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Credit Facility | 12 Months Ended
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Jul. 31, 2024
Line of Credit Facility [Abstract] |
Credit Facility | Credit Facility On November 30, 2022, we entered into a Second Amended and Restated Credit Agreement which provided a senior secured loan facility up to $300,000,000, consisting of (i) a revolving loan facility with a borrowing limit up to $150,000,000; and (ii) a $50,000,000 term loan. At July 31, 2023, the amount outstanding under the credit facility was $164,404,000, of which $160,029,000, net of deferred financing fees of $621,000, is reflected in the non-current portion of long-term debt on our Consolidated Balance Sheets. On Nov ember 7, 2023, we entered into a Third Amended and Restated Credit Agreement (the "Prior Credit Facility"), which provided f or a senior secured loan facility of up to $200,000,000 consisting of: (i) a revolving loan facility with an initial borrowing limit of $150,000,000; and (ii) a $50,000,000 te rm loan. The Prior Credit Fac ility also provided for the following, among other things: effective January 31, 2024 and April 30, 2024, (a) our borrowing limit under the revolving loan facility reduced to $140,000,000 and $135,000,000, respectively; (b) the term loa n amortization increased from $1,250,000 to $1,875,000 per quarter, with the remaining balance due upon maturity; and (c) the Applicable Rate increased 0.25%. In connection with entering the Prior Credit Facility, we capitalized $5,941,000 of total financing costs and accounted for the amendments as debt modifications. On June 17, 2024, we entered into a $222,000,000 senior secured loan facility with a new syndicate of lenders (the “Credit Facility”), which replaced our Prior Credit Facility. The Credit Facility consists of: (i) a $162,000,000 term loan (the "Term Loan" facility) and an asset-based revolving credit facility with revolving commitments in an aggregate principal amount of $60,000,000, subject to borrowing base limitations as described below (the "Revolving Loan" facility). At closing, $25,000,000 of the Revolving Loan was funded and, together with the Term Loan, the proceeds were used to repay the Prior Credit Facility in full and for working capital and other general corporate purposes. The obligations under the Credit Facility are guaranteed by certain of our domestic and foreign subsidiaries (the “Guarantors), who have granted for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets. The Credit Facility, which was amended October 17, 2024, has a maturity date which is the earlier of (x) July 31, 2028 or (y) 90 days prior to the earliest date that the debt under the Subordinated Credit Facility becomes due and payable (the "Maturity Date"), as discussed further below. In connection with entering the Credit Facility, the Term Loan lenders received 1,435,884 detachable warrants ("Lender warrants") granted at an exercise price of $0.10 per common share which entitles the Term Loan lenders to purchase 1,435,884 shares of our common stock from us at any time and from time to time after the Closing Date and on or prior to June 17, 2031, subject to certain adjustments. If the Term Loan is refinanced, the Term Loan lenders have the right to sell up to 50.0% of the warrants back to us for cash, at a 10.0% discount to the 30-day volume weighted average price of our common stock, subject to certain adjustments. We determined that the Lender warrants met the definition of a freestanding financial instrument that should be accounted for as a liability. We established an initial Lender warrant liability of $3,011,000 which was allocated as a discount against the Term Loan proceeds. The Lender warrant liability is classified in "Other Liabilities" on the Consolidated Balance Sheets and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs, until the Lender warrants are exercised or expire. Changes in the estimated fair value of the Lender warrant liability are recognized in our Consolidated Statement of Operations as a non-cash expense or benefit. As of July 31, 2024, the Lender warrant liability was remeasured to $4,544,000, resulting in a non-cash expense of $1,533,000 recorded in "Other expenses (income)" on the Consolidated Statements of Operations. Additionally, we identified several embedded derivatives that require bifurcation from the Credit Facility under ASC 815-40 "Derivatives and Hedging - Contracts in Entity's Own Equity." Certain of these embedded features include events of default and contingent fee and interest rate increases and were determined to qualify as embedded derivatives, accounted for as one compound embedded derivative liability. We established an initial embedded derivative liability of $3,116,000, which was allocated