer, on or about August 26, 2024.
23
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated or the context otherwise requires, references in this section to "MariaDB", the "Company", "we", "us" or "our" refer to MariaDB Corporation Ab and its consolidated subsidiaries prior to the closing of the Business Combination, and to MariaDB plc and its consolidated subsidiaries following the closing of the Business Combination.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q ("Unaudited Condensed Consolidated Financial Statements"), as well as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on December 29, 2023 and amended on January 29, 2024 ("2023 Annual Report"). Some of the information contained in this discussion and analysis, including information with respect to our planned investments in our research and development, sales and marketing, payment of our debt, and general and administrative functions, includes forward-looking statements that involve risks and uncertainties. You should review the sections "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" contained elsewhere in this quarterly report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual financial results and condition to differ materially from the results and condition described in or implied by the forward-looking statements contained in the following discussion and analysis. Additionally, our historical results and condition are not necessarily indicative of the financial results or condition that may be expected as of any other date or for any period in the future.
Overview
MariaDB is a database company whose products are used by companies big and small, reaching over a billion users through Linux distributions, downloaded over a billion times, and used across all types of use cases and industries. Built for all clouds (public, private and hybrid), our open source relational database delivers the flexibility and elasticity businesses need in today's world with the reliability and dependability necessary to power the most mission critical applications. Rooted in open source, MariaDB is open and transparent, working hand-in-hand with customers to solve their data storage and access challenges at a fraction of the cost of legacy databases.
We generate revenue primarily from two sources:
•Subscriptions: subscriptions to MariaDB Enterprise solutions are sold in conjunction with post-contract support, or PCS. Our subscription agreements for Maria DB Enterprise solutions typically have terms of one to three years. Our subscription agreements generally provide for future updates, upgrades, enhancements, and technical product support.
•Services: professional services consisting primarily of consulting, training, remote database administration, and enterprise architect services.
MariaDB database solutions are capable of supporting an organization's growth, scaling to millions of users and millions of transactions per second with ease. The commercial components of our enterprise database solutions are the MariaDB Enterprise Server, MariaDB MaxScale, and MariaDB Enterprise ColumnStore. These components, which can be installed by the customer on their specific hardware in a private data center or in a public cloud, are provided under a licensing framework that aims to protect our intellectual property and drive our software subscription model while still allowing for contributions to MariaDB open source code, which fosters a healthy, growing MariaDB ecosystem.
To support our database solutions and increase customer satisfaction and retention, we provide professional services to aid our customers in making their applications on the MariaDB platform successful. Our services revenue accounted for 8.6% and 11.5%, respectively, of our total revenue during the three months ended June 30, 2024 and 2023 and 9.5% and 11.4%, respectively, of our total revenue during the nine months ended June 30, 2024 and 2023. We continue to invest in our professional service offerings as part of our customer retention and expansion strategy.
Our database solutions are used globally by organizations of all sizes across a broad range of industries. We currently offer our products in the (1) Americas, (2) Europe, the Middle East, and Africa ("EMEA"), and (3) Asia-Pacific ("APAC"). Our revenue from those regions constituted 43%, 38%, and 19%, respectively, of our revenue for the three months ended June 30, 2024, and 43%, 37%, and 20%, respectively, of our revenue for the three months ended June 30, 2023. Revenue from those regions constituted 44%, 37%, and 19%, respectively, of our revenue for the nine months ended June 30, 2024, and 46%, 36%, and 18%, respectively, of our revenue for the nine months ended June 30, 2023. We believe international
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expansion represents a meaningful opportunity to generate further demand for our solutions in international markets. We plan to invest in our operations internationally to reach new customers by expanding in targeted key geographies where we believe there are opportunities for significant return on investment.
Key Factors Affecting Our Performance
Acquiring New Customers.We believe that there is significant opportunity to expand our customer base by continuing to make substantial investments in sales, marketing, and brand awareness. Our ability to attract new customers will depend on several factors, including our success in recruiting, training, retaining, and scaling our sales and marketing organization, as well as our ability to capitalize on the competitive dynamics of our target markets. While our database solutions are built for organizations of all sizes and industries, we intend to expand our direct sales force with a primary focus on increasing sales to large enterprises. Secondarily, sales force expansion will be necessary to cover a wider array of global markets that are currently underserved.
Expansion Within Our Existing Customer Base. We believe that there is also a significant opportunity to drive additional sales to existing customers, and we expect to invest in sales and marketing and customer success personnel and activities to achieve additional revenue growth from existing customers. Our customers may potentially expand their subscriptions to our database solutions as they migrate additional existing applications or build new applications, either within the same department or in other lines of business or geographies. Further, as customers modernize their information technology infrastructure and move to the cloud, they may migrate applications from legacy databases. Our goal is to increase the number of customers that standardize on our database within their organization.
Key Business Metrics
We monitor the key business metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The definition and calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, competitors, industry experts, securities analysts, and investors.
