You should read the following discussion and analysis along with our
consolidated financial statements and the related notes included elsewhere in
this quarterly report on Form 10-Q. The statements in this discussion regarding
our expectations of our future performance, liquidity and capital resources, and
other non-historical statements are forward-looking statements. These
forward-looking statements are subject to numerous risks and uncertainties,
including, but not limited to, the risks and uncertainties described under "Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31,
2020. Our actual results may differ materially from those contained in or
implied by any forward-looking statements.
Overview

Commvault is a leading provider of data protection and information management
software applications and related services. Commvault was incorporated in 1996
as a Delaware corporation. The Commvault software platform is an enterprise
level, integrated data and information management solution, built from the
ground up on a single platform and unified code base. All software functionality
share the same back-end technologies to deliver the benefits of a holistic
approach to protecting, managing, and accessing data. The software addresses
many aspects of data management in the enterprise, while providing scalability
and control of data and information. We also sell appliances that integrate the
Commvault software with hardware and address a wide-range of business needs and
use cases, ranging from support for remote or branch offices with limited IT
staff up to large corporate data centers. Commvault also provides customers with
a broad range of professional services that are delivered by our worldwide
support and field operations.

Sources of Revenues
We derive a significant portion of our total revenues from sales of licenses of
our software applications and related appliance products. We do not customize
our software or products for a specific end-user customer. We sell our software
applications and products to end-user customers both directly through our sales
force and indirectly through our global network of value-added reseller
partners, systems integrators, corporate resellers and original equipment
manufacturers. Our software and products revenue was 45% and 41% of our total
revenues for the nine months ended December 31, 2020 and 2019, respectively.
Our total software and products revenue in any particular period is, to a
certain extent, dependent upon our ability to generate revenues from large
customer software and products deals. Larger deals (transactions greater than
$0.1 million) represented 69% and 64% of our total software and products revenue
in the nine months ended December 31, 2020 and 2019, respectively.
Software and products revenue generated through indirect distribution channels
accounted for over 90% of total software and products revenue in both the nine
months ended December 31, 2020 and 2019. Software and products revenue generated
through direct distribution channels accounted for less than 10% of total
software and products revenue in both the nine months ended December 31, 2020
and 2019. The dollar value of software and products revenue generated through
indirect distribution channels increased $28.4 million in the nine months ended
December 31, 2020 compared to the nine months ended December 31, 2019. The
dollar value of software and products revenue generated through direct
distribution channels increased $0.1 million in the nine months ended
December 31, 2020 compared to the nine months ended December 31, 2019. Deals
initiated by our direct sales force are sometimes transacted through indirect
channels based on end-user customer requirements, which are not always in our
control and can cause this overall percentage split to vary from
period-to-period. As such, there may be fluctuations in the dollars and
percentage of software and products revenue generated through our direct
distribution channels from time-to-time. We believe that the growth of our
software and products revenue, derived from both our indirect channel partners
and direct sales force, are key attributes to our long-term growth strategy. We
will continue to invest in both our channel relationships and direct sales force
in the future, but we continue to expect more revenue to be generated through
indirect distribution channels over the long term. The failure of our indirect
distribution channels or our direct sales force to effectively sell our software
applications could have a material adverse effect on our revenues and results of
operations.
We also have a non-exclusive distribution agreement covering our North American
commercial markets and our U.S. Federal Government market with Arrow Enterprise
Computing Solutions, Inc. ("Arrow"), a subsidiary of Arrow Electronics, Inc.
Pursuant to this distribution agreement, Arrow's primary role is to enable a
more efficient and effective distribution channel for our products and services
by managing our reseller partners and leveraging their own industry experience.
We generated 36% and 37% of our total revenues through Arrow in the nine months
ended December 31, 2020 and 2019, respectively. If Arrow were to discontinue or
reduce the sales of our products,
                                       17
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or if our agreement with Arrow was terminated, and if we were unable to take
back the management of our reseller channel or find another North American
distributor to replace Arrow, then it would have a material adverse effect on
our future business.
Our services revenue was 55% of our total revenues for the nine months ended
December 31, 2020 and 59% of our total revenues for the nine months ended
December 31, 2019. Our services revenue is made up of fees from the delivery of
customer support and other professional services, which are typically sold in
connection with the sale of our software applications. Customer support
agreements provide technical support and unspecified software updates on a
when-and-if-available basis for an annual fee based on licenses purchased and
the level of service subscribed. Other professional services include consulting,
assessment and design services, implementation and post-deployment services and
training, all of which to date have predominantly been sold in connection with
the sale of software applications. Our newly launched software-as-a-service
solution, branded Metallic, is also included in services revenue. Revenue from
Metallic is recognized ratably over the contract period.

