

~~Delaware~~

	~~22-3447504~~
Delaware		22-3447504
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

~~1 Commvault Way~~ ~~Tinton Falls, New Jersey~~	~~07724~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~

~~(732)~~

1 Commvault Way

Tinton Falls, New Jersey

07724

(Address of principal executive offices)

(Zip Code)

(732) 870-4000

(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
Common Stock	CVLT	The NASDAQ Stock Market
Preferred Stock Purchase Rights		The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by the Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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 registrant was required to submit ~~and post~~ such files.) Yes x No ¨

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. See definition 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 filerþ

☑

Accelerated filero

☐

Non-accelerated filero

☐

Smaller reporting companyo

☐

Emerging growth company o

☐

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 Acto

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x

As of ~~January 22, 2018,~~October 27, 2020, there were ~~44,942,269~~47,130,331 shares of the registrant’s common stock, $0.01 par value, outstanding.

~~Table of Contents~~

COMMVAULT SYSTEMS, INC.

FORM 10-Q

INDEX



			Page
Part I – FINANCIAL INFORMATION
Item 1.		Financial Statements and Notes
		Unaudited Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017 (as adjusted)~~2020	1
		Unaudited Consolidated Statements of ~~Income (Loss)~~Operations for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016 (as adjusted)~~2019	2
		Unaudited Consolidated Statements of Comprehensive Loss for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016 (as adjusted)~~2019	3
		Unaudited Consolidated ~~Statement~~Statements of Stockholders’ Equity for the ~~nine~~three and six months ended ~~December 31, 2017~~September 30, 2020 and 2019	4
		Unaudited Consolidated Statements of Cash Flows for the ~~nine~~ six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016 (as adjusted)~~2019	56
		Notes to Consolidated Financial Statements (unaudited)	67
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2016
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	3027
Item 4.		Controls and Procedures	3127

Part II – OTHER INFORMATION
Item 1.		Legal Proceedings	3229
Item 1A.		Risk Factors	3329
Item 2.		Unregistered Sale of Equity Securities and Use of Proceeds	3329
Item 3.		Defaults Upon Senior Securities	3329
Item 4.		Mine Safety Disclosures	3329
Item 5.		Other Information	3329
Item 6.		Exhibits	3330

SIGNATURES			3431

~~Exhibit Index~~	35
~~Exhibit 31.1~~
~~Exhibit 31.2~~
~~Exhibit 32.1~~
~~Exhibit 32.2~~

~~Table of Contents~~

Commvault Systems, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)


	December 31, 2017			March 31, 2017 As adjusted - See Note 2				September 30, 2020		March 31, 2020
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	314,494		$	329,491		Cash and cash equivalents	$	383,153	$	288,082
Restricted cash							Restricted cash	0		8,000
Short-term investments	130,993			120,693			Short-term investments	10,845		43,645
Trade accounts receivable, net	146,750			140,084			Trade accounts receivable, net	138,957		146,990
Other current assets	24,181			15,791			Other current assets	26,038		26,969
Total current assets	616,418			606,059			Total current assets	558,993		513,686
Deferred tax assets, net	—			50,228

Property and equipment, net	129,632			132,319			Property and equipment, net	113,014		114,519
Equity method investment	3,340			3,621
Operating lease assets							Operating lease assets	18,691		15,009
Deferred commissions cost	31,372			30,378			Deferred commissions cost	32,726		31,394
Intangible assets, net							Intangible assets, net	0		46,350
Goodwill							Goodwill	112,435		112,435
Other assets	8,512			7,273			Other assets	16,119		11,683
Total assets	$	789,274		$	829,878		Total assets	$	851,978	$	845,076
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	193		$	117		Accounts payable	$	253	$	307
Accrued liabilities	79,179			78,701			Accrued liabilities	79,112		87,051
Current portion of operating lease liabilities							Current portion of operating lease liabilities	7,563		7,699
Deferred revenue	227,532			209,099			Deferred revenue	227,777		233,497
Total current liabilities	306,904			287,917			Total current liabilities	314,705		328,554
Deferred revenue, less current portion	80,035			70,803			Deferred revenue, less current portion	97,506		92,723
Deferred tax liabilities, net	2,504			—			Deferred tax liabilities, net	739		849
Long-term operating lease liabilities							Long-term operating lease liabilities	12,574		8,808
Other liabilities	3,749			4,226			Other liabilities	6,978		2,238
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.01 par value: 50,000 shares authorized, no shares issued and outstanding at December 31, 2017 and March 31, 2017	—			—
Common stock, $0.01 par value: 250,000 shares authorized, 44,785 shares and 44,816 shares issued and outstanding at December 31, 2017 and March 31, 2017, respectively	447			447
Preferred stock, $0.01 par value: 50,000 shares authorized, 0 shares issued and outstanding							Preferred stock, $0.01 par value: 50,000 shares authorized, 0 shares issued and outstanding	0		0
Common stock, $0.01 par value: 250,000 shares authorized, 46,685 shares and 46,011 shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively							Common stock, $0.01 par value: 250,000 shares authorized, 46,685 shares and 46,011 shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively	464		458
Additional paid-in capital	756,531			694,477			Additional paid-in capital	1,023,459		978,659
Accumulated deficit	(354,264		)	(215,677		)	Accumulated deficit	(592,762)		(553,790)
Accumulated other comprehensive loss	(6,632		)	(12,315		)	Accumulated other comprehensive loss	(11,685)		(13,423)
Total stockholders’ equity	396,082			466,932			Total stockholders’ equity	419,476		411,904
Total liabilities and stockholders’ equity	$	789,274		$	829,878		Total liabilities and stockholders’ equity	$	851,978	$	845,076

See accompanying unaudited notes to consolidated financial statements

~~Table of Contents~~

Commvault Systems, Inc.

Consolidated Statements of ~~Income (Loss)~~Operations

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Revenues:
Software and products	$	72,309	$	68,595	$	148,863	$	132,269
Services	98,830		98,987		195,276		197,516
Total revenues	171,139		167,582		344,139		329,785
Cost of revenues:
Software and products	7,903		8,831		13,750		14,861
Services	18,896		22,410		37,600		45,100
Total cost of revenues	26,799		31,241		51,350		59,961
Gross margin	144,340		136,341		292,789		269,824
Operating expenses:
Sales and marketing	79,069		80,960		160,745		168,345
Research and development	30,955		23,227		62,097		46,807
General and administrative	24,748		24,753		46,307		47,260
Restructuring	5,767		12,851		8,091		16,930
Impairment of intangible assets	40,700		0		40,700		0
Depreciation and amortization	5,053		2,719		10,118		5,325
Total operating expenses	186,292		144,510		328,058		284,667
Loss from operations	(41,952)		(8,169)		(35,269)		(14,843)
Interest income	249		1,561		592		3,484
Loss before income taxes	(41,703)		(6,608)		(34,677)		(11,359)
Income tax expense (benefit)	(532)		476		4,211		2,571
Net loss	$	(41,171)	$	(7,084)	$	(38,888)	$	(13,930)
Net loss per common share:
Basic	$	(0.89)	$	(0.16)	$	(0.84)	$	(0.31)
Diluted	$	(0.89)	$	(0.16)	$	(0.84)	$	(0.31)
Weighted average common shares outstanding:
Basic	46,516		45,277		46,354		45,363
Diluted	46,516		45,277		46,354		45,363

Three Months Ended December 31, Nine Months Ended December 31,
2017
2016

As Adjusted -
See Note 2
2017
2016

As Adjusted -
See Note 2
Revenues:
Software and products $ 81,443
$ 78,655
$ 228,224
$ 212,473
Services 98,923
88,406
286,254
265,800
Total revenues 180,366
167,061
514,478
478,273
Cost of revenues:
Software and products 1,234
772
3,125
2,306
Services 23,723
20,394
66,760
61,512
Total cost of revenues 24,957
21,166
69,885
63,818
Gross margin 155,409
145,895
444,593
414,455
Operating expenses:
Sales and marketing 105,106
97,053
305,610
283,979
Research and development 23,981
21,227
69,451
60,676
General and administrative 20,387
21,610
67,858
62,862
Depreciation and amortization 2,457
2,163
7,212
6,382
Total operating expenses 151,931
142,053
450,131
413,899
Income (loss) from operations 3,478
3,842
(5,538 ) 556
Interest expense (232 ) (233 ) (698 ) (724 )
Interest income 588
312
1,560
843
Equity in loss of affiliate (158 ) (300 ) (281 ) (544 )
Income (loss) before income taxes 3,676
3,621
(4,957 ) 131
Income tax expense 62,621
1,662
55,282
836
Net income (loss) $ (58,945 ) $ 1,959
$ (60,239 ) $ (705 )
Net income (loss) per common share:
Basic $ (1.30 ) $ 0.04
$ (1.33 ) $ (0.02 )
Diluted $ (1.30 ) $ 0.04
$ (1.33 ) $ (0.02 )
Weighted average common shares outstanding:
Basic 45,291
45,099
45,340
44,645
Diluted 45,291
47,115
45,340
44,645

See accompanying unaudited notes to consolidated financial statements

~~Table of Contents~~

Commvault Systems, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Net loss	(41,171)		(7,084)		(38,888)		$	(13,930)
Other comprehensive income (loss):
Foreign currency translation adjustment	788		(1,138)		1,738		$	(1,165)
Comprehensive loss	$	(40,383)	$	(8,222)	$	(37,150)	$	(15,095)

Three Months Ended December 31, Nine Months Ended December 31,
2017
2016

As Adjusted -
See Note 2
2017
2016

As Adjusted -
See Note 2
Net income (loss) (58,945 ) 1,959
(60,239 ) (705 )
Other comprehensive income (loss):
Foreign currency translation adjustment 1,063
(3,268 ) 5,683
(4,787 )
Comprehensive loss $ (57,882 ) $ (1,309 ) $ (54,556 ) $ (5,492 )

See accompanying unaudited notes to consolidated financial statements

~~Table of Contents~~

Commvault Systems, Inc.