As of June 30, 2024 and 2023, our key business metrics were as follows:
| As of June 30, | ||
| ($ in thousands) | 2024 |
2023(1)
|
| Total Annual Recurring Revenue | $53,935 | $49,498 |
| Total Net Revenue Retention Rate | 100% | 106% |
| Customers | 688 | 656 |
Annual Recurring Revenue
We view ARR as an important indicator of our financial performance and operating results given the renewable nature of our business. ARR does not have a standardized meaning and is therefore unlikely to be comparable to similarly titled metrics presented by other companies. We define ARR as the annualized revenue for our subscription customers, excluding revenue from nonrecurring contract services (e.g., time and material consulting services). For our annual subscription customers, we calculate ARR as the annualized value of their subscription contracts as of the measurement date, assuming any contract that expires during the next 12 months is renewed on its existing terms (including contracts for which we are
25
negotiating a renewal). In the event that we are still negotiating a renewal with a customer after the expiration of their subscription, we continue to include that revenue in ARR for a maximum period of 30 days after the subscription end date. Our calculation of ARR is not adjusted for the impact of any known or projected events that may cause any such contract not to be renewed on its existing terms. Consequently, our ARR may fluctuate within each quarter and from quarter to quarter. This metric should be viewed independently of U.S. GAAP revenue and does not represent U.S. GAAP revenue on an annualized basis, as it is an operating metric that can be impacted by contract start and end dates and renewal rates. ARR is not intended to be a replacement for or forecast of revenue.
Net Revenue Retention Rate
We believe that net revenue retention rate is an important measure of the health of our business and our future growth prospects as it measures the growth in the use of our database by our existing subscription customers.
We calculate our dollar-based net retention rate as of a period end by starting with the ARR from the cohort of all subscription customers as of 12 months prior to such period end, or prior period value. We then calculate the ARR from this same customer cohort as of the current period end, or current period value, which includes any growth in the value of subscriptions and reflects the growth or contraction in customer attrition over the prior 12 months. We then divide the current period value by the prior period value to arrive at our dollar-based net retention rate. The dollar-based net retention rate includes the effect of our subscriptions that expand, renew, contract, or terminate, but excludes ARR from new customers in the current period. Our dollar-based net retention rate is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.
Customers
We believe the number of customers is an important indicator of the growth in our business and future revenue trends. We calculate our total number of customers at the end of each period, and we include in this calculation each customer account that has an active subscription contract with us or with which we are negotiating a renewal contract at the end of a given period. Each party with which we enter into a subscription contract is considered a unique customer and, in some cases, a single organization may be counted as more than one customer (i.e., when two or more business units of an enterprise customer each enter into subscription contracts). We exclude pay-as-you-go customers from our calculation. Our customer count is subject to adjustments for acquisitions, consolidations, spin-offs, and other market activity.
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Results of Operations
The following table sets forth our Unaudited Condensed Consolidated Statements of Operations for the periods indicated (amounts stated in thousands):
Overview for the Three and Nine Months Ended June 30, 2024 and 2023
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Revenue: | ||||||||
| Subscription | $ | 12,403 | $ | 11,539 | $ | 36,875 | $ | 34,837 |
| Services | 1,163 | 1,503 | 3,888 | 4,484 | ||||
| Total revenue | 13,566 | 13,042 | 40,763 | 39,321 | ||||
| Cost of revenue: | ||||||||
| Subscription | 1,291 | 1,822 | 4,466 | 4,957 | ||||
| Services | 1,260 | 1,866 | 3,681 | 5,315 | ||||
| Total cost of revenue | 2,551 | 3,688 | 8,147 | 10,272 | ||||
| Gross profit | 11,015 | 9,354 | 32,616 | 29,049 | ||||
| Operating expenses: | ||||||||
| Research and development | 5,729 | 8,668 | 14,931 | 27,415 | ||||
| Sales and marketing | 4,511 | 6,290 | 13,202 | 20,465 | ||||
| General and administrative | 8,494 | 6,631 | 17,029 | 18,850 | ||||
|
Restructuring and other charges
|
26 | - | 3,268 | - | ||||
| Gain on divestitures | - | - | (799) | - | ||||
| Total operating expenses | 18,760 | 21,589 | 47,631 | 66,730 | ||||
| Loss from operations | (7,745) | (12,235) | (15,015) | (37,681) | ||||
| Other (expense) income: | ||||||||
| Interest expense | (893) | (307) | (5,371) | (821) | ||||
| Change in fair value of warrant liabilities | (976) | 1,807 | (1,146) | 5,835 | ||||
| Other income (expense), net | 107 | 1,077 | (422) | (1,531) | ||||
| Loss before income taxes | (9,507) | (9,658) | (21,954) | (34,198) | ||||
| Income tax (expense) benefit | - | (11) | 160 | (17) | ||||
| Net loss | $ | (9,507) | $ | (9,669) | $ | (21,794) | $ | (34,215) |
Comparison of the Three and Nine Months Ended June 30, 2024 and 2023
Revenue
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||
|
(in thousands)
|
( in thousands)
|
|||||||||||||||
| Revenue | ||||||||||||||||
| Subscription | $ | 12,403 | $ | 11,539 | $ | 864 | 7.5 | % | $ | 36,875 | $ | 34,837 | $ | 2,038 | 5.9 | % |
| Services | 1,163 | 1,503 | (340) | (22.6) | % | 3,888 | 4,484 | (596) | (13.3) | % | ||||||
| Total revenue | $ | 13,566 | $ | 13,042 | $ | 524 | 4.0 | % | $ | 40,763 | $ | 39,321 | $ | 1,442 | 3.7 | % |
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Subscription revenue
Subscription revenue increased by $0.9 million, or 7.5%, and $2.0 million, or 5.9%, from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively. The increase in subscription revenues for the three and nine months ended June 30, 2024 was primarily caused by volume-driven increases from new business, which includes new customers and additional subscriptions from existing customers. Our customer base grew from 656 customers as of June 30, 2023 to 688 customers as of June 30, 2024.
Services revenue
Services revenue decreased by $0.3 million, or 22.6%, and $0.6 million, or 13.3%, from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively, primarily due to a decline in delivery of enterprise architect services and remote database administration services.