as a discount against the Term Loan proceeds. The embedded derivative liability is classified in "Other Liabilities" on the Consolidated Balance Sheets and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs, until the embedded derivative features have zero probability of occurring or expire. Changes in the estimated fair value of the embedded derivative liability are recognized in our Consolidated Statement of Operations as a non-cash expense or benefit. As of July 31, 2024, the embedded derivative liability was remeasured to $3,041,000, resulting in $75,000 of income recorded in "Other expenses (income)" on the Consolidated Statements of Operations. In connection with entering the Credit Facility, we paid fees of $15,035,000, including: (i) $9,979,000 of financing fees, of which $6,626,000 is attributable to the Term Loan and $3,353,000 is attributable to the Revolving Loan; and (ii) $5,056,000 of closing fees, representing approximately 3.0% of the Term Loan commitment plus certain other reimbursable expenses paid directly to the Term Loan lenders and accounted for as a discount against the Term Loan proceeds. Additionally, a $2,430,000 Term Loan exit fee, which was earned on the closing date and is payable directly to the Term Loan lenders at maturity or earlier, as defined, was accounted for as a discount against the Term Loan proceeds. The financing fees and discounts attributable to the Term Loan are amortized as interest expense over the life of the debt and are presented as a deduction to the borrowings outstanding under the Term Loan. The financing fees attributable to the Revolving Loan are capitalized on the Consolidated Balance Sheets and amortized as interest expense over the life of the debt. As of July 31, 2024, the amount outstanding under our Credit Facility was as follows:
| July 31, 2024
Term Loan | $ | 161,663,000 |
Less unamortized deferred financing costs related to Term Loan | 6,425,000 |
Less unamortized discount related to Term Loan | 13,202,000 |
Term Loan, net | 142,036,000 |
Revolving Loan | 32,500,000 |
Amount outstanding under Credit Facility, net | 174,536,000 |
Less current portion of long-term debt | 4,050,000 |
Non-current portion of long-term debt | $ | 170,486,000 |
During the fiscal year ended July 31, 2024, we had outstanding balances under our credit facilities ranging from $156,241,000 to $202,000,000. As of July 31, 2024, total net deferred financing costs related to the Credit Facility were $9,676,000 and are being amortized over the term of the Credit Facility through the Maturity Date. The refinancing of our Prior Credit Facility is considered a debt extinguishment and, as such, $1,832,000 of net deferred financing costs primarily related to the Prior Credit Facility were expensed in fiscal 2024 and included in interest expense reported on our Consolidated Statement of Operations. Interest expense related to our Credit Facility and Prior Credit Facility, including amortization of deferred financing costs and discounts, recorded during the fiscal years ended July 31, 2024, 2023 and 2022 was $22,058,000, $14,931,000 and $4,933,000, respectively. Our blended interest rate approximated 12.26%, 8.89% and 3.41% for fiscal 2024, 2023 and 2022, respectively. Availability under the Revolving Loan is subject to eligibility criteria set forth in the Credit Facility, and equal to a borrowing base in an amount equal to, from time to time: (a) 85% of the net book value of billed and invoiced accounts receivables of the Borrowing Base Parties, as defined; plus (b) 85% of the net book value of accounts receivables that the Borrowing Base Parties have the right to bill but have not yet billed up to the lesser of (i) 12.5% of the amount calculated pursuant to the sum of clauses (a) and (b) and (ii) $15.0 million of such accounts; plus (c) 60% of the net book value of all inventory of the Borrowing Base Parties, less (d) customary reserves. The Credit Facility provides that (a) Revolving Loans comprised of (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 3.75% to 4.25%, depending on the average quarterly revolving loan usage during the applicable determination period and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 4.75% to 5.25%, depending on the average quarterly revolving loan usage during the applicable determination period and (b) Term Loans comprised of (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 7.50% to 9.00%, depending on our net leverage ratio during the applicable determination period and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 8.50% to 10.00%, depending on our net leverage ratio during the applicable determination period. The Term Loans bear both cash interest and interest paid-in-kind ("PIK"). PIK interest is fixed at 2.50% and is to be capitalized and added to