Consolidated ~~Statement~~Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock			Additional Paid – In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance as of June 30, 2020	46,321	$	461	$	997,838	$	(551,591)	$	(12,473)	$	434,235
Stock-based compensation				20,584						20,584
Share issuances related to stock-based compensation	364	3		5,037						5,040


Net loss						(41,171)				(41,171)
Other comprehensive income								788		788
Balance as of September 30, 2020	46,685	$	464	$	1,023,459	$	(592,762)	$	(11,685)	$	419,476


	Common Stock			Additional Paid – In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance as of March 31, 2020	46,011	$	458	$	978,659	$	(553,790)	$	(13,423)	$	411,904
Stock-based compensation				39,535						39,535
Share issuances related to stock-based compensation	674	6		5,265						5,271

Cumulative effect change in accounting for ASU 2016-13						(84)				(84)
Net loss						(38,888)				(38,888)
Other comprehensive income								1,738		1,738
Balance as of September 30, 2020	46,685	$	464	$	1,023,459	$	(592,762)	$	(11,685)	$	419,476

Common Stock Additional
Paid – In
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Total
Shares Amount
Balance as of March 31, 2017 - As Adjusted 44,816
$ 447
$ 694,477
$ (215,677 ) $ (12,315 ) $ 466,932
Cumulative Effect of Adoption of ASU 2016-09 435
(271 ) 164
Stock-based compensation 57,138
57,138
Share issuances related to stock-based compensation 1,660
17
17,696
17,713
Repurchase of common stock (1,691 ) (17 ) (13,215 ) (78,077 ) (91,309 )
Net loss (60,239 ) (60,239 )
Other comprehensive income 5,683
5,683
Balance as of December 31, 2017 44,785
$ 447
$ 756,531
$ (354,264 ) $ (6,632 ) $ 396,082
Commvault Systems, Inc.

Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock			Additional Paid – In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance as of June 30, 2019	45,077	$	449	$	896,383	$	(525,420)	$	(11,595)	$	359,817
Stock-based compensation				14,857						14,857
Share issuances related to stock-based compensation	332	3		5,659						5,662

Net loss						(7,084)				(7,084)
Other comprehensive loss								(1,138)		(1,138)
Balance as of September 30, 2019	45,409	$	452	$	916,899	$	(532,504)	$	(12,733)	$	372,114


	Common Stock			Additional Paid – In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total
	Shares	Amount
Balance as of March 31, 2019	45,582	$	454	$	887,907	$	(485,490)	$	(11,568)	$	391,303
Stock-based compensation				29,607						29,607
Share issuances related to stock-based compensation	657	6		6,319						6,325
Repurchase of common stock	(830)	(8)		(6,934)		(33,084)				(40,026)
Net loss						(13,930)				(13,930)
Other comprehensive loss								(1,165)		(1,165)
Balance as of September 30, 2019	45,409	$	452	$	916,899	$	(532,504)	$	(12,733)	$	372,114

See accompanying unaudited notes to consolidated financial statements

~~Table of Contents~~

Commvault Systems, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Nine Months Ended December 31,							Six Months Ended September 30,
	2017			2016 As Adjusted - See Note 2				2020		2019
Cash flows from operating activities							Cash flows from operating activities
Net loss	$	(60,239	)	$	(705	)	Net loss	$	(38,888)	$	(13,930)
Adjustments to reconcile net loss to net cash provided by operating activities:							Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	8,446			7,573			Depreciation and amortization	10,743		6,054
Noncash stock-based compensation	57,138			55,153			Noncash stock-based compensation	39,535		29,607
Excess tax benefits from stock-based compensation	—			(4,776		)
Deferred income taxes	53,682			(7,398		)
Equity in loss of affiliate	281			544

Amortization of deferred commissions cost	12,314			11,784			Amortization of deferred commissions cost	9,526		8,730
Impairment of operating lease assets							Impairment of operating lease assets	692		2,050
Impairment of intangible asset							Impairment of intangible asset	40,700		0
Changes in operating assets and liabilities:							Changes in operating assets and liabilities:
Trade accounts receivable	(4,591		)	(6,651		)	Trade accounts receivable	3,637		45,625
Operating lease assets and liabilities, net							Operating lease assets and liabilities, net	(808)		42
Other current assets and Other assets	(7,101		)	1,060			Other current assets and Other assets	9,982		(1,796)
Deferred commissions cost	(12,262		)	(12,563		)	Deferred commissions cost	(9,965)		(6,962)
Accounts payable	71			(159		)	Accounts payable	(67)		(425)
Accrued liabilities	(3,652		)	10,858			Accrued liabilities	(17,151)		(1,015)
Deferred revenue	17,963			16,282			Deferred revenue	(10,222)		(12,079)
Other liabilities	(1,222		)	52			Other liabilities	4,528		(782)
Net cash provided by operating activities	60,828			71,054			Net cash provided by operating activities	42,242		55,119
Cash flows from investing activities							Cash flows from investing activities
Purchase of short-term investments	(110,181		)	(93,911		)	Purchase of short-term investments	0		(32,800)
Proceeds from maturity of short-term investments	99,881			72,236			Proceeds from maturity of short-term investments	32,800		65,519

Purchase of property and equipment	(5,297		)	(4,485		)	Purchase of property and equipment	(3,662)		(1,457)
Net cash used in investing activities	(15,597		)	(26,160		)

Net cash provided by investing activities							Net cash provided by investing activities	29,138		31,262
Cash flows from financing activities							Cash flows from financing activities
Repurchase of common stock	(91,309		)	(24,997		)	Repurchase of common stock	0		(40,026)
Proceeds from stock-based compensation plans	17,713			14,271			Proceeds from stock-based compensation plans	5,271		6,325
Excess tax benefits from stock-based compensation (see Note 2)	—			4,776
Net cash used in financing activities	(73,596		)	(5,950		)

Net cash provided by (used in) financing activities							Net cash provided by (used in) financing activities	5,271		(33,701)
Effects of exchange rate — changes in cash	13,368			(10,639		)	Effects of exchange rate — changes in cash	10,420		(3,047)
Net increase (decrease) in cash and cash equivalents	(14,997		)	28,305
Cash and cash equivalents at beginning of period	329,491			288,107
Cash and cash equivalents at end of period	$	314,494		$	316,412
Net increase in cash, cash equivalents and restricted cash							Net increase in cash, cash equivalents and restricted cash	87,071		49,633
Cash, cash equivalents and restricted cash at beginning of period							Cash, cash equivalents and restricted cash at beginning of period	296,082		327,992
Cash, cash equivalents and restricted cash at end of period							Cash, cash equivalents and restricted cash at end of period	$	383,153	$	377,625

See accompanying unaudited notes to consolidated financial statements

~~Table of Contents~~

Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited

(In thousands, except per share data)

1.Basis of Presentation

Commvault Systems, Inc. and its subsidiaries ~~(“Commvault”~~("Commvault," "we," "us," or ~~the “Company”~~"our") is a provider of data protection and information management software applications and ~~related services. The Company develops, markets~~products. We develop, market and ~~sells~~sell a suite of software applications and services, ~~primarily in North America, Europe, Australia and Asia,~~globally, that provides ~~its~~our customers with data protection solutions supporting all major operating systems, applications, and databases on virtual and physical servers, NAS shares, cloud-based infrastructures, and mobile devices; management through a single console; multiple protection methods including backup and archive, snapshot management, replication, and content indexing for eDiscovery; efficient storage management using deduplication for disk, tape and cloud; integration with the industry's top storage arrays; complete virtual infrastructure management supporting multiple hypervisors; security capabilities to limit access to critical data; policy based data management; and an end-user experience that allows them to protect, find and recover their own data using common tools such as web browsers, Microsoft Outlook and File Explorer. In fiscal 2018 the Companysolutions. We also started selling appliances that integrate the Company's 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. The Company also provides itsprovide our customers with a broad range of professional and customer support services.

The consolidated financial statements of Commvault as of ~~December 31, 2017~~September 30, 2020 and for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 are unaudited, and in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the financial statements and notes in ~~the Company’s~~our Annual Report on Form 10-K for fiscal ~~2017.~~2020. The results reported in these financial statements should not necessarily be taken as indicative of results that may be expected for the entire fiscal year. The Company has early adopted the new revenue standard as of April 1, 2017 using the full retrospective method which required each prior reporting period presented to be adjusted beginning with this issuance of the Company’s financial statements.

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments and estimates that affect the amounts reported in ~~the Company’s~~our consolidated financial statements and the accompanying notes. ~~The Company bases its~~We base our estimates and judgments on historical experience and on various other assumptions that ~~it believes~~we believe are reasonable under the circumstances. The amounts of assets and liabilities reported in ~~the Company’s~~our balance sheets and the amounts of revenues and expenses reported for each of ~~its~~our periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition, income taxes and related reserves, ~~stock-based compensation~~ and ~~accounting for research~~goodwill and ~~development costs.~~purchased intangible assets. Actual results could differ from those estimates.

2. Summary of Significant Accounting Policies

During fiscal 2018 the Company adopted new accounting guidance related to revenue recognition and accounting for share-based compensation which is described below. There have been no other significant changes in the Company’s accounting policies during the nine months ended December 31, 2017 as compared to the significant accounting policies described in its Annual Report on Form 10-K for the year ended March 31, 2017.Recently Adopted Accounting Standards


Standard	Description	Effective Date	Effect on the Consolidated Financial Statements (or Other Significant Matters)
Accounting Standards Update ("ASU") No. 2016-13 (Topic 326), Financial Instruments-Credit Losses	The standard amends guidance on the impairment of financial instruments. The ASU estimates credit losses based on expected losses and provides for a simplified accounting model for purchased financial assets with credit deterioration. The standard requires a modified retrospective basis adoption through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.	We adopted this new standard as of April 1, 2020, using the modified retrospective method recognized as of the date of initial application.	The adoption of this new standard resulted in an $84 thousand cumulative effect on our unaudited consolidated financial statements related to an adjustment to our allowance for doubtful accounts. Under the new standard, we assess credit losses on accounts receivable by taking into consideration past collection experience, credit quality of the customer, age of the receivable balance, current economic conditions, and forecasts that affect the collectability of the reported amount.