Cost of revenue, Gross profit and Gross margin
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||
|
( in thousands)
|
(in thousands)
|
|||||||||||||||
| Cost of revenue | ||||||||||||||||
| Subscription | $ | 1,291 | $ | 1,822 | $ | (531) | (29.1) | % | $ | 4,466 | $ | 4,957 | $ | (491) | (9.9) | % |
| Services | 1,260 | 1,866 | (606) | (32.5) | % | 3,681 | 5,315 | (1,634) | (30.7) | % | ||||||
| Total cost of revenue | $ | 2,551 | $ | 3,688 | $ | (1,137) | (30.8) | % | $ | 8,147 | $ | 10,272 | $ | (2,125) | (20.7) | % |
| Gross profit | $ | 11,015 | $ | 9,354 | $ | 1,661 | 17.8 | % | $ | 32,616 | $ | 29,049 | $ | 3,567 | 12.3 | % |
| Gross margin | 81.2 | % | 71.7 | % |
NA
|
NA
|
80.0 | % | 73.9 | % |
NA
|
NA
|
Cost of subscription revenue
Cost of subscription revenue decreased by $0.5 million, or 29.1%, and $0.5 million, or 9.9%, from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively. The decrease in cost of subscription revenues for the three and nine months ended June 30, 2024 was primarily caused by a decrease in costs related to third-party tools, a decrease in third-party hosting infrastructure costs, and a decrease in personnel-related costs as a result of headcount reduction related to restructuring activities during Q1 and Q2 2024 (discussed below).
Cost of services revenue
Cost of services revenue decreased by $0.6 million, or 32.5%, and $1.6 million, or 30.7%, from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively. The decrease in cost of services revenues for the three and nine months ended June 30, 2024 was primarily due to a decrease in personnel-related costs as a result of headcount reduction related to restructuring activities during Q1 and Q2, 2024 (discussed below) and a decrease in third-party hosting infrastructure costs.
Gross margin
Our overall gross margin increased 9.5% to 81.2% and 6.1% to 80.0% during the three and nine months ended June 30, 2024 compared to the same periods in fiscal year 2023, primarily due to growth in subscription revenue and personnel-related cost savings realized pursuant to our restructuring plan announced in Q1 and Q2, 2024.
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Operating expenses
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||
|
(in thousands)
|
(in thousands)
|
|||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | $ | 5,729 | $ | 8,668 | $ | (2,939) | (33.9) | % | $ | 14,931 | $ | 27,415 | $ | (12,484) | (45.5) | % |
| Sales and marketing | 4,511 | 6,290 | (1,779) | (28.3) | % | 13,202 | 20,465 | (7,263) | (35.5) | % | ||||||
| General and administrative | 8,494 | 6,631 | 1,863 | 28.1 | % | 17,029 | 18,850 | (1,821) | (9.7) | % | ||||||
|
Restructuring and other charges
|
26 | - | 26 | NM | 3,268 | - | 3,268 | NM | ||||||||
| Gain on divestitures | - | - | - | NM | (799) | - | (799) | NM | ||||||||
| Total operating expenses | $ | 18,760 | $ | 21,589 | $ | (2,829) | (13.1) | % | $ | 47,631 | $ | 66,730 | $ | (19,099) | (28.6) | % |
NM - Not meaningful.
Research and development
Research and development expense decreased by $2.9 million, or 33.9%, from $8.7 million for the three months ended June 30, 2023 to $5.7 million for the three months ended June 30, 2024. The decrease was primarily attributable to a $4.2 million decrease in personnel-related expenses as a result of headcount reduction related to restructuring activities (discussed below), a $0.3 million decrease in professional service fees, and a $0.2 million decrease in other expenses, such as software costs, partially offset by a $1.8 million increase in third-party hosting infrastructure costs primarily due to losses recorded in the current period related to non-cancelable purchase commitments.
Research and development expense decreased by $12.5 million, or 45.5%, from $27.4 million for the nine months ended June 30, 2023 to $14.9 million for the nine months ended June 30, 2024. The decrease was primarily attributable to a $11.5 million decrease in personnel-related expenses as a result of headcount reduction related to restructuring activities (discussed below), a $0.8 million decrease in professional service fees, and a $0.9 million decrease in other expenses, such as software costs and amortization of acquired intangible assets and depreciation, partially offset by a $0.7 million increase in third-party hosting and other infrastructure costs.
Sales and marketing
Sales and marketing expense decreased by $1.8 million, or 28.3%, from $6.3 million for the three months ended June 30, 2023 to $4.5 million for the three months ended June 30, 2024. The decrease was primarily attributable to a $1.2 million decrease in marketing expenses, a $0.2 million decrease in personnel-related expenses as a result of headcount reduction related to restructuring activities (discussed below), and a $0.4 million decrease in other expenses, such as professional fees and technology-related costs.
Sales and marketing expense decreased by $7.3 million, or 35.5%, from $20.5 million for the nine months ended June 30, 2023 to $13.2 million for the nine months ended June 30, 2024. The decrease was primarily attributable to a $3.2 million decrease in marketing expenses, a $3.1 million decrease in personnel-related expenses as a result of headcount reduction related to restructuring activities (discussed below), and a $1.0 million decrease in other expenses, such as travel-related costs, professional fees, and technology-related costs.
General and administrative
General and administrative expense increased by $1.9 million, or 28.1%, from $6.6 million for the three months ended June 30, 2023 to $8.5 million for the three months ended June 30, 2024. The increase was primarily attributable to a $4.0 million
29
charge in the current period of previously deferred legal fees and issuance costs related to the unsuccessful convertible preferred equity financing, partially offset by a $0.7 million decrease in personnel-related expenses, a $0.7 million decrease in professional fees, a $0.6 million decrease in legal expenses, and a $0.1 million decrease in other expenses, such as technology-related costs and bad debt expense.