Foreign Currency Exchange Rates' Impact on Results of Operations
Sales outside the United States were 48% of our total revenue for the nine
months ended December 31, 2020 and 49% of our total revenue for the nine months
ended December 31, 2019. The results of our non-U.S. operations are translated
into U.S. dollars at the average exchange rates for each applicable month in a
period. To the extent the U.S. dollar weakens against foreign currencies, the
translation of these foreign currency denominated transactions generally results
in increased revenue, operating expenses and income from operations for our
non-U.S. operations. Similarly, our revenue, operating expenses and net income
will generally decrease for our non-U.S. operations if the U.S. dollar
strengthens against foreign currencies.
Using the average foreign currency exchange rates from the three months ended
December 31, 2019, our software and products revenue would have been lower by
$2.8 million, our services revenue would have been lower by $2.5 million, our
cost of sales would have been lower by $0.6 million and our operating expenses
would have been lower by $1.7 million from non-U.S. operations for the three
months ended December 31, 2020. Using the average foreign currency exchange
rates for the nine months ended December 31, 2019, our software and products
revenue would have been lower by $3.5 million, our services revenue would have
been lower by $2.9 million, our cost of sales would have been lower by $0.8
million and our operating expenses would have been lower by $1.5 million from
non-U.S. operations for the nine months ended December 31, 2020.
In addition, we are exposed to risks of foreign currency fluctuation primarily
from cash balances, accounts receivables and intercompany accounts denominated
in foreign currencies and are subject to the resulting transaction gains and
losses, which are recorded as a component of General and administrative
expenses. We recognized net foreign currency transaction losses of $0.5 million
and $1.7 million for the three and nine months ended December 31, 2020,
respectively. We recognized net foreign currency transaction losses of $0.1
million and $0.2 million for the three and nine months ended December 31, 2019,
respectively.
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Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with
U.S. GAAP. The preparation of these condensed consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, costs and expenses and related disclosures. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. In many instances, we
could have reasonably used different accounting estimates, and in other
instances changes in the accounting estimates are reasonably likely to occur
from period-to-period. Accordingly, actual results could differ significantly
from the estimates made by our management. To the extent that there are material
differences between these estimates and actual results, our future financial
statement presentation, financial condition, results of operations and cash
flows will be affected.
In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application, while in other cases, significant judgment is required in selecting
among available alternative accounting standards that allow different accounting
treatment for similar transactions. We consider these policies requiring
significant management judgment to be critical accounting policies. These
critical accounting policies are:
•Revenue Recognition;
•Accounting for Income Taxes
•Goodwill and Purchased Intangible Assets
There have been no significant changes in our critical accounting policies
during the nine months ended December 31, 2020 as compared to the critical
accounting policies and estimates disclosed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies" included in our Annual Report on Form 10-K for the year ended
March 31, 2020.
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Results of Operations
Three months ended December 31, 2020 compared to three months ended December 31,
2019
Revenues (in millions)
[[Image Removed: cvlt-20201231_g1.jpg]][[Image Removed: cvlt-20201231_g2.jpg]][[Image Removed: cvlt-20201231_g3.jpg]]
-Total revenues increased $11.6 million, or 7%.
•Software and products revenue represented 47% of our total revenue in the three
months ended December 31, 2020 and 43% of our total revenue in the three months
ended December 31, 2019.
•Larger deal revenue (deals greater than $0.1 million) represented 68% of our
software and products revenue in the three months ended December 31, 2020 and
66% of our software and products revenue in the three months ended December 31,
2019.
-Software and products revenue increased $12.0 million, or 16%, as a result of
the following:
•An increase of $9.5 million, or 19%, in larger deal revenue.
•An increase of 3% in the volume of larger deal revenue transactions from 182
deals for the three months ended December 31, 2019 to 187 deals for the three
months ended December 31, 2020.
•The average dollar amount of larger deal revenue transactions was approximately
$322 thousand and $279 thousand for the three months ended December 31, 2020 and
2019, representing a 15% increase respectively.
•An increase of $2.5 million in transactions less than $0.1 million.
-Services revenue represented 53% of our total revenue in the three months ended
December 31, 2020 and 57% of our total revenue in the three months ended
December 31, 2019. Services revenue decreased $0.3 million primarily due to the
following:
•A decrease of $0.8 million in revenue from customer support agreements.
•Partially offset by an increase of $0.5 million of revenue from Metallic, our
SaaS based offering
We track software and products revenue on a geographic basis. The geographic
regions that are tracked are the Americas (United States, Canada, Latin
America), EMEA (Europe, Middle East, Africa) and APJ (Australia, New Zealand,
Southeast Asia, China, Japan). Americas, EMEA and APJ represented 49%, 38% and
13% of total software and products revenue, respectively, for the three months
ended December 31, 2020. Software and products revenue increased year over year
by 8% in the Americas, 15% in EMEA and 61% in APJ.
?The increase in Americas software and products revenue was primarily the result
of a 10% increase in larger deal transactions revenue driven by an increase in
the volume of larger deal transactions.
?EMEA software and products revenue increased as a result of a 23% increase in
revenue on deals under $0.1 million. Using exchange rates from the prior year,
the increase in software and products revenue would have been 8%.
?The increase in APJ was the result of larger deal transactions increasing more
than two times over the prior year period, partially offset by a decrease in
deals under $0.1 million. Using exchange rates from the prior year, the increase
in software and products revenue would have been 52%.