Table of Contents

Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

Recently Issued Accounting Standards Not Yet Adopted

~~Revenue Recognition~~

~~In May 2014, the Financial Accounting Standards Board (“FASB”~~


Standard	Description	Effective Date	Effect on the Consolidated Financial Statements (or Other Significant Matters)
ASU No. 2019-12 (Topic 740), Income Taxes	In December 2019, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." This standard replaced existing revenue recognition rules with~~ a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. The ASU also includes guidance regarding the accounting for contract acquisition costs, which includes sales commissions. The Company has early adopted the new standard to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.	The standard will be effective for us beginning April 1, 2021, with early adoption permitted.	We are currently evaluating the impact of this standard in our consolidated financial statements, including accounting policies, processes, and systems.

Concentration of Credit Risk

We grant credit to customers in a wide variety of industries worldwide and generally do not require collateral. Credit losses relating to these customers have historically been minimal.

Sales through our distribution agreement with Arrow Enterprise Computing Solutions, Inc. (“Arrow”) totaled 36% and 37% of total revenues for the six months ended September 30, 2020 and 2019, respectively. Arrow accounted for approximately 26% and 31% of total accounts receivable as of ~~April 1, 2017 using the full retrospective method which required each prior reporting period presented to be adjusted beginning with this issuance~~September 30, 2020 and March 31, 2020, respectively.

Tech Data Corporation ("Tech Data") accounted for approximately 11% of ~~the Company’s financial statements.~~ total accounts receivable as of September 30, 2020.

Fair Value of Financial Instruments

The ~~most significant impact~~carrying amounts of ~~adopting the new standard related~~our cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the ~~deferral~~short-term maturity of ~~commission costs. A portion~~these instruments. Our short-term investments balance consists of ~~sales commissions cost is now recorded~~U.S. Treasury Bills with maturities of one year or less. We account for our short-term investments as ~~an asset and recognized as an operating expense over the time period that the Company expects~~held to ~~recover the costs.~~

~~Select adjusted unaudited financial statement information, which reflect the adoption of Topic 606 is below. The Company’s historical net cash flows are not impacted by this accounting change.~~maturity.

Three Months Ended December 31, 2016
Unaudited
As Reported Adjustments Adjusted for Adoption of ASC 606
Revenues:
Software and products $ 77,322
$ 1,333
$ 78,655
Services 88,519
(113 ) 88,406
Total revenues 165,841
1,220
167,061
Total cost of revenues 21,166
—
21,166
Gross margin 144,675
1,220
145,895
Total operating expenses 143,433
(1,380 ) 142,053
Income from operations 1,242
2,600
3,842
Interest expense (233 ) —
(233 )
Interest income 312
—
312
Equity in loss of affiliate (300 ) —
(300 )
Income before income taxes 1,021
2,600
3,621
Income tax expense 1,063
599
1,662
Net income (loss) $ (42 ) $ 2,001
$ 1,959

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Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

Nine Months Ended December 31, 2016
Unaudited
As Reported Adjustments Adjusted for Adoption of ASC 606
Revenues:
Software and products $ 211,716
$ 757
$ 212,473
Services 265,871
(71 ) 265,800
Total revenues 477,587
686
478,273
Total cost of revenues 63,818
—
63,818
Gross margin 413,769
686
414,455
Total operating expenses 415,832
(1,933 ) 413,899
Income (loss) from operations (2,063 ) 2,619
556
Interest expense (724 ) —
(724 )
Interest income 843
—
843
Equity in loss of affiliate (544 ) —
(544 )
Income (loss) before income taxes (2,488 ) 2,619
131
Income tax expense 160
676
836
Net income (loss) $ (2,648 ) $ 1,943
$ (705 )

March 31, 2017
Unaudited Balance Sheet Data
As Reported Adjustments Adjusted for Adoption of ASC 606
Current assets:
Trade accounts receivable $ 132,761
$ 7,323
$ 140,084
Total current assets $ 598,736
$ 7,323
$ 606,059
Deferred tax assets, net $ 61,018
$ (10,790 ) $ 50,228
Deferred commissions $ —
$ 30,378
$ 30,378
Total assets $ 802,967
$ 26,911
$ 829,878
Current Liabilities:
Deferred revenue $ 206,777
$ 2,322
$ 209,099
Total current liabilities $ 285,595
$ 2,322
$ 287,917
Other liabilities $ 3,934
$ 292
$ 4,226
Accumulated deficit $ (239,974 ) $ 24,297
$ (215,677 )
Total stockholders’ equity $ 442,635
$ 24,297
$ 466,932
Total liabilities and stockholders’ equity $ 802,967
$ 26,911
$ 829,878

~~Share-Based Compensation~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718),~~ which simplifies the accounting for share-based payment transactions, including related accounting for income taxes, forfeitures, and classification in the statement of cash flows. The Company adopted the guidance prospectively effective April 1, 2017.

~~Table of Contents~~

~~Commvault Systems, Inc~~

~~Notes to Consolidated Financial Statements - Unaudited (continued)~~

~~(In thousands, except per share data)~~

The guidance requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement of income when the awards vest or are settled, and eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the statement of cash flows. In the nine months ended December 31, 2017, the Company recognized $7,884 of such excess tax benefits, and, pursuant to the adopted guidance, net loss decreased by $7,884, or $0.17 per basic and diluted share. Amounts previously recorded to Additional paid-in capital related to excess tax benefits prior to April 1, 2017 remain in Stockholders' equity. Cash flows related to excess taxes prior to April 1, 2017 remain classified as financing cash flows. In addition, the standard allows the Company to repurchase more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and provides an accounting policy election to account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur. The cumulative impact of the election to account for forfeitures as they are incurred is included as an adjustment to accumulated deficit.

~~Leases~~

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02, a lessee will recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-to-use asset representing its right to use the underlying asset for the lease term. The amendments of this ASU are effective for the Company's fiscal 2020, with early adoption permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have on the financial statements.

~~Trade and Other Receivables~~

Trade and other receivables are primarily comprised of trade receivables that are recorded at the invoice amount, net of an allowance for doubtful accounts, which is not material. Unbilled receivables represent amounts for which revenue has been recognized but which have not yet been invoiced to the customer. The current portion of unbilled receivables is included in Trade accounts receivable on the consolidated balance sheet. Long term unbilled receivables are included in Other assets.

~~Sales Tax~~

~~The Company records revenue net of sales tax.~~

~~Shipping and Handling Costs~~

~~Shipping and handling costs are included in cost of revenues for all periods presented~~

~~Deferred Commissions Cost~~

Sales commissions and related payroll taxes earned by the Company's employees are considered incremental and recoverable costs of obtaining a contract with a customer. The Company’s typical contracts include performance obligations related to software licenses, software updates, customer support and other professional services. In these contracts, incremental costs of obtaining a contract are allocated to the performance obligations based on the relative estimated standalone selling prices and then recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates. The Company does not pay commissions on annual renewals of contracts for software updates and customer support for perpetual licenses. The costs allocated to software and products are expensed at the time of sale, when revenue for the functional software license or appliance is recognized. The costs allocated to software updates and customer support for perpetual licenses are amortized ratably over a period of approximately five years, the expected period of benefit of the asset capitalized. The Company currently estimates a period of five years is appropriate based on consideration of historical average customer life and the estimated useful life of the underlying software or appliance sold as part of the transaction. The costs related to professional services are amortized within one quarter following the date of the related software or appliance sale, which is typically the period the related professional services are provided and revenue is recognized. Amortization expense related to these costs is included in Sales and marketing expenses in the accompanying condensed consolidated statements of loss.

Costs related to software updates and support for term-based, or subscription software licenses, are limited to the contractual period of the arrangement as the Company intends to pay a commensurate commission upon renewal of the subscription license and related updates and support.

~~Table of Contents~~

~~Commvault Systems, Inc~~

~~Notes to Consolidated Financial Statements - Unaudited (continued)~~

~~(In thousands, except per share data)~~

~~Deferred Revenue~~

Deferred revenues represent amounts collected from, or invoiced to, customers in excess of revenues recognized. This results primarily from the billing of annual customer support agreements, and billings for other professional services fees that have not yet been performed by the Company. The value of deferred revenues will increase or decrease based on the timing of invoices and recognition of revenue.

~~Related Party Transactions~~

During the first quarter of fiscal 2018, one of our Directors, Joseph F. Eazor, was hired as the CEO of Rackspace, Inc ("Rackspace"). Prior to his appointment as CEO, the Company completed the sale of $4,212 of software and related services to Rackspace. Total recognized revenue related to Rackspace in the first nine months of fiscal 2018 was $4,950. The outstanding accounts receivable from this customer as of December 31, 2017 is $1,910.

~~Concentration of Credit Risk~~

~~The Company grants credit to customers in a wide variety of industries worldwide and generally does not require collateral. Credit losses relating to these customers have been minimal.~~

Sales through the Company’s distribution agreement with Arrow Enterprise Computing Solutions, Inc. (“Arrow”) totaled approximately 37% of total revenues for the nine months ended December 31, 2017 and 2016. Arrow accounted for approximately 40% of total accounts receivable as of both December 31, 2017 and March 31, 2017.