General and administrative expense decreased by $1.8 million, or 9.7%, from $18.9 million for the nine months ended June 30, 2023 to $17.0 million for the nine months ended June 30, 2024. The decrease was primarily attributable to a $1.7 million decrease in professional service fees, a $1.3 million decrease in personnel-related expenses, a $1.3 million decrease in legal expense, a $0.9 million decrease in bad debt expense, and a $0.6 million decrease in other expenses, such as technology-related costs, partially offset by a $4.0 million charge in the current period of previously deferred legal fees and issuance costs related to the unsuccessful convertible preferred equity financing.
Restructuring and other charges
On October 12, 2023, the Company announced its plan to better align its workforce with the needs of its business and to reduce the Company's operating costs. The plan included a reduction of the Company's workforce by approximately 84 individuals. During the three months ended March 31, 2024, the Company recorded an additional restructuring charge of approximately $0.5 million related to a reduction of the workforce by approximately 12 individuals. The total restructuring charge for the nine months ended June 30, 2024 was approximately $3.3 million, which was related primarily to headcount. The Company's restructuring was substantially completed in the third quarter of fiscal 2024.
Gain on divestitures
During the nine months ended June 30, 2024, the Company recorded a gain on divestiture of approximately $0.8 million, respectively, primarily related to the Company's divestiture of its SkySQL and geospatial businesses. For additional information, Refer to Note 14, Divestitures to our Unaudited Condensed Consolidated Financial Statements.
Interest expense
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||||
|
( in thousands)
|
( in thousands)
|
|||||||||||||||
| Interest expense | $ | (893) | $ | (307) | $ | (586) | 190.9 | % | $ | (5,371) | $ | (821) | $ | (4,550) | 554.2 | % |
Interest expense increased by $0.6 million, or 190.9%, and $4.6 million, or 554.2%, from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively. The increase in interest expense for the three and nine months ended June 30, 2024 was primarily due to the increase in interest expense and amortization of debt issuance costs related to the issuance of a senior secured promissory note to RP Ventures LLC ("RP Ventures") in the principal amount of $26.5 million during the quarter ending December 31, 2023. For additional information, Refer to Note 8, Debt to our Unaudited Condensed Consolidated Financial Statements. Further, the Company started selling certain designated trade account receivables based on factoring arrangements with a well-established factoring company in the current period and as a result, the Company recognized factoring related interest expense of approximately $0.1 million. For additional information, Refer to Note 2, Summary of Significant Accounting Policies to our Unaudited Condensed Consolidated Financial Statements.
Change in fair value of warrant liabilities
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||
|
( in thousands)
|
(in thousands)
|
|||||||||||||
| Change in fair value of warrant liabilities | $ | (976) | $ | 1,807 | $ | (2,783) |
NM
|
$ | (1,146) | $ | 5,835 | $ | (6,981) |
NM
|
NM - Not meaningful.
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Our warrant liabilities are remeasured at the end of each quarter to reflect changes in the fair value of warrant liabilities.
The change in fair value of warrant liabilities reflected a $1.0 million loss for the three months ended June 30, 2024, compared to $1.8 million of gain for the three months ended June 30, 2023. During the quarter ended June 30, 2024, the Company recorded a $1.0 million loss related to the increase in fair value associated with the Public and Private Warrants primarily as a result of the increase in the Company's stock price from March 31, 2024 to June 30, 2024.
The change in fair value of warrant liabilities reflected a $1.1 million loss for the nine months ended June 30, 2024, compared to $5.8 million of gain for the nine months ended June 30, 2023. During the nine months ended June 30, 2024, the Company recorded a $1.1 million loss related to the increase in fair value associated with the Public and Private Warrants primarily as a result of the increase in the Company's stock price from September 30, 2023 to June 30, 2024.
For additional information, Refer to Note 4, Warrants to our Unaudited Condensed Consolidated Financial Statements.
Other income (expense), net
| For the Three Months Ended June 30, | Change | For the Nine Months Ended June 30, | Change | |||||||||||
| 2024 | 2023 | $ | % | 2024 | 2023 | $ | % | |||||||
|
(in thousands)
|
( in thousands)
|
|||||||||||||
| Other income (expense), net | $ | 107 | $ | 1,077 | $ | (970) |
NM
|
$ | (422) | $ | (1,531) | $ | 1,109 |
NM
|
NM - Not meaningful.
Other income (expense), net decreased by $1.0 million and increased by $1.1 million from the three and nine months ended June 30, 2023 to the three and nine months ended June 30, 2024, respectively, primarily due to currency exchange gains or losses related to transactions denominated in various foreign currencies.
Income taxes
The effective tax rate realized for each period was significantly below the statutory rate of 21%, as we incurred significant operating losses during each reporting period and did not recognize an income tax benefit associated with these losses because a full valuation allowance is maintained against our net deferred income tax assets in our primary taxable jurisdiction. Amounts reflected in income tax (expense) benefit generally represent various foreign income taxes. Based on the weight of negative evidence and our projections of future taxable income, we expect to maintain our valuation allowance for the foreseeable future.