Our software and products revenue in EMEA and APJ is subject to changes in foreign exchange rates as more fully discussed above in the "Foreign Currency Exchange Rates' Impact on Results of Operations" section.


                                       20
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Cost of Revenues and Gross Margin ($ in millions)



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-Total cost of revenues decreased $2.1 million, and represented 15% of our total
revenues for the three months ended December 31, 2020 compared to 17% for the
three months ended December 31, 2019.
-Cost of software and products revenue decreased $1.2 million, and represented
8% of our total software and products revenue for the three months ended
December 31, 2020 compared to 11% for the three months ended December 31, 2019.
The decrease is the result of reduced sales of hardware associated with our
appliance as well as reduced software royalties associated with sales of
HyperScale appliances and software. Beginning with the launch of HyperScale X,
we will transition to a software only model. HyperScale X also has reduced
software royalties relative to prior versions of HyperScale.
-Cost of services revenue decreased $0.9 million, representing 22% of our total
services revenue for the three months ended December 31, 2020 compared to 23%
for the three months ended December 31, 2019. The decline in cost of services
revenue is primarily related to a decrease in employee-related expenses
attributable to our restructuring and reorganization initiatives.













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Operating Expenses ($ in millions) [[Image Removed: cvlt-20201231_g10.jpg]][[Image Removed: cvlt-20201231_g11.jpg]][[Image Removed: cvlt-20201231_g12.jpg]]



[[Image Removed: cvlt-20201231_g13.jpg]][[Image Removed: cvlt-20201231_g14.jpg]][[Image Removed: cvlt-20201231_g15.jpg]]
- Sales and marketing expenses remained relatively flat with a slight decrease
of $0.1 million driven by:
•Decrease in travel and related expenses as a result of COVID-19, partially
offset by an increase in variable compensation associated with increased
revenue.
- Research and development expenses increased $5.2 million, or 17%, as a result
of an increase in employee compensation and related expenses attributable to the
expansion of our engineering group.
•Stock-based compensation increased $1.2 million compared to prior year.
•Investing in research and development has been a priority for Commvault, and we
anticipate continued spending related to the development of our data and
information management software applications.
- General and administrative expenses decreased $1.2 million, or 5%, primarily
due to the following:
•Reduction related to non-recurring prior year expenses associated with Hedvig
acquisition costs.
- Restructuring: Our restructuring plan is intended to increase efficiency in
our sales, marketing and distribution functions as well as reduce costs across
all functional areas.  Restructuring expenses were $11.6 million and $2.0
million in the three months ended December 31, 2020 and 2019, respectively.
These restructuring charges relate primarily to severance and related costs
associated with headcount reductions as well as lease abandonment charges
related to the closure of one office in the third quarter of fiscal year 2021
and two offices in the third quarter of fiscal 2020. These charges include $1.2
million and $0.7 million in the three months ended December 31, 2020 and 2019,
respectively, of stock-based compensation related to modifications of existing
awards granted to certain employees included in the restructuring. We cannot
guarantee the restructuring program will achieve its intended result. Risks
associated with this restructuring program also include additional unexpected
costs, adverse effects on employee morale and the failure to meet operational
and growth targets due to the loss of key employees, any of which may impair our
ability to achieve anticipated results of operations or otherwise harm our
business.
-Depreciation and amortization expense decreased $3.1 million, from $5.4 million
in the three months ended December 31, 2019 to $2.3 million in the three months
ended December 31, 2020, driven by the reduced amortization of intangible assets
related to Hedvig due to their impairment in the second quarter of fiscal 2021.