~~Fair Value of Financial Instruments~~

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to the short-term maturity of these instruments. The Company’s cash equivalents balance consists primarily of money market funds. The Company’s short-term investments balance consists of U.S. Treasury Bills with maturities of one year or less. The Company accounts for its short-term investments as held to maturity.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for such asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:

~~Level 1 – Quoted prices in active markets for identical assets or liabilities.~~

Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

~~Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.~~

The following table summarizes the composition of ~~the Company’s~~our financial assets and liabilities measured at fair value on a recurring basis at ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017:~~2020:


September 30, 2020	Level 1		Level 2	Level 3	Total

Short-term investments	$	0	10,996	0	$	10,996

December 31, 2017 Level 1 Level 2 Level 3 Total
Cash equivalents $ 41,672
—
—
$ 41,672
Short-term investments $ —
131,457
—
$ 131,457


March 31, 2020	Level 1		Level 2	Level 3	Total

Short-term investments	$	0	44,484	0	$	44,484

March 31, 2017 Level 1 Level 2 Level 3 Total
Cash equivalents $ 70,190
—
—
$ 70,190
Short-term investments $ —
120,989
—
$ 120,989

~~Table of Contents~~

~~Commvault Systems, Inc~~

~~Notes to Consolidated Financial Statements - Unaudited (continued)~~

~~(In thousands, except per share data)~~

~~Income Taxes~~

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes” (“ASC 740”). The provision for income taxes and effective tax rates are calculated by legal entity and jurisdiction and are based on a number of factors, including the level of pre-tax earnings, income tax planning strategies, differences between tax laws and accounting rules, statutory tax rates and credits, uncertain tax positions and valuation allowances. The Company uses significant judgment and estimates in evaluating tax positions. The effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings by taxing jurisdiction.

Under ASC 740, deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts. Valuation allowances are established when, in the Company's judgment, it is more likely than not that deferred tax assets will not be realized. In assessing the need for a valuation allowance, the Company weighs the available positive and negative evidence, including historical levels of pre-tax income, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies.

3. Revenue

~~The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which was adopted on April 1, 2017, using the full retrospective method.~~

~~The Company derives~~We derive revenues from ~~two~~2 primary sources: software and products, and services. Software and products revenue includes ~~the Company's~~our software and integrated appliances that combine ~~the Company's~~our software with hardware. Services include customer support (software updates and technical support), consulting, assessment and design services, installation services, customer education and ~~customer education. A typical contract includes~~Commvault software-as-a-service, which is branded as Metallic.

We sell both perpetual and term-based licenses ~~and services.~~

~~The Company’s software licenses typically provide for a perpetual right~~of our software. We refer to ~~use the Company’s software. The Company also sells~~our term-based software licenses ~~that expire, which are referred to~~ as subscription arrangements. ~~The Company does~~We do not customize ~~its~~our software and installation services are not required. The software is delivered before related services are provided and is functional without professional services, updates and technical support. ~~The Company has~~We have concluded that ~~its~~our software ~~license is~~licenses (both perpetual and subscription) are functional intellectual property that is distinct as the user can benefit from the software on its own. Software revenue for both perpetual and subscription licenses is typically recognized when the software is delivered and/or made available for download as this is the point the user of the software can direct the use of, and obtain substantially all of the remaining benefits from the functional intellectual property. ~~The Company does~~We do not recognize software revenue related to the renewal of subscription software licenses earlier than the beginning of the new subscription period.

~~In fiscal 2018, the Company~~We also ~~started selling~~sell appliances that integrate ~~the Company's~~our 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. Revenue related to appliances is recognized when control of the appliances passes to the customer; typically upon delivery. ~~Revenue to date related to appliances has not been significant.~~

Services revenue includes revenue from customer support and other professional services. Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches. The Company sells its customer support contracts as a percentage of net software purchases the support is related to. Customer support revenue is recognized ratably over the term of the customer support agreement, which is typically one year.

~~The Company’s~~Our other professional services include consulting, assessment and design services, installation services and customer education. Customer education services include courses taught by ~~the Company’s~~our instructors or third-party contractors. Revenue related to other professional services and customer education services is typically recognized as the services are performed. In fiscal 2020 Commvault launched Metallic, which is a Commvault software-as-a-service offering. Revenue from Metallic is recognized ratably as services revenue. Revenue to date from Metallic has not been material.

Most of ~~the Company’s~~our contracts with customers contain multiple performance obligations. For these contracts, ~~the Company accounts~~we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software and appliances are typically estimated using the residual approach. Standalone selling prices of services are typically estimated based on observable transactions when these services are sold on a standalone basis.

Table of Contents

Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

~~The Company’s~~Our typical performance obligations include the following:



Performance Obligation	When Performance Obligation is Typically Satisfied	When Payment is Typically Due	How Standalone Selling Price is Typically Estimated
Software and Products Revenue
Software Licenses	Upon shipment or made available for download (point in time)	Within 90 days of shipment except for certain subscription licenses which are paid for over time	Residual approach
Appliances	When control of the appliances passes to the customer; typically upon delivery	Within 90 days of delivery ~~except for certain subscriptions which are paid for over time~~	Residual approach
Customer Support Revenue
Software Updates	Ratably over the course of the support contract (over time)	At the beginning of the contract period	Observable in renewal transactions
Customer Support	Ratably over the course of the support contract (over time)	At the beginning of the contract period	Observable in renewal transactions
~~Professional~~Other Services Revenue
Other Professional Services (except for education services)	As work is performed (over time)	Within 90 days of services being performed	Observable in transactions without multiple performance obligations
Education Services	When the class is taught (point in time)	Within 90 days of services being performed	Observable in transactions without multiple performance obligations
Software-as-a-service (Metallic)	Ratably over the course of the contract (over time)	Annual or monthly payments	Observable in transactions without multiple performance obligations

Disaggregation of Revenue

~~The Company disaggregates~~We disaggregate revenue from contracts with customers into the nature of the products and services and geographical regions. The geographic regions that are tracked are the Americas (United States, Canada, Latin America), EMEA (Europe, Middle East, Africa) and ~~APAC~~APJ (Australia, New Zealand, Southeast Asia, China). ~~The Company operates~~We operate in ~~one~~1 segment.


	Three Months Ended September 30, 2020
	Americas		EMEA		APJ		Total
Software and Products Revenue	$	39,241	$	22,063	$	11,005	$	72,309
Customer Support Revenue	54,177		24,911		10,359		89,447
Other Services Revenue	4,794		3,084		1,505		9,383
Total Revenue	$	98,212	$	50,058	$	22,869	$	171,139

Three Months Ended December 31, 2017
Americas EMEA APAC Total
Software and Products Revenue $ 40,783
$ 29,472
$ 11,188
$ 81,443
Customer Support Revenue 59,225
19,478
9,151
87,854
Professional Services 6,287
2,944
1,838
11,069
Total Revenue $ 106,295
$ 51,894
$ 22,177
$ 180,366


	Three Months Ended September 30, 2019
	Americas		EMEA		APJ		Total
Software and Products Revenue	$	35,863	$	21,440	$	11,292	$	68,595
Customer Support Revenue	57,864		21,906		10,233		90,003
Other Services Revenue	4,430		2,680		1,874		8,984
Total Revenue	$	98,157	$	46,026	$	23,399	$	167,582

Three Months Ended December 31, 2016
Americas EMEA APAC Total
Software and Products Revenue $ 41,804
$ 26,228
$ 10,623
$ 78,655
Customer Support Revenue 54,738
16,323
8,079
79,140
Professional Services 5,385
2,574
1,307
9,266
Total Revenue $ 101,927
$ 45,125
$ 20,009
$ 167,061

Table of Contents

Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)


	Six Months Ended September 30, 2020
	Americas		EMEA		APJ		Total
Software and Products Revenue	$	89,886	$	40,858	$	18,119	$	148,863
Customer Support Revenue	109,415		48,221		20,454		178,090
Other Services Revenue	8,907		5,639		2,640		17,186
Total Revenue	$	208,208	$	94,718	$	41,213	$	344,139


	Six Months Ended September 30, 2019
	Americas		EMEA		APJ		Total
Software and Products Revenue	$	67,084	$	42,815	$	22,370	$	132,269
Customer Support Revenue	115,594		43,573		20,318		179,485
Other Services Revenue	9,296		5,362		3,373		18,031
Total Revenue	$	191,974	$	91,750	$	46,061	$	329,785

Nine Months Ended December 31, 2017
Americas EMEA APAC Total
Software and Products Revenue $ 121,498
$ 74,293
$ 32,433
$ 228,224
Customer Support Revenue 173,619
55,214
26,688
255,521
Professional Services 17,113
8,248
5,372
30,733
Total Revenue $ 312,230
$ 137,755
$ 64,493
$ 514,478

Nine Months Ended December 31, 2016
Americas EMEA APAC Total
Software and Products Revenue $ 121,527
$ 61,014
$ 29,932
$ 212,473
Customer Support Revenue 162,223
49,385
24,237
235,845
Professional Services 17,770
8,143
4,042
29,955
Total Revenue $ 301,520
$ 118,542
$ 58,211
$ 478,273

Information about Contract Balances

Amounts collected in advance of services being provided are accounted for as deferred revenue. Nearly all of ~~the Company's~~our deferred revenue balance is related to services revenue, primarily customer support contracts.