Non-GAAP Financial Measures
To supplement our financial results which are prepared and presented in accordance with U.S. GAAP, we provide investors with non-GAAP financial measures including Adjusted EBITDA and Adjusted EBITDA Margin, as defined below. These measures are presented for supplemental informational purposes only, have limitations as analytical tools and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of these measures as tools for comparison. Because of these limitations, when evaluating our performance, you should consider each of these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable financial measure calculated in accordance with GAAP and our other GAAP results. A reconciliation of each of our non-GAAP financial measures to the most directly comparable financial measure calculated in accordance with GAAP is set forth below.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net loss before (1) interest expense, (2) income tax expense or benefit, (3) depreciation and amortization, (4) stock-based compensation, (5) change in fair value of warrant liabilities, (6) other income (expense), net, (7) net costs associated with discontinued products pursuant to the Company's October 2023 restructuring plan, (8) the current period charge of previously deferred legal fees and issuance costs related to the unsuccessful convertible preferred
31
equity financing, and any other one-time non-recurring transaction amounts impacting the statement of operations during the relevant period.We believe that Adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across periods. Our management uses Adjusted EBITDA to assess our operating performance and to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA, when considered together with our GAAP financial results, provides meaningful supplemental information regarding our operating performance by excluding certain items that may not be indicative of our business, results of operations or outlook, such as the impact of our capital structure (primarily interest charges) and asset base (primarily depreciation and amortization), items outside the control of the management team (taxes), expenses that do not relate to our core operations, and other non-cash items, including stock-based compensation, unrealized gains and losses related to foreign currency translation (included in other income (expense), net), and change in fair value of warrant liabilities. We consider Adjusted EBITDA to be an important measure because it helps illustrate underlying trends in our business and our historical operating performance on a more consistent basis.
Adjusted EBITDA Margin means Adjusted EBITDA as a percentage of revenue determined in accordance with GAAP. We calculate Adjusted EBITDA Margin by dividing Adjusted EBITDA by total GAAP revenue. We believe that Adjusted EBITDA Margin helps us to better understand MariaDB's normalized operating performance (excluding certain non-indicative items) in the context of GAAP revenue providing management with important supplemental information in understanding business efficiency and trends.
Our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may differ from how other companies, including companies in our industry, calculate these or similarly titled non-GAAP measures, which could reduce the usefulness of these measures as tools for comparison. Because of these limitations, when evaluating our performance, you should consider Adjusted EBITDA and Adjusted EBITDA Margin alongside other financial performance measures, including our net loss and other GAAP results.
| For the Three Months Ended June 30, | For the Nine Months Ended June 30, | |||||||
| ($ in thousands) | 2024 | 2023 | 2024 | 2023 | ||||
| Net Loss | $ | (9,507) | $ | (9,669) | $ | (21,794) | $ | (34,215) |
| Adjustments: | ||||||||
| Interest expense | 893 | 307 | 5,371 | 821 | ||||
| Income tax (expense) benefit | - | 11 | (160) | 17 | ||||
| Depreciation and amortization | 16 | 134 | 76 | 508 | ||||
| Stock-based compensation | 296 | 724 | 479 | 1,581 | ||||
| Change in fair value of warrant liabilities | 976 | (1,807) | 1,146 | (5,835) | ||||
| Other income (expense), net | (107) | (1,077) | 422 | 1,531 | ||||
| Restructuring and other charges | 26 | - | 3,268 | - | ||||
| Gain on divestitures | - | - | (799) | - | ||||
| Costs associated with discontinued products, net | 2,966 | - | 4,484 | - | ||||
| Charge of previously deferred legal fees and issuance costs | $ | 3,976 | $ | - | $ | 3,976 | $ | - |
| Adjusted EBITDA | $ | (465) | $ | (11,377) | $ | (3,531) | $ | (35,592) |
| Net Loss Margin | (70.1) | % | (74.1) | % | (53.5) | % | (87.0) | % |
| Adjusted EBITDA Margin | (3.4) | % | (87.2) | % | (8.7) | % | (90.5) | % |
Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital, capital expenditure needs, contractual obligations, and other commitments, with cash flows from operations and other sources of funding. Our primary short-term requirements for liquidity and capital relate mainly to employee compensation and benefits, funds for general working capital, and the repayment of the RP Note, together with accrued interest, that became due in January 2024. (Part of the net proceeds from the financing were used to repay our outstanding term loan from EIB (the "Term Loan"). Refer to discussion below under the heading "- Debt - Loan facility agreement
32
with European Investment Bank".) Our primary long-term liquidity needs are related to potential acquisitions, working capital needs and the evolution of our operating cash flows.
As of June 30, 2024, our primary sources of liquidity are from the collection of proceeds from the subscriptions of customers and cash generated from financing activities. On October 10, 2023, we entered into a senior secured debt financing transaction with RP Ventures pursuant to which we raised gross proceeds of $26.5 million. Net proceeds were $7.7 million after repayment of the Term Loan and payment of the debt issuance costs.
The Company incurred negative cash flow from operations of $10.6 million during the nine months ended June 30, 2024. As of June 30, 2024, we had an accumulated deficit of $271.2 million.
As of June 30, 2024, we had $1.1 million in cash and cash equivalents. We are currently seeking financing, as we do not believe our existing cash and cash equivalents, cash provided by sales of database subscriptions, and sales of our services will be sufficient to meet our projected operating requirements (including capital expenditures and the repayment of the remaining principal and related interest of the RP Note that was due in January 2024) over the next 12 months following the date on which the Unaudited Condensed Consolidated Financial Statements were issued (August 14, 2024), and may potentially not meet our short-term and long-term working capital needs. Our future capital requirements may depend on many factors, including our subscription revenue growth rate, subscription renewals, billing timing and frequency, the timing and extent of spending to support development, expansion of sales and marketing activities, increased costs associated with being a public company, the need for necessary technology investment, the operating and controls infrastructure to support our business and compliance, the introduction of new and enhanced database features and functionality, and the continued market adoption of our database solutions. We may in the future pursue acquisitions of businesses, technologies, assets and talent, which may also require additional capital.