                                       22
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Income Tax Expense
Income tax expense was $1.2 million in the three months ended December 31, 2020
compared to expense of $1.0 million in the three months ended December 31, 2019.
The income tax expense for the three months ended December 31, 2020 relates
primarily to current federal and foreign taxes.

Nine months ended December 31, 2020 compared to nine months ended December 31,
2019
Revenues (in millions)
[[Image Removed: cvlt-20201231_g16.jpg]][[Image Removed: cvlt-20201231_g17.jpg]][[Image Removed: cvlt-20201231_g18.jpg]]
-Total revenues increased $26.0 million, or 5%.
•Software and products revenue represented 45% of our total revenue in the nine
months ended December 31, 2020 and 41% of our total revenue in the nine months
ended December 31, 2019.
•Larger deal revenue (deals greater than $0.1 million) represented approximately
69% of our software and products revenue in the nine months ended December 31,
2020 and 64% of our software and products revenue in the nine months ended
December 31, 2019.
-Software and products revenue increased $28.6 million, or 14%, as a result of
the following:
•An increase of $29.3 million, or 22%, in larger deal revenue.
•An increase of 6% in the number of larger deal revenue transactions and an
increase of 15% in the average dollar amount of such transactions.
•The average dollar amount of larger deal revenue transactions was approximately
$344 thousand and $299 thousand for the nine months ended December 31, 2020 and
2019, respectively.
-Services revenue represented 55% of our total revenue in the nine months ended
December 31, 2020 and 59% of our total revenue in the nine months ended
December 31, 2019. Services revenue decreased $2.6 million, or 1%, primarily due
to the following:
•A decrease of $2.2 million in revenue from customer support agreements.
• A decrease of $0.4 million in training and consulting services.

We track software and products revenue on a geographic basis. The geographic
regions that are tracked are the Americas (United States, Canada, Latin
America), EMEA (Europe, Middle East, Africa) and APJ (Australia, New Zealand,
Southeast Asia, China, Japan). Americas, EMEA and APJ represented 56%, 31% and
13% of total software and products revenue, respectively, for the nine months
ended December 31, 2020. Software and products revenue increased year over year
by 24% in the Americas and 3% in EMEA; whereas APJ remained flat.
?The increase in Americas software and products revenue was primarily the result
of a 32% increase in revenue from larger deal transactions compared to the nine
months ended December 31, 2019.
?EMEA software and products revenue increased as a result of a 6% increase in
revenue on deals under $0.1 million.
?Revenue from larger deal transactions in APJ increased by $2.9 million; whereas
transactions under $0.1 million decreased by $2.7 million resulting in nominal
growth.

                                       23
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Our software and products revenue in EMEA and APJ is subject to changes in foreign exchange rates as more fully discussed above in the "Foreign Currency Exchange Rates' Impact on Results of Operations" section.

Cost of Revenues and Gross Margin ($ in millions)

[[Image Removed: cvlt-20201231_g19.jpg]][[Image Removed: cvlt-20201231_g20.jpg]][[Image Removed: cvlt-20201231_g21.jpg]] [[Image Removed: cvlt-20201231_g22.jpg]][[Image Removed: cvlt-20201231_g23.jpg]][[Image Removed: cvlt-20201231_g24.jpg]]



-Total cost of revenues decreased $10.6 million, and represented 15% of our
total revenues for the nine months ended December 31, 2020 compared to 18% for
the nine months ended December 31, 2019. Temporary salary cuts during the first
half of fiscal year 2021 related to COVID-19 resulted in savings of $1.1 million
in cost of revenues. The remaining decrease is primarily due to a decrease in
employee-related expenses attributable to our restructuring and reorganization
initiatives and a decrease in cost of sales associated with our appliance.
-Cost of software and products revenue decreased $2.2 million, and represented
9% of our total software and products revenue for the nine months ended
December 31, 2020 compared to 11% for the nine months ended December 31, 2019.
The decrease is the result of lower cost of sales associated with our appliance
compared to the same period in the prior year.
-Cost of services revenue decreased $8.4 million, representing 20% of our total
services revenue for the nine months ended December 31, 2020 compared to 23% for
the nine months ended December 31, 2019. The decline in cost of services revenue
is primarily related to a decrease in employee-related expenses attributable to
our restructuring and reorganization initiatives. Additionally, there was a
decrease in expenses associated with the delivery of professional services
revenue as well as temporary salary cuts during the first half of fiscal year
2021 related to COVID-19.