the outstanding principal on each interest payment date. The Term Loan is subject to 2.50% amortization per annum, payable on the last day of each fiscal quarter. The first Term Loan repayment of $675,000 was paid on July 31, 2024 and quarterly Term Loan repayments thereafter are $1,012,500, with the remaining Term Loan balance due on the Maturity Date. The Credit Facility contains (a) customary representations, warranties and affirmative covenants; (b) customary conditions to drawing the Revolver; (c) customary negative covenants, subject to negotiated exceptions, including but not limited to: (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, including the disposition of assets by any Loan Party to any Subsidiary that is not a Subsidiary Loan Party, (vi) restricted payments, including stockholder dividends, (vii) distributions, including the repayment of subordinated intercompany and third party indebtedness, and (viii) certain other restrictive agreements; (d) certain financial covenants, including a maximum Net Leverage Ratio, minimum Fixed Charge Coverage Ratio, Minimum Average Liquidity and Minimum EBITDA; (e) customary optional and mandatory prepayment events; and (f) customary events of default (subject to grace periods, as appropriate), such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of our business. In addition, under certain circumstances, we may be required to enter into amendments to the Credit Facility in connection with any further syndication of the Credit Facility. Under the Credit Facility, for the trailing twelve months ("TTM") ended July 31, 2024, we were required to maintain a maximum Net Leverage Ratio of 3.25x TTM Adjusted EBITDA, a minimum Fixed Charge Coverage Ratio of 1.20x TTM Adjusted EBITDA and Minimum Average Liquidity of $20,000,000. As discussed below, on October 17, 2024, we entered into an amendment to the Credit Facility to waive a Net Leverage Ratio and Fixed Charge Coverage Ratio event of default as of July 31, 2024. Subsequent Event On October 17, 2024, we entered into an amendment to the Credit Facility (the “Amended Credit Facility”) in order to (i) waive certain events of default that occurred under the Credit Facility, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio for the 4 quarter period ended July 31, 2024. and (ii) amend the Credit Facility. As a result the Amended Credit Facility, there are no ongoing events of default under the Credit Facility. The Amended Credit Facility also amends the Credit Agreement to, amongst other things; (i) increase the interest rate margins applicable to the loans (as described in further detail below); (ii) modify certain financial and collateral reporting requirements; (iii) provide the lenders a consent right with respect to $27,500,000 of revolver borrowings above $32,500,000 (i.e., the current amount of revolver borrowings outstanding); (iv) permit the incurrence of $25,000,000 of senior unsecured subordinated debt (the "Subordinated Credit Agreement") (as described in further Note (19) – “Subsequent Event - Subordinated Credit Agreement”); (v) amend the Maturity Date; and (vi) suspend financial covenant testing through the end of our fiscal quarter ending January 31, 2025. Under the Amended Credit Facility, the interest rate margins that are applicable to the Revolving Loan are increased by 1.00% at each level. Accordingly, the Amended Credit Facility provides that Revolving Loans comprised of (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 4.75% to 5.25%; and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 5.75% to 6.25%, each depending on the average quarterly revolving loan usage during the applicable determination period. The Amended Credit Facility provides that the interest rate margins on the Term Loans are 12.00% per annum for Base Rate Loans and 13.00% per annum for SOFR Loans until the first business day of the month following January 31, 2025, when the Company has delivered financial statements demonstrating compliance with the financial covenants under the Amended Credit Facility. If demonstrated, the interest rate margins revert to the margins provided under the Existing Credit Facility with respect to Term Loans, specifically, (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 7.50% to 9.00%; and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 8.50% to 10.00%, each depending on our Net Leverage Ratio during the applicable determination period. Capitalized terms used but not defined herein have the meanings set forth for such terms in the Prior Credit Facility, the Credit Facility and the Amended Credit Facility, all of which have been documented and filed with the SEC.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481544/470-10-50-6 Reference 2: 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