If we are unable to raise additional capital or generate cash flows necessary to repay the RP Note or expand our operations and invest in new technologies or businesses, our business, competitive position, growth prospects, financial condition, and results of operations could be materially adversely affected. Refer to Note 1 to our unaudited Condensed Consolidated Financial Statements for additional information on this assessment.
Deferred Revenue
As of June 30, 2024, we had total deferred revenue of $43.9 million, of which $11.8 million was related to refundable customer deposits. As of June 30, 2024, the remaining performance obligations were $62.9 million, and we expect to recognize revenue on approximately 47.4% of these remaining performance obligations over the next 12 months. Our subscription contracts are recognized ratably over the contract terms; accordingly, the majority of our noncurrent remaining performance obligation is expected to be recognized in the next 13 to 36 months, with the remainder recognized thereafter.
Debt
Loan facility agreement with European Investment Bank
In October 2023, the Term Loan was repaid from the net proceeds of the RP Note.
Loan facility agreement with RP Ventures LLC (Purchased by Meridian Topco LLC)
On October 10, 2023, the Company issued a senior secured promissory note, dated as of October 10, 2023 and amended on January 10, 2024, to RP Ventures in the principal amount of $26.5 million. RP Ventures acted as the initial Agent as defined in the RP Note (in such capacity, the "Agent"). On April 24, 2024, Meridian Topco LLC ("Meridian"), an affiliate of K1 Investment Management, LLC, a Delaware limited liability company ("K1"), purchased from RP Ventures, at a premium, all right, title and interest in, to and under the RP Note (the "RP Note Acquisition"). Further, Meridian Topco LLC became the Successor Agent (as defined in the note).
The proceeds of the RP Note were used by the Company to repay all amounts outstanding under the Term Loan from EIB, to pay RP Ventures a nonrefundable funding fee of $132,500, to pay or reimburse RP Ventures and Runa Capital Fund II,
33
L.P. ("Runa") for its out-of-pocket expenses related to the RP Note transaction, and to pay for working capital purposes as approved by the Company's board of directors.
Interest on the RP Note accrued on the principal amount at the rate of ten percent (10%) per annum and was payable commencing on January 1, 2024 and quarterly thereafter in arrears on the first business day of each calendar quarter and on the maturity date, whichever was earlier.
While the RP Note remains outstanding, the note restricts the Company from pursuing or accepting any offer with respect to any recapitalization, reorganization, merger, business combination, purchase, sale, loan, notes issuance, issuance of other indebtedness or other financing or similar transaction, or to any acquisition by any person or group, which would result in any person or group becoming the beneficial owner of 2% or more of any class of equity interests or voting power or consolidated net income, revenue or assets, of the Company, in each case other than with the note holder.
The RP Note contains certain customary representations and warranties and covenants of the Company. In addition, the Company has agreed to, among other things, provide to the note holder certain financial information, maintain minimum aggregate liquidity in an amount to be agreed upon after the Closing Date by the Board and the Agent or Successor Agent, and make disbursements and collect receivables based on budget amounts.
The RP Note limits the ability of the Company to, among other things, (i) incur indebtedness, (ii) create certain liens, (iii) declare or distribute dividends or make certain other restricted payments, (iv) be party to a merger, consolidation, division or other fundamental change, (v) transfer, sell or lease Company assets, (vi) make certain modifications to the Company's organizational documents or indebtedness, (vii) engage in certain transactions with affiliates, (viii) change the Company's business, accounting or reporting practices, name or jurisdiction or organization, (ix) establish new bank accounts, and (x) establish or acquire any subsidiary. In addition, without the Agent or Successor Agent's prior consent, the Company will be restricted in, among other things, taking part in transactions outside of the ordinary course of its existing business, making certain payments, or issuing equity interests.
The RP Note provides for customary events of default, including for, among other things, payment defaults, breach of representations and certain covenants, cross defaults, insolvency, dissolution and bankruptcy, certain judgments against the Company, and material adverse changes. In the case of an event of default, the note holder may demand immediate repayment by the Company of all or part of the amounts outstanding, if any, under the RP Note.
In connection with issuance of the RP Note, the Company and MariaDB USA. Inc. and certain other of the Company's subsidiaries (the "Guarantors") entered into a Guarantee and Collateral Agreement, pursuant to which the Company and each Guarantor pledged substantially all of their respective assets as collateral for the RP Note and each Guarantor guaranteed to the note holder the payment of all obligations arising from the RP Note.
The RP Note was initially due on the earlier of (i) January 10, 2024, (ii) the occurrence of a "change of control" (as that term is defined in the RP Note), (iii) the occurrence of any breach of any of the documentation relating to the Company's Term Loan or any demand for repayment of the Term Loan, and (iv) the date on which the RP Note is otherwise declared due and payable pursuant to its terms. On January 10, 2024, MariaDB entered into an amendment (the "First Amendment") of the RP Note. The First Amendment, among and between the Company, RP Ventures, and other note parties to the RP Note, extended (i) the maturity date of the RP Note from January 10, 2024 to January 31, 2024, providing time for the Company to continue to work with parties related to the note holder on a recapitalization structure and (ii) the exclusivity period under the RP Note from January 10, 2024 to January 31, 2024. The Company paid RP Ventures a nonrefundable funding fee of $75,000 relating to the First Amendment.