In some arrangements ~~the Company allows~~we allow customers to pay for ~~term based~~term-based software licenses and products over the term of the software license. ~~The Company refers to these as subscription transactions.~~ Amounts recognized as revenue in excess of amounts billed are recorded as unbilled receivables. Unbilled receivables, which are anticipated to be invoiced in the next twelve months, are included in Accounts receivable on the ~~consolidated balance sheet. Long term~~Consolidated Balance Sheets. Long-term unbilled receivables are included in Other assets. The opening and closing balances of ~~the Company’s~~our accounts receivable, unbilled receivables, and deferred revenues are as follows:


	Accounts Receivable		Unbilled Receivable (current)		Unbilled Receivable (long-term)		Deferred Revenue (current)		Deferred Revenue (long-term)
Opening Balance as of March 31, 2020	$	129,856	$	17,134	$	7,857	$	233,497	$	92,723
Increase/(decrease), net	(12,135)		4,102		3,736		(5,720)		4,783
Ending Balance as of September 30, 2020	$	117,721	$	21,236	$	11,593	$	227,777	$	97,506

Accounts Receivable
Unbilled Receivable
(current)
Unbilled Receivable
(long-term)
Deferred Revenue
(current)
Deferred Revenue
(long-term)
Opening Balance as of March 31, 2017 $ 132,711
$ 7,373
$ —
$ 209,099
$ 70,803
Increase/(decrease), net 8,750
(2,084 ) 1,419
18,433
9,232
Ending Balance as of December 31, 2017 $ 141,461
$ 5,289
$ 1,419
$ 227,532
$ 80,035

The ~~increase~~decrease in accounts receivable (inclusive of unbilled receivables) is ~~primarily~~ a result of ~~an increase~~a concentration of customer support renewals in ~~software and products revenue relative to~~ the ~~fourth quarter~~second half of the prior ~~year.~~fiscal year. The ~~increase~~decrease in deferred revenue is primarily due to the ~~result of an increase~~decrease in deferred customer support revenue related to software and products revenue transactions and customer support renewals ~~during~~relative to the ~~first nine months~~fourth quarter of fiscal ~~2018, most of which will be recognized over the course of the next twelve months.~~2020.

The amount of revenue recognized in the period that was included in the ~~opening~~March 31, 2020 balance of deferred revenue ~~balance~~ was ~~$86,756~~$69,025 and ~~$248,352~~$155,728 for the three and ~~nine~~six months ended ~~December 31, 2017, respectively.~~September 30, 2020. The vast majority of this revenue consists of customer support arrangements. The amount of software and products revenue recognized ~~from~~in the three and six months ended September 30, 2020 related to performance obligations ~~satisfied in~~from prior periods was not ~~material.~~significant.

Remaining Performance Obligations

In addition to the amounts included in deferred revenue as of ~~December 31, 2017, approximately $18,658~~September 30, 2020, $32,238 of revenue may be recognized from remaining performance obligations, of which ~~$736~~approximately $3,000 was related to software and products. ~~The Company expects~~We expect the majority of this software and products revenue to be recognized ~~next quarter.~~during the three months ended December 31, 2020. The vast majority of the services revenue is related to other professional services which may be recognized over the next twelve months but is contingent upon a number of factors, including customers’ needs and schedules.

Table of Contents

Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

4. ~~Property~~Goodwill and ~~Equipment~~Intangible Assets, Net

~~Property~~Goodwill

There were 0 additions, impairments or any other changes to the carrying amount of goodwill during the three and ~~equipment consist~~six months ended September 30, 2020.

Intangible assets, net

Intangible assets subject to amortization as of September 30, 2020 are as follows:


	Gross Carrying Amount		Accumulated Amortization		Impairment Charge		Net Carrying Value
Developed technology	$	49,000	$	(9,800)	$	(39,200)	$	0
Customer relationships	3,000		(1,500)		(1,500)		0
Total intangible assets, net	$	52,000	$	(11,300)	$	(40,700)	$	0

Amortization expense from acquired intangible assets was $2,825 and $5,650 for the three and six months ended September 30, 2020, respectively. There were 0 intangible assets subject to amortization for the three and six months ended September 30, 2019.

Our intangible assets (developed technology and customer relationships) were acquired in connection with the Hedvig, Inc. ("Hedvig") transaction. The most material of these assets was the developed technology. The value of this asset was attributable to forecasted incremental revenues directly attributable to this technology. While we have successfully integrated this technology into our existing Hyperscale technology, we have not met our forecasts for standalone sales of this acquired technology. During the second quarter of fiscal year 2021 we identified an indicator of impairment and concluded that the carrying values of the ~~following:~~

December 31, March 31,
2017 2017
Land $ 9,445
$ 9,445
Buildings 103,244
103,244
Computers, servers and other equipment 38,412
35,274
Furniture and fixtures 15,656
14,912
Leasehold improvements 9,254
7,040
Purchased software 1,494
1,335
Construction in process 749
1,147
178,254
172,397
Less: Accumulated depreciation and amortization (48,622 ) (40,078 )
$ 129,632
$ 132,319

~~The Company~~developed technology and customer relationships acquired in connection with the Hedvig transaction were not recoverable on an undiscounted basis. As a result, we remeasured the fair value of these assets and concluded their value was de minimis. We recorded ~~depreciation and amortization expense~~a $40,700 impairment charge in the accompanying Consolidated Statements of ~~$8,257 and $7,384~~Operations for the ~~nine~~three months ended ~~December 31, 2017~~September 30, 2020. These non-recurring fair value measurements were categorized as Level 3, as significant unobservable inputs were used in the valuation analysis. Key assumptions used in the valuation include forecasts of revenue and ~~2016, respectively.~~expenses over an extended period, the useful life of the asset, tax rates, and estimated costs of debt and equity capital to discount the projected cash flows. Certain of these assumptions involve significant judgment and are based on management’s estimate of current and forecasted market conditions.

5. Net Income per Common Share

Basic net income per common share is computed by dividing net income by the weighted average number of common shares during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options, vesting of restricted stock units and shares to be purchased under the Employee Stock Purchase Plan. The dilutive effect of such potential common shares is reflected in diluted earnings per share by application of the treasury stock method.

The diluted ~~weighted average~~weighted-average shares outstanding exclude outstanding stock options, restricted stock units, ~~performance stock options,~~ performance restricted stock units and shares to be purchased under the employee stock purchase plan totaling ~~approximately 7,247~~5,040 and ~~1,879~~4,780 for the three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019, respectively, and ~~7,398~~5,031 and ~~8,346~~4,810 for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016, respectively,~~2019 because the effect would have been anti-dilutive.

6. Commitments and Contingencies

From time to time, we are subject to claims in legal proceedings arising in the normal course of business. We do not believe that we are currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business or operating results.

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Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

7. Capitalization

~~6. Commitments and Contingencies~~As of September 30, 2020, $162,829 remained in our current stock repurchase authorization which expires on March 31, 2021.

~~In the normal course of its business, the Company may be involved in various claims, negotiations and legal actions.~~

Subsequent Event

On October 22, 2020, the Board of Directors authorized an increase to the existing share repurchase program so that $200,000 was available. The authorization will expire on March 31, 2022.

8. Stock Plans

The following table presents the stock-based compensation expense included in Cost of services revenue, Sales and marketing, Research and development, General and administrative expenses and Restructuring expenses for the three and six months ended September ~~10, 2014,~~30, 2020 and 2019. Stock-based compensation is attributable to stock options, restricted stock units, performance based awards and the employee stock purchase plan.


	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Cost of services revenue	$	740	$	698	$	1,406	$	1,388
Sales and marketing	8,988		7,359		16,192		15,005
Research and development	5,578		2,011		11,519		4,004
General and administrative	4,631		4,184		9,714		8,237
Restructuring	647		605		704		973
Stock-based compensation expense	$	20,584	$	14,857	$	39,535	$	29,607

As of September 30, 2020, there was $110,911 of unrecognized stock-based compensation expense related to restricted stock unit awards that is expected to be recognized over a ~~purported class action complaint~~weighted-average period of 1.90 years. We account for forfeitures as they occur. To the extent that awards are forfeited, stock-based compensation will be different from our current estimate.

Stock option activity was ~~filed~~not significant in the ~~United States District Court~~three and six months ended September 30, 2020.

Restricted Stock Units

Restricted stock unit activity for the ~~District~~six months ended September 30, 2020 is as follows:


Non-vested Restricted Stock Units	Number of Awards	Weighted- Average Grant Date Fair Value
Non-vested as of March 31, 2020	3,237	$	50.47
Awarded	857	37.42
Vested	(521)	55.29
Forfeited	(189)	52.45
Non-vested as of September 30, 2020	3,384	$	46.38

The weighted-average fair value of ~~New Jersey against the Company, its Chief Executive Officer~~restricted stock units awarded was $42.02 and its Chief Financial Officer. The case is captioned In re Commvault Systems, Inc. Securities Litigation (Master File No. 3:14-cv-05628-MAS-LHG). The suit alleges that the Company made materially false and misleading statements, or failed to disclose material facts, regarding the Company's financial results, business, operations and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The suit is purportedly brought on behalf of purchasers of the Company's common stock$37.42 per unit during the ~~period from May 7, 2013 through April 24, 2014,~~three and seeks compensatory damages, costs and expenses, as well as equitable or other relief. Lead plaintiff, the Arkansas Teachers Retirement System, was appointed on January 12, 2015, and on March 18, 2015, an amended complaint was filed by the plaintiffs. On December 17, 2015, the defendant’s motion to dismiss the case was granted and the case dismissed; however, the plaintiffs were permitted to re-file their claim, which they did on February 5, 2016. Defendants filed another motion to dismiss on April 5, 2016, which was denied by the court onsix months ended September 30, ~~2016. Thereafter, discovery commenced. On October 2, 2017,~~2020, and $43.39 and $48.17 per unit during the ~~parties entered into an agreement in principle to settle~~three and six months ended September 30, 2019. The weighted-average fair value of awards includes the ~~action for $12,500. The parties signed~~awards with a stipulation of settlement on November 30, 2017. The settlement remains subject to court approval. The Company has not recorded an accrual for this matter as the settlement amount is to be funded solely by the Company’s insurers. There can be no assurance that the settlement will ultimately be approved or that it will become final. If the settlement does not occur and litigation against the Company continues, the Company believes that it has meritorious defenses and intends to defend the case vigorously. However, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of this matter if the litigation continues.market condition described below.