                                       24

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Operating Expenses ($ in millions) [[Image Removed: cvlt-20201231_g25.jpg]][[Image Removed: cvlt-20201231_g26.jpg]][[Image Removed: cvlt-20201231_g27.jpg]]



[[Image Removed: cvlt-20201231_g28.jpg]][[Image Removed: cvlt-20201231_g29.jpg]][[Image Removed: cvlt-20201231_g30.jpg]]
- Sales and marketing expenses decreased $7.6 million, or 3%, primarily due to
the following:
•Decreases related to the decline of travel and related expenses as a result of
COVID-19.
•Temporary salary cuts during the first half of fiscal year 2021 related to
COVID-19
•These declines were partially offset by an increase in variable compensation
associated with increased revenue.
- Research and development expenses increased $20.5 million, or 27%, as a result
of an increase in employee compensation and related expenses attributable to the
expansion of our engineering group.
•The increase is the result of additional headcount related to the acquisition
of Hedvig including the stock-based compensation issued in connection with the
transaction. Hedvig was acquired in October 2019; therefore, the prior year
period includes only three months of such expenses compared to nine months
during this period.
•Additionally, certain Hedvig shareholders will receive cash payments totaling
$14.1 million over the course of the 30 months following the date of
acquisition, subject to their continued employment with the Company. While these
payments are proportionate to these shareholders' ownership of Hedvig, under
GAAP they are accounted for as compensation expense over the course of the 30
month service period. Research and development expenses in the nine months ended
December 31, 2020 includes $4.2 million of expense related to this arrangement
compared to $1.4 million in the nine months ended December 31, 2019.
•These increases were partially offset by $1.7 million in savings related to
temporary pay cuts in the first half of fiscal year 2021.
•Investing in research and development has been a priority for Commvault, and we
anticipate continued spending related to the development of our data and
information management software applications.
- General and administrative expenses decreased $2.1 million, or 3%, primarily
due to the following:
•Reduction of non-recurring prior year expenses associated with a non-routine
shareholder matter and Hedvig acquisition costs.
•Temporary salary cuts during the first half of fiscal year 2021 related to
COVID-19.
                                       25
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•Partially offset by increases in legal expenses for intellectual property
associated with ongoing litigation and foreign currency losses due to the
weakening of the US dollar.
- Restructuring: Our restructuring plan is intended to increase efficiency in
our sales, marketing and distribution functions as well as reduce costs across
all functional areas.  Restructuring expenses were $19.7 million and $19.0
million in the nine months ended December 31, 2020 and 2019, respectively. These
restructuring charges relate primarily to severance and related costs associated
with headcount reductions as well as lease abandonment charges related to the
closure of six offices for the nine months ended December 31, 2020 and five
offices in the nine months ended December 31, 2019. These charges include $1.9
million for the nine months ended December 31, 2020 and $1.7 million for the
nine months ended December 31, 2019 of stock-based compensation related to
modifications of existing awards granted to certain employees included in the
restructuring. We cannot guarantee the restructuring program will achieve its
intended result. Risks associated with this restructuring program also include
additional unexpected costs, adverse effects on employee morale and the failure
to meet operational and growth targets due to the loss of key employees, any of
which may impair our ability to achieve anticipated results of operations or
otherwise harm our business.
-Impairment of intangible assets: In the second quarter of fiscal year 2021, we
recorded non-cash impairment charges of $40.7 million on the intangible assets
(developed technology and customer relationships) acquired in connection with
Hedvig, Inc. The charges were the result of a moderated view of acquisition
assumptions.
-Depreciation and amortization expense increased $1.7 million, from $10.7
million in the nine months ended December 31, 2019 to $12.4 million in the nine
months ended December 31, 2020, driven by the amortization of intangible assets
acquired as a result of the Hedvig business combination in October 2019. The
current year includes six months of amortization of these intangible assets as
they were impaired in the second quarter of fiscal 2021; whereas prior year
includes three months.

Income Tax Expense
Income tax expense was $5.4 million in the nine months ended December 31, 2020
compared to expense of $3.5 million in the nine months ended December 31, 2019.
In the fourth quarter of fiscal 2020, we recorded a current tax benefit of
approximately $10.0 million which represented our estimate of the net operating
loss carryback resulting from the CARES Act. In the first quarter of fiscal
2021, we recorded an adjustment of $3.2 million to reduce the current benefit of
the net operating loss carryback benefit we will realize from the CARES Act.