On January 31, 2024, the RP Note matured. The Company did not pay the outstanding principal, interest, and other applicable fees or charges due and payable on the RP Note. In addition, the Company and the Guarantors under the RP Note failed to comply with certain other obligations under the RP Note. This nonpayment and compliance failure gave rise to events of default under the RP Note. On February 5, 2024, to allow for further negotiations with respect to a transaction to restructure all or any material part of the obligations under the RP Note and any amendment or extension of the RP Note (the "RPV Transaction"), the Company and the Guarantors entered into the Forbearance Agreement with RP Ventures. Pursuant to the Forbearance Agreement, RP Ventures agreed not to exercise its rights and remedies in relation to the defaults under the RP Note identified in the Forbearance Agreement until February 21, 2024, subject to certain limitations and conditions. In addition, the Company agreed to pay RP Ventures a forbearance fee of $100,000 and to reimburse all reasonable and documented fees and out-of-pocket expenses of RP Ventures and any of its directors, officers, employees or agents, including its counsel, consultant and any other advisors, in connection with the Forbearance Agreement, the RP
34
Note, the Guarantee and Collateral Agreement and other related RP Note documents. Under the terms of the Forbearance Agreement, interest on amounts due under the RP Note accrues at the default rate of 2% above the otherwise-applicable non-default interest rate of 10%.
During the three month period ended June 30, 2024, the Company made no principal or interest payments to the note holder. During the nine month period ended June 30, 2024, the Company paid the note holder approximately $2.0 million which included approximately $0.9 million related to principal and approximately $1.1 million of interest.
For additional information on the terms of the First Amendment and the Forbearance Agreement, refer to Note 8, Debt to our Unaudited Condensed Consolidated Financial Statements.
The Company is currently in the process of being acquired and is seeking financing to avoid any potential shortfall of cash and cash equivalents to fund operations, for at least 12 months from the date the financial statements were issued. However, such additional financings are subject to market conditions, and are not within the Company's control, and therefore cannot be deemed probable as adequate capital may not be available to the Company when needed or on acceptable terms. There is no assurance that the Company will be successful in raising additional funds.
Cash Flows
The following table presents a summary of our cash flows for the nine months ended June 30, 2024 and 2023:
| For the Nine Months Ended June 30, | ||||
| 2024 | 2023 | |||
| Net cash provided by (used in) |
( in thousands)
|
|||
| Operating activities | $ | (10,574) | $ | (26,763) |
| Investing activities | $ | - | $ | 25,886 |
| Financing activities | $ | 7,796 | $ | 8,078 |
Operating activities
Cash used in operating activities consists mainly of our net loss adjusted for certain non-cash items, including stock-based compensation, depreciation of property and equipment, changes in fair value of warrant liabilities, changes in allowance for doubtful accounts, non- cash interest expense, including expense associated with amortization of debt issuance costs, restructuring and other charges, gain on divestitures, non-cash operating lease costs, amortization of deferred commissions, net foreign exchange differences, and changes in operating assets and liabilities during the period.
For the nine months ended June 30, 2024, cash used in operating activities was $10.6 million, primarily consisting of our net loss of $21.8 million, adjusted for non-cash charges of $7.7 million and net cash inflows of $3.5 million related to changes in our operating assets and liabilities. Non-cash charges included $3.1 million of non-cash interest expense, including amortization of debt issuance costs, $1.4 million of amortization of deferred commissions, $1.1 million of change in fair value of warrant liability, $0.9 million of restructuring and other charges, $0.9 million of foreign currency loss, net, and $1.2 million of other normal recurring non-cash charges, offset by $0.9 million related to gain on divestitures. The main driver of the changes in operating assets and liabilities was a result of an increase in accounts payable and accrued expense and a decrease in accounts receivable, offset by a corresponding increases in other current assets and other noncurrent assets and a decrease in deferred revenue.
For the nine months ended June 30, 2023, cash used in operating activities was $26.8 million, primarily consisting of our net loss of $34.2 million, adjusted for non-cash income of $0.4 million and net cash inflows of $7.8 million related to changes in our operating assets and liabilities. Non-cash income included $1.4 million of unrealized foreign currency losses and $5.0 million of other normal recurring non-cash charges, offset by a change in the fair value of warrant liabilities of $5.8 million and non-cash investment income of $0.9 million. The main driver of the changes in operating assets and liabilities was a result of an increase in deferred revenue, offset by a corresponding increases in accounts receivable, other current assets, and other noncurrent assets, and a decrease in accounts payable and accrued expenses.
Investing activities
There was no cash provided (used by) investing activities for the nine months ended June 30, 2024.
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Cash provided by investing activities during the nine months ended June 30, 2023 was $25.9 million, resulting primarily from the sale of remaining short-term investments.
Financing activities
Cash provided by financing activities for the nine months ended June 30, 2024 totaled $7.8 million and primarily consisted of net proceeds received from RP Ventures of $24.7 million, partially offset by the repayment of the Term Loan of $16.0 million and repayments of the RP Note of $0.9 million.
Cash provided by financing activities for the nine months ended June 30, 2023 totaled $8.1 million and consisted of proceeds received from the Business Combination of $10.5 million, proceeds received from the exercise of warrants of $2.9 million, and proceeds from the exercise of stock options of $0.7 million, offset by payment of offering costs of $5.4 million, settlement of warrant liabilities of $0.4 million relating to warrant rights redeemed, and repayment of borrowings of $0.1 million.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results and condition could differ from these estimates.
Our significant accounting policies are fully described in Note 2 of Part II, Item 8 in our Annual Report on Form 10-K for the year ended September 30, 2023. There have been no material changes to the Company's significant accounting policies since the fiscal year 2023 Form 10-K.
Recent Accounting Pronouncements
For more information, Refer to Note 2 to our Consolidated Financial Statements as of and for the year ended September 30, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Credit, Interest Rate, and Foreign Currency Exchange Risk
Credit Risk
Generally, we have been able to collect our accounts receivable in the ordinary course of business. We do not hold any collateral to secure payment from customers. We have established policies and procedures relating to customer credit risk.