On April 12, 2017, a shareholder derivative complaint was filed in the United States District Court for the District of New Jersey against the Company (nominally), certain of its executive officers and certain members of the board of directors. The complaint is entitled Murashko v. Hammer, et al. (Civ. No. 3:17-cv-02533-PGS-TJB). The plaintiff filed an amended complaint on July 14, 2017. The amended complaint largely repeats the allegations made in the securities litigation also pending in the United States District Court for the District of New Jersey (In re Commvault Systems, Inc. Securities Litigation (Master File No. 3:14-cv-05628-PGS-LHG), claiming that the defendant officers and directors breached their fiduciary duties to the Company by causing, or allowing, the Company to manipulate its financial results and conceal the state of its business prospects. The suit also alleges that certain executive officers engaged in unlawful insider trading in 2013 and/or 2014 based on their knowledge of the information that was supposedly concealed. The allegations asserted in the shareholder derivative action purport to cover a period from 2013 through the present. As a derivative action, the complaint does not seek damages from the Company, but rather seeks to recover from the defendant officers and directors on behalf of the Company compensatory damages, restitution, costs and expenses, as well as equitable or other relief. On August 29, 2017, all of the defendants, including the Company, filed a motion to dismiss the derivative action, and a hearing took place on December 18, 2017. On November 30, 2017, a virtually identical shareholder derivative complaint was filed in state court in New Jersey entitled Lee v. Hammer, et al., Civ. 201-17 (N.J. Super. Ct.). The Lee case has been voluntarily stayed by agreement of the parties pending a ruling on the motion to dismiss in the Murashko complaint. Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of these matters. The Company is unable at this time to determine whether the outcome of the litigations will have a material impact on its results of operations, financial condition or cash flows. As of December 31, 2017, the Company has not recorded an accrual for these matters.

On February 27, 2017, Realtime Data LLC d/b/a/ IXO (“Realtime”), a non-practicing entity, sued the Company and Spectra Logic Corporation in the Eastern District of Texas for alleged infringement of four patents: U.S. Patent Nos. 9,054,728, 7,415,530, 9,116,908, and 8,717,204. Realtime dismissed the case in Texas and refiled this case in the District of Delaware on July 10, 2017. Realtime has sued numerous other companies for infringement of these and other patents. Realtime seeks monetary damages and an injunction. The Company responded to the complaint by filing a motion to dismiss on the grounds that the patents are directed to patent-ineligible subject matter. The Court has not yet ruled on this motion. Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of this matter. The Company is unable at this time to determine whether the outcome of the litigation will have a material impact on its results of operations, financial condition or cash flows. The Company intends to defend itself vigorously. As of December 31, 2017, the Company has not recorded an accrual for this matter.

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Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

~~7. Revolving Credit Facility~~

On June 30, 2014, the Company entered into a five-year $250,000 revolving credit facility (the “Credit Facility”). The Credit Facility is available for share repurchases, general corporate purposes, and letters of credit. The Credit Facility contains financial maintenance covenants including a leverage ratio and interest coverage ratio. The Credit Facility also contains certain customary events of default which would permit the lenders to, among other things, declare all loans then outstanding to be immediately due and payable if such default is not cured within applicable grace periods. The Credit Facility also limits the Company's ability to incur certain additional indebtedness, create or permit liens on assets, make acquisitions, make investments, loans or advances, sell or transfer assets, pay dividends or distributions, and engage in certain transactions with foreign affiliates. Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to London Interbank Offered Rate plus 1.50% subject to increases based on the Company's actual leverage. The unused balance on the Credit Facility is also subject to a 0.25% annual interest charge subject to increases based on the Company's actual leverage. As of December 31, 2017, there were no borrowings under the Credit Facility and the Company was in compliance with all covenants.

The Company has deferred the expense related to debt issuance costs, which are classified as Other assets, and will amortize the costs into Interest expense over the term of the Credit Facility. Unamortized amounts at December 31, 2017 were $379. The amortization of debt issuance costs was $63 and $189 in the three and nine months ended December 31, 2017 and 2016.

~~8. Capitalization~~

~~During the nine months ended December 31, 2017, the company repurchased $91,309 of common stock (1,691 shares).~~

~~Subsequent Event~~

On January 17, 2018, the Board of Directors extended the expiration date of the share repurchase program to March 31, 2019 and authorized a $100,000 increase to the existing share repurchase program so that $133,749 is now available.

~~9. Stock Plans~~

On August 24, 2017, the Company’s shareholders approved an amendment to the Omnibus Incentive Plan (the “2016 Incentive Plan”) to increase the maximum number of shares of common stock that may be delivered under plan to 3,550. The 2016 Incentive Plan authorizes a broad range of awards including stock options, stock appreciation rights, full value awards (including restricted stock, restricted stock units, performance shares or units and other stock-based awards) and cash-based awards.

The following table presents the stock-based compensation expense included in Cost of services revenue, Sales and marketing, Research and development and General and administrative expenses for the three and nine months ended December 31, 2017 and 2016. Stock-based compensation is attributable to stock options, restricted stock units, performance based awards and the employee stock purchase plan.

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Cost of services revenue $ 846
$ 1,060
$ 2,348
$ 2,895
Sales and marketing 9,464
9,100
27,888
25,061
Research and development 2,170
1,924
6,310
5,372
General and administrative 5,273
7,026
20,592
21,825
Stock-based compensation expense $ 17,753
$ 19,110
$ 57,138
$ 55,153

As of December 31, 2017, there was approximately $103,468 of unrecognized stock-based compensation expense related to non-vested stock option and restricted stock unit awards that is expected to be recognized over a weighted average period of 1.21 years. The Company accounts for forfeitures as they occur. To the extent that awards are forfeitured, stock-based compensation will be different from the Company’s current estimate.

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~~Commvault Systems, Inc~~

~~Notes to Consolidated Financial Statements - Unaudited (continued)~~

~~(In thousands, except per share data)~~

~~Stock Options~~

~~Stock Option activity for the nine months ended December 31, 2017 is as follows:~~

Options
Number
of
Options

Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term
(Years)

Aggregate
Intrinsic
Value
Outstanding as of March 31, 2017 5,300
$ 44.74

Options granted —
—

Options exercised (442 ) 29.27

Options forfeited (20 ) 43.40

Options expired (25 ) 68.85

Outstanding as of December 31, 2017 4,813
$ 46.04
4.13 $ 66,006
Exercisable as of December 31, 2017 4,554
$ 46.09
3.97 $ 64,086

The total intrinsic value of options exercised was $1,194 and $12,819 for the three and nine months ended December 31, 2017 and $2,101 and $6,540 for the three and nine months ended December 31, 2016. The Company’s policy is to issue new shares upon exercise of options as the Company does not hold shares in treasury.

~~Restricted Stock Units~~

~~Restricted stock unit activity for the nine months ended December 31, 2017 is as follows:~~

Non-vested Restricted Stock Units Number of
Awards Weighted
Average Grant
Date Fair Value
Non-vested as of March 31, 2017 2,396
$ 45.53
Awarded 1,191
59.91
Vested (1,108 ) 58.32
Forfeited (90 ) 46.69
Non-vested as of December 31, 2017 2,389
$ 51.24

The weighted average fair value of restricted stock units awarded was $59.84 and $59.91 per unit during the three and nine months ended December 31, 2017, and $53.16 and $50.55 per unit during the three and nine months ended December 31, 2016. The weighted average fair value of awards includes the awards with a market condition described below.

~~Performance Based Awards~~

In the nine months ended December 31, 2017, the Company granted 107 performance restricted stock units ("PSU") to certain executives. Vesting of these awards is contingent upon i) the Company meeting certain company-wide revenue and non-GAAP performance goals (performance-based) in fiscal 2017 and ii) the Company's customary service periods. The awards vest over three years and have a maximum potential to vest at 200% (214 shares) based on actual fiscal 2018 performance. The related stock-based compensation expense is determined based on the value of the underlying shares on the date of grant and is recognized over the vesting term using the accelerated method. During the interim financial periods, management estimates the probable number of PSU’s that would vest until the ultimate achievement of the performance goals is known. The awards are included in the restricted stock unit table.

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~~Commvault Systems, Inc~~

~~Notes to Consolidated Financial Statements - Unaudited (continued)~~

~~(In thousands, except per share data)~~

Awards with a Market Condition

In the ~~nine~~six months ended ~~December 31, 2017, the Company~~September 30, 2020, we granted 88299 market performance stock units to certain executives. The vesting of these awards is contingent upon ~~the Company~~us meeting certain total shareholder return ("TSR") levels as compared to athe Russell 3000 market index over the next three years. The awards vest in ~~three~~3 annual tranches and have a maximum potential to vest at 200% ~~(176~~(598 shares) based on TSR performance. The related stock-based compensation expense is determined based on the estimated fair value of the underlying shares on the date of grant and is recognized using the accelerated method over the vesting term. The estimated fair value was calculated using a Monte Carlo simulation model. The fair value of the awards granted during the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 was ~~$78.28.~~$36.76 per unit. The awards are included in the restricted stock unit ~~table.~~table above.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the ~~“Purchase Plan”~~"Purchase Plan") is a shareholder approved plan under which substantially all employees may purchase ~~the Company’s~~Commvault’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of the six-month offering periods. An employee’s payroll deductions under the Purchase Plan are limited to 10% of the employee’s salary and employees may not purchase more than $25 of stock during any calendar year. AsEmployees purchased 129 shares in exchange for $4,652 of December 31, 2017, 2,290 shares were reserved for future issuance under the Purchase Plan. The Purchase Plan is considered compensatory and the fair value of the discount and look back provision are estimated using the Black-Scholes formula and recognized overproceeds in the six ~~month withholding period prior to purchase.~~months ended September 30, 2020 and 136 shares in exchange for $4,833 in the six months ended September 30, 2019. The total expense associated with the Purchase Plan was ~~$722 and $2,097~~$1,511 for the ~~three and nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~$632 and $1,966~~$1,521 for the ~~three and nine~~six months ended ~~December 31, 2016.~~September 30, 2019.