Liquidity and Capital Resources
As of December 31, 2020, our cash and cash equivalents balance of $377.6 million
primarily consisted of cash. In addition, we have approximately $10.8 million of
short-term investments invested in U.S. Treasury Bills. In recent fiscal years,
our principal source of liquidity has been cash provided by operations.
As of December 31, 2020, the amount of cash and cash equivalents held outside of
the United States by our foreign legal entities was approximately $176.5
million. These balances are dispersed across many international locations around
the world. We believe that such dispersion meets the current and anticipated
future liquidity needs of our foreign legal entities. In the event we needed to
repatriate funds from outside of the United States, such repatriation would
likely be subject to restrictions by local laws and/or tax consequences
including foreign withholding taxes.
During the nine months ended December 31, 2020, we repurchased $33.1 million
shares of our common stock under our share repurchase program. Under our stock
repurchase program, repurchased shares are constructively retired and returned
to unissued status. Our stock repurchase program has been funded by our existing
cash and cash equivalent balances as well as cash flows provided by our
operations. Our Board has approved, and we intend to execute, a capital
allocation policy that provides for the repurchase of $200 million of our common
stock for the period from February 1, 2021 through the end of our 2022 fiscal
year, plus the use of approximately 75% of our free cash flow for additional
repurchases during fiscal year 2022.
                                       26
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Our future stock repurchase activity is subject to the business judgment of our
management and Board of Directors, taking into consideration our historical and
projected results of operations, financial condition, cash flows and other
anticipated capital requirements or investment alternatives. Our stock
repurchase program reduces the dilutive impact on our common shares outstanding
associated with stock option exercises and our previous public and private stock
offerings through the repurchase of common stock.
Our summarized cash flow information is as follows (in thousands):

Nine Months Ended December 31,


                                                                            2020                   2019
Net cash provided by operating activities                            $        59,247          $     56,008
Net cash provided by (used in) investing activities                           26,806               (94,056)
Net cash used in financing activities                                        (26,129)               (9,082)
Effects of exchange rate-changes in cash                                      21,563                  (837)
Net increase (decrease) in cash, cash equivalents and
restricted cash                                                      $        81,487          $    (47,967)

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- Net cash provided by operating activities was impacted by net loss adjusted
for the impact of non-cash charges, an increase in deferred revenue and
partially offset by an increase in accounts receivable.
- Net cash provided by investing activities was related to net proceeds from the
maturity of short-term investments of $32.8 million partially offset by $6.0
million of capital expenditures.
- Net cash used in financing activities was the result of $33.1 million of
repurchases of common shares partially offset by $7.0 million of proceeds from
the exercise of stock options and purchases of our stock under the Employee
Stock Purchase Plan.
Working capital increased $62.1 million from $185.1 million as of March 31, 2020
to $247.2 million as of December 31, 2020. The net increase in working capital
is primarily the result of cash flow from operations.
We believe that our existing cash, cash equivalents and our cash from operations
will be sufficient to meet our anticipated cash needs for working capital,
income taxes, capital expenditures and potential stock repurchases for at least
the next twelve months. We may seek additional funding through public or private
financings or other arrangements during this period. Adequate funds may not be
available when needed or may not be available on terms favorable to us, or at
all. If additional funds are raised by issuing equity securities, dilution to
existing stockholders will result. If we raise additional funds by obtaining
loans from third parties, the terms of those financing arrangements may include
negative covenants or other restrictions on our business that could impair our
operational flexibility, and would also require us to fund additional interest
expense. If funding is insufficient at any time in the future, we may be unable
to develop or enhance our products or services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition and results of
operations.

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Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have off-balance sheet financing
arrangements, including any relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance
or special purpose entities.
Indemnifications
Certain of our software licensing agreements contain certain provisions that
indemnify our customers from any claim, suit or proceeding arising from alleged
or actual intellectual property infringement. These provisions continue in
perpetuity along with our software licensing agreements. We have never incurred
a liability relating to one of these indemnification provisions in the past and
we believe that the likelihood of any future payout relating to these provisions
is remote. Therefore, we have not recorded a liability during any period related
to these indemnification provisions.

Impact of Recently Issued Accounting Standards
See Note 2 of the unaudited consolidated financial statements for a discussion
of the impact of recently issued accounting standards.

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