As of June 30, 2024, two customers accounted for 38.9% of the total balance of accounts receivable, net. As of September 30, 2023, one customer accounted for 10.5% of the total balance of accounts receivable, net. Based upon performing ongoing credit evaluations and our past collection experience, we believe that the receivable balance concentrated in two customers as of June 30, 2024 does not represent a significant credit risk, although we continue to actively monitor creditworthiness and economic conditions that may affect our customer's business and access to capital. Further, we are monitoring the current global economic conditions, including credit markets and other factors, as they relate to our customers in order to manage the risk of uncollectible accounts receivable.
Interest Rate Risk
As of June 30, 2024, we had cash and cash equivalents of $1.1 million. Currently, these funds are held in cash accounts. Currently, we have little exposure to market risk due to fluctuations in interest rates but may in the future depending on our cash management strategy. The rate of interest on our RP Note that was disbursed on October 10, 2023 is not tied to fluctuations in interest rates; therefore, any change in market rates is not expected to impact the current interest rate on the RP Note.
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Foreign Currency Exchange Risk
We conduct business in several locations outside of the U.S. with a portion of our operating expenses denominated in the currencies of the countries in which our operations are located. These include Europe, United Kingdom, Canada, and India, among others. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains (losses) related to changes in foreign currency exchange rates, which may be significant. In the event our foreign currency denominated assets, liabilities, revenue, or expenses increase, our results of operations may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive and financial officers evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2024, and have concluded that because of the material weaknesses in our internal control over financial reporting, as discussed in Part II, Item 9A under the caption "Controls and Procedures" in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on December 29, 2023 and amended on January 29, 2024 ("2023 Annual Report"), these controls and procedures were not effective.
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management of the Company, including the principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. In light of the material weaknesses indicated above, we performed additional analysis and other post-closing procedures to ensure our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Accordingly, our management, including our principal executive and financial officers, have concluded that the Unaudited Condensed Consolidated Financial Statements included in this Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Limitations on Controls and Procedures
In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, management recognizes that disclosure controls and procedures and internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of those controls and procedures are met. Additionally, in designing disclosure controls and procedures and internal control over financial reporting, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2024, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II. Other Information
Item 1. Legal Proceedings
Refer to Note 7, Commitments and Contingencies to our Unaudited Condensed Consolidated Financial Statements for information regarding legal proceedings and other similar matters in which we may be involved from time to time, which applicable information is incorporated herein.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Risk factors that affect our business and financial results are discussed in Part I, Item 1A under the caption "Risk Factors" in our Annual Report on Form 10-K for the year ended September 30, 2023, filed with the SEC on December 29, 2023 and amended on January 29, 2024 ("2023 Annual Report"), in Part II, Item 1A under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, subject to the updates as set forth below ("2024 Q1 Report") and in Part II, Item 1A under the caption "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, subject to the updates as set forth below ("2024 Q2 Report"). You should consider the following risks and those described in the 2023 Annual Report, the 2024 Q1 Report and the 2024 Q2 Report, together with all other information in this report, including our unaudited condensed consolidated financial statements as of and for the quarter ended June 30, 2024 and related notes included elsewhere in this report ("Consolidated Financial Statements"). These risks and uncertainties, some of which have occurred and any of which may occur in the future, could have a material adverse effect on our business, financial condition, results of operations, cash flows, and prospects. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations, cash flows, and prospects. Other than the risk factors set forth below and in the 2024 Q1 Report and 2024 Q2 Report, there have been no material changes to the risk factors described in our 2023 Annual Report.
Risks Related to the Buy Out
Completion of the Buy Out is subject to certain conditions. Failure to complete the Buy Out could have material adverse effects on our business, financial condition and results of operations.
On July 26, 2024, Bidco sent compulsory acquisition notices (the "Notices") to those Company shareholders who did not accept the Offer (the "Non-Assenting Shareholders"). Following the expiration of 30 calendar days from the date of the Notices, which is expected to be August 25, 2024, unless a Non-Assenting Shareholder has applied to the Irish High Court and the Irish High Court orders otherwise, the shares of MariaDB held by Non-Assenting Shareholders will be acquired compulsorily by Bidco (without any action on the part of such shareholders) on the same terms as the Offer, on or about August 26, 2024.
If the Buy Out is not settled within the expected time frame or at all, we may be subject to a number of material risks and our financial results and operations may be materially adversely affected. Our share price may fluctuate significantly based on announcement by Bidco, other third parties or us regarding the Buy Out.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| Incorporated by Reference |
Filed/
Furnished with
This Report
|
||||
|
Exhibit
Number
|
Exhibit Title | Form | File No. | Exhibit |
Filing Date |
| 3.1 | 8-K | 001-41571 | 3.1 | 12/22/2022 | |
| 10.7# | 8-K | 001-41571 | 10.1 | 5/31/2024 | |
| 31.1 |
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X | |||
| 31.2 |
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
X | |||
| 32.1 |
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X | |||
| 32.2 |
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
X | |||
| 101.INS | Inline XBRL Instance Document | X | |||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | |||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | |||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | |||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | X | |||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | |||
| 104 | Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101) | X |
# Indicates a management contract or compensatory plan, contract or arrangement.
39
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| MARIADB PLC | ||
|
Date: August 14, 2024
|
By: | /s/ Paul O'Brien |
| Name: | Paul O'Brien | |
| Title: | Chief Executive Officer and Director | |
| (Principal Executive Officer) | ||
|
Date: August 14, 2024
|
By: | /s/ Conor McCarthy |
| Name: | Conor McCarthy | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
40