~~10.~~

9. Income Taxes

Income tax expense was ~~$55,282~~$4,211 in the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 compared to an expense of ~~$836~~$2,571 in the ~~nine~~six months ended ~~December 31, 2016. The increase in income~~September 30, 2019. In the fourth quarter of fiscal 2020, we recorded a current tax ~~expense was primarily the result~~benefit of ~~the combined impact of the lower U.S. corporate income tax rate on net deferred tax assets and recording a full valuation allowance against the remaining value of net deferred tax assets.~~

~~Impact of U.S. Tax Reform~~

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, the Company has not completed the accounting for the tax effects of enactment of the Act; however, as described below, it has made a reasonableapproximately $10,000 which represented our estimate of the ~~effects on existing deferred tax balances. These amounts are provisional and subject to change. The most significant impact of~~net operating loss carryback resulting from the ~~legislation for~~CARES Act. In the Company was a $24,300 reduction of the value of the Company's net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S. corporate income tax rate from 35% to 21%. The Act also includes a requirement to pay a one-time transition tax on the cumulative value of earnings and profits that were previously not repatriated for U.S. income tax purposes. The Company has not made sufficient progress on the transition tax analysis to reasonably estimate the effects, and therefore, has not recorded provisional amounts. However, based on analysis to date the one-time transition tax is not expected to be material. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

~~Valuation Allowance~~

Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance in the thirdfirst quarter of fiscal 2021, we recorded an adjustment of $3,200 to reduce the current benefit of the net operating loss carryback benefit we will realize from the CARES Act. In fiscal 2018, the Company considered all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. The Company currently estimates that as of March 31, 2018 both the consolidated entity and its U.S. entity will have generated a cumulative three year pre-tax loss. As a result of this analysis, the Companywe determined that it iswas more likely than not that itwe will not realize the benefits of ~~its~~our gross deferred tax assets and therefore ~~has~~ recorded a valuation allowance to reduce the carrying value of these gross deferred tax assets, net of the impact of the reversal of taxable temporary differences, to ~~zero.~~0. Our position remains unchanged with respect to the realizability of our deferred tax assets as of September 30, 2020.

10. Restructuring

Our restructuring plan, initiated in the first quarter of fiscal 2019, is aimed to increase efficiency in our sales, marketing and distribution functions as well as reduce costs across all functional areas. These restructuring charges relate primarily to severance and related costs associated with headcount reductions and lease abandonment charges.

During the three months ended September 30, 2020 and 2019, we incurred total restructuring charges of $5,767 and $12,851, respectively. These restructuring charges include $647 and $605 of stock-based compensation related to modifications of existing unvested awards granted to certain employees impacted by the restructuring plan for the three months ended September 30, 2020 and 2019, respectively.

During the six months ended September 30, 2020 and 2019, we incurred total restructuring charges of $8,091 and $16,930, respectively. These charges include $704 and $973 of stock-based compensation related to modifications of existing unvested awards granted to certain employees impacted by the restructuring plan for the six months ended September 30, 2020 and 2019, respectively.

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Commvault Systems, Inc

Notes to Consolidated Financial Statements - Unaudited (continued)

(In thousands, except per share data)

~~Other Tax Items~~The activity in our restructuring accruals for the three and six months ended September 30, 2020 and 2019 is summarized as follows:

~~The Company conducts business globally~~


	Three Months Ended September 30,
	2020		2019
Balance as of June 30,	$	3,228	$	2,218
Restructuring charges, net (1)	4,895		11,132
Payments	(3,085)		(2,992)
Balance as of September 30,	$	5,038	$	10,358


	Six Months Ended September 30,
	2020		2019
Balance as of March 31,	$	2,531	$	1,089
Restructuring charges, net (1)	6,695		13,907
Payments	(4,188)		(4,638)
Balance as of September 30,	$	5,038	$	10,358

(1) Net restructuring charges of $4,895 and ~~as a result, files income tax returns~~$6,695 in the ~~United States and in various state and foreign jurisdictions. In the normal course~~ tables above excludes restructuring charges for 3 of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Australia, Canada, Germany, Netherlands and United Kingdom. The years subject to income tax examinationour leases in the ~~Company’s foreign jurisdictions cover~~amount of $225 and 5 in the ~~maximum time period with respect~~amount of $692 for the three and six months ended September 30, 2020, respectively. It also excludes stock-based compensation related to ~~these jurisdictions. Due~~modifications for the three and six months ended September 30, 2020 of $647 and $704, respectively. Net restructuring charges of $11,132 and $13,907 in the tables above excludes restructuring charges for 1 of our leases in the amount of $1,114 and 3 in the amount of $2,050 for the three and six months ended September 30, 2019, respectively. It also excludes stock-based compensation related to ~~net operating loss ("NOL") carryforwards, in some cases~~modifications for the ~~tax years continue~~three and six months ended September 30, 2019 of $605 and $973, respectively.

As of September 30, 2020, the outstanding restructuring accruals primarily relate to ~~remain subject to examination with respect to such NOLs.~~future severance payments.

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, ~~2017.~~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. ~~In fiscal 2018, we~~We also ~~started selling~~sell appliances that integrate the ~~our~~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. WeCommvault also ~~provide our~~provides customers with a broad range of professional services that are delivered by our worldwide support and field operations. ~~As of December 31, 2017, we had licensed our software applications to over 26,000 registered customers.~~

Our software licenses typically provide for a perpetual right to use our software and are sold on a per terabyte capacity basis, per-copy, as site licenses or as a solution set. Prior to fiscal 2018, an insignificant amount of our revenue has been sold under subscription, or term based, license arrangements. In these arrangements the customer has the right to use the software over a designated period of time. During fiscal 2018, we expect revenue from subscription arrangements to become a more significant portion of our total revenue compared to historical periods.

In recent years, the majority of our software and products have been sold on a capacity basis and we expect this to remain true in the near future. During the nine months ended December 31, 2017, approximately 67% of software and product revenue was sold on a capacity basis. This compares to approximately 69% of software and products revenue was sold on a capacity basis during fiscal 2017. Software licenses sold on a capacity basis provide the customer with unlimited licenses of specified software products based on a defined level of terabytes of data under management. As a result, when we sell our platform through a capacity license, certain of the various functionalities discussed below are bundled into one capacity based price. Site licenses give the customer the additional right to deploy the software on a limited basis during a specified term.

Our solution sets are generally sold on a per unit basis such as per virtual machine for our virtual machine backup, recovery and cloud management solution set; per mailbox for our email archive solution set, and per user for our endpoint data protection solution set. These solution sets are purpose-built offerings designed to accelerate private, public and hybrid cloud adoption that seamlessly integrate with our single platform software, offering a path towards holistic data management while allowing customers to utilize functionality that addresses the point solution requirements their business dictates. We primarily sell solution sets for virtual machine backup, recovery and cloud management; endpoint data protection; and email archive.

The industry in which we currently operate continues to go through accelerating changes as the result of compounding data growth and the introduction of new technologies. We remain focused on both the data and information management trends in the marketplace and, in fact, a material portion of our existing research and development expenses are utilized toward the development of such new technologies. While we are confident in our ability to meet these changing industry demands with our Commvault suite and potential future releases, the development, release and timing of any features or functionality remain at our sole discretion and our solutions or other technologies may not be widely adopted.

Given the nature of the industry in which we operate, our software applications are subject to obsolescence. We continually develop and introduce updates to our existing software applications in order to keep pace with evolving industry technologies. In addition, we must address evolving industry standards, changing customer requirements and competitive software applications that may render our existing software applications obsolete. For each of our software applications, we provide full support for the current generally available release and one prior release. When we declare a product release obsolete, a customer notice is delivered twelve months prior to the effective date of obsolescence announcing continuation of full product support for the first six months. We provide an additional six months of extended assistance support in which we only provide existing workarounds or fixes that do not require additional development activity. We do not have existing plans to make any of our software products permanently obsolete.

~~Table of Contents~~

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 ~~44%~~43% and 40% of our total revenues for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016.~~2019, respectively.

In recent fiscal periods, we have generated approximately three-quarters of our software and products revenue from our existing customer base and approximately one-quarter of our software and products revenue from new customers. In addition, ourOur 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 ~~which we refer to as enterprise transactions. Enterprise transactions~~ (transactions greater than $0.1 million) represented ~~approximately 59%~~69% and ~~55%~~63% of our total software and products revenue in the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively.

Software and products revenue generated through indirect distribution channels was ~~88%~~95% of total software and products revenue in both the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~in the nine months ended December 31, 2016.~~September 30, 2019. Software and products revenue generated through direct distribution channels was ~~approximately 12%~~5% of total software and products revenue in both the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~in the nine months ended December 31, 2016.~~September 30, 2019. The dollar value of software and products revenue generated through indirect distribution channels increased ~~approximately $12.0~~$15.0 million ~~or 6%,~~ in the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 compared to the ~~nine~~six months ended ~~December 31, 2016.~~September 30, 2019. The dollar value of software and products revenue generated through direct distribution channels increased ~~approximately $3.7~~$1.6 million ~~or 15%,~~ in the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 compared to the ~~nine~~six months ended ~~December 31, 2016.~~September 30, 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.

Our primary original equipment manufacturer agreement is with Hitachi Data Systems ("HDS") and allows them to market, sell and support our software applications and services on a stand-alone basis and/or incorporate our software applications into their own hardware products. Our original equipment manufacturer partners, including HDS, have no obligation to recommend or offer our software applications exclusively or at all, and they have no minimum sales requirements and can terminate our relationship at any time. Sales through our original equipment manufacturer agreements, accounted for approximately 14% of our total revenues for the nine months ended December 31, 2017 and 15% of our total revenues for the nine months ended December 31, 2016.

We also have a non-exclusive distribution ~~agreements~~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.~~, and Tech Data Corporation (formerly Avnet Technology) ("Tech Data").~~ Pursuant to ~~these~~this distribution ~~agreements, these distributors’~~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 ~~approximately~~36% and 37% of our total revenues through Arrow in ~~both~~ the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016.~~2019, respectively. If Arrow were to discontinue or reduce the sales of our products, 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 ~~could~~would have a material adverse effect on our future business.

Our services revenue was ~~56%~~57% of our total revenues for ~~both~~ the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016.~~60% of our total revenues for the six months ended September 30, 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, ~~installation~~implementation and post-deployment services and ~~customer education.~~

~~Table~~training, all of ~~Contents~~

Most of our customer support agreements are priced as a percentage of the related net software purchased and are for a one year term. As the end of the annual period approaches, we pursue the renewal of the agreementwhich to date have predominantly been sold in connection with the ~~customer. Historically, customer support renewals have represented a significant portion~~sale of ~~our total~~software applications. Our newly launched software-as-a-service solution, branded Metallic, is also included in services revenue. ~~Because of this characteristic of our business, if our customers choose~~Revenue from Metallic, which has not been material to ~~renew their support agreements with us on beneficial terms, or at all, our business, operating results and financial condition could be harmed.~~date, is recognized ratably over the contract period.

Foreign Currency Exchange Rates’ Impact on Results of Operations

Sales outside the United States were ~~approximately 46%~~45% of our total revenue for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~43%~~49% of our total revenue for the ~~nine~~six months ended ~~December 31, 2016.~~September 30, 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, 2016~~September 30, 2019, our software and products revenue would have been lower by ~~$3.3~~$1.1 million, our services revenue would have been lower by ~~$2.3~~$1.6 million, our cost of sales would have been lower by ~~$0.6~~$0.4 million and our operating expenses would have been lower by ~~$3.0~~$1.2 million from non-U.S. operations for the three months ended ~~December 31, 2017.~~September 30, 2020. Using the average foreign currency exchange rates ~~from~~for the ~~nine~~six months ended ~~December 31, 2016~~September 30, 2019, our software and products revenue would have been lower by ~~$3.5~~$0.7 million, our services revenue would have been lower by ~~$2.3~~$0.4 million, our cost of sales would have been lower by ~~$0.9~~$0.2 million and our operating expenses would have been ~~lower~~higher by ~~$1.5~~$0.2 million from non-U.S. operations for the ~~nine~~six months ended ~~December 31, 2017.~~September 30, 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~~General and administrative expenses. We recognized a net foreign currency transaction losses of ~~$0.2~~$1.2 million and $0.4 million for the three and six months ended September 30, 2020, respectively. We recognized net foreign currency transaction gain of $0.1 million in the three months ended September 30, 2019, and a loss of less than $0.1 million in the ~~three and nine~~six months ended December 31, 2017, respectively. We recognized a net foreign currency transaction loss of less than $0.1 million and gain of $0.4 million in the three and nine months ended December 31, 2016, respectively.September 30, 2019

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;

•~~Stock-Based Compensation;~~

•Accounting for Income Taxes

•~~Software Development Costs~~

•~~Deferred Commissions Costs~~

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~~The discussion below includes changes to our critical accounting policies that have occurred in fiscal 2018.~~

~~Revenue Recognition~~

~~We account for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Our revenue recognition policies require us to make significant judgments~~Goodwill and estimates. In applying our revenue recognition policy, we must determine which portions of our revenue are recognized currently (generally software and products revenue) and which portions must be deferred and recognized in future periods (generally services revenue). We analyze various factors including, but not limited to, the selling price of undelivered services when sold on a stand-alone basis, our pricing policies, the credit-worthiness of our customers, and contractual terms and conditions in helping us to make such judgments about revenue recognition. Changes in judgment on any of these factors could materially impact the timing and amount of revenue recognized in a given period.

We derive revenue from two primary sources: software and products, and services. Services include customer support (software updates and technical support), consulting, assessment and design services, installation services and customer education. A typical contract includes both licenses and services.

Our software licenses typically provide for a perpetual right to use our software. We also sell term-based software licenses that expire, which are referred to as subscription arrangements. We do not customize its software and installation services are not required. The software is delivered before related services are provided and is functional without professional services, updates and technical support. We have concluded that our software license is functional intellectual property that is distinct as the user can benefit from the software on its own. Software and product revenue is typically recognized when the software is delivered and/or made available for download as this is the point the user of the software can direct the use of, and obtain substantially all of the remaining benefits from the functional intellectual property. We do not recognize software revenue related to the renewal of subscription software licenses earlier than the beginning of the subscription period.

In fiscal 2018, we also started selling appliances that integrate our 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. Revenue related to appliances is recognized when control of the appliances passes to the customer; typically upon delivery. Revenue to date related to appliances has not been significant.

Other professional services include consulting, assessment and design services, installation services and customer education. Customer education services include courses taught by our instructors or third-party contractors. Revenue related to other professional services and customer education services is typically recognized as the services are performed.

Most of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of software and products are typically estimated using the residual approach. Standalone selling prices of services are typically estimated based on observable transactions when these services are sold on a standalone basis.

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~~Our typical performance obligations include the following:~~



~~Performance Obligation~~	~~When Performance Obligation~~ ~~is Typically Satisfied~~	~~When Payment is~~ ~~Typically Due~~	~~How Standalone Selling Price is~~ ~~Typically Estimated~~
~~Software and Products Revenue~~
~~Software Licenses~~	~~Upon shipment or made available for download (point in time)~~	~~Within 90 days of shipment except for certain subscription licenses which are paid for over time~~	~~Residual approach~~
~~Appliances~~	~~When control of the appliances passes to the customer; typically upon delivery~~	~~Within 90 days of delivery except for certain subscriptions which are paid for over time~~	~~Residual approach~~
~~Customer Support Revenue~~
~~Software Updates~~	~~Ratably over the course of the support contract (over time)~~	~~At the beginning of the contract period~~	~~Observable in renewal transactions~~
~~Customer Support~~	~~Ratably over the course of the support contract (over time)~~	~~At the beginning of the contract period~~	~~Observable in renewal transactions~~
~~Professional Services~~
~~Other Professional Services (except for education services)~~	~~As work is performed (over time)~~	~~Within 90 days of services being performed~~	~~Observable in transactions without multiple performance obligations~~
~~Education Services~~	~~When the class is taught (point in time)~~	~~Within 90 days of services being performed~~	~~Observable in transactions without multiple performance obligations~~

~~Stock-Based Compensation and Accounting for Income Taxes~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Improvements to Employee Share-Based Payment Accounting (Topic 718),~~ which simplifies the accounting for share-based payment transactions, including related accounting for income taxes, forfeitures, and classification in the statement of cash flows. In connection with the adoption of this guidance we elected an accounting policy to account for forfeitures as they occur. The guidance also requires excess tax benefits and tax deficiencies to be recorded as income tax benefit or expense in the statement of income when the awards vest or are settled, and eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the statement of cash flows.

~~Deferred Commissions Cost~~

Sales commissions and related payroll taxes earned by our employees are considered incremental and recoverable costs of obtaining a contract with a customer. Our typical contracts include performance obligations related to software licenses, software updates, customer support and other professional services. In these contracts, incremental costs of obtaining a contract are allocated to the performance obligations based on the relative estimated standalone selling prices and then recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates. We do not pay commissions on annual renewals of contracts for software updates and customer support for perpetual licenses. The costs allocated to software are expensed at the time of sale, when revenue for the functional software license is recognized. The costs allocated to software updates and customer support for perpetual licenses are amortized ratably over a period of approximately five years, the expected period of benefit of the asset capitalized. We currently estimate a period of five years is appropriate based on consideration of historical average customer life and the estimated useful life of the underlying software sold as part of the transaction. The costs related to professional services are amortized within one quarter following the date of the related software sale, which is typically the period the related professional services are provided and revenue is recognized. If we were to change our estimate of the period of benefit of these deferred costs it would impact our results of operations.

Costs related to software updates and support for term-based, or subscription software licenses, are limited to the contractual period of the arrangement as we intend to pay a commensurate commission upon renewal of the subscription license and related updates and support.

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Purchased Intangible Assets

There have been no ~~other~~ significant changes in our critical accounting policies during the ~~nine~~six months ended ~~December 31, 2017~~September 30, 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, 2017. In addition, please see Note 2 of Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements included in our fiscal 2017 Annual Report on Form 10-K filed for a description of our accounting policies.2020.

Results of Operations

Three months ended ~~December 31, 2017~~September 30, 2020 compared to three months ended ~~December 31, 2016~~September 30, 2019

Revenues (in millions)

–Total revenues increased ~~$13.3~~$3.6 million, or ~~8%, from $167.1 million~~2%.

•Software and products revenue represented 42% of our total revenue in the three months ended ~~December 31, 2016 to $180.4 million~~September 30, 2020 and 41% of our total revenue in the three months ended ~~December 31, 2017.~~September 30, 2019.

~~Software~~•Larger deal revenue (deals greater than $0.1 million) represented 66% of our software and ~~Products Revenue.~~products revenue in the three months ended September 30, 2020 and 64% of our software and products revenue in the three months ended September 30, 2019.

–Software and products revenue increased ~~$2.8~~$3.7 million, or 4%5%, ~~from $78.7~~as a result of the following:

•An increase of $3.5 million, or 8%, in larger deal revenue.

•An increase of 11% in the volume of larger deal revenue transactions, offset by a decrease of 3% in the average dollar amount of such transactions.

•The average dollar amount of larger deal revenue transactions was approximately $319 thousand and $328 thousand for the three months ended September 30, 2020 and 2019, respectively.

•An increase of $0.2 million in transactions less than $0.1 million.

–Services revenue represented 58% of our total revenue in the three months ended ~~December 31, 2016 to $81.4 million~~September 30, 2020 and 59% of our total revenue in the three months ended ~~December 31, 2017. Software~~September 30, 2019. Services revenue decreased $0.2 million primarily due to the following:

•An increase of $0.4 million in training and ~~products~~consulting services.

•Offset by a decrease of $0.6 million in revenue ~~represented 45% of our total revenues in the three months ended December 31, 2017 compared to 47% of total revenues in the three months ended December 31, 2016.~~from customer support agreements.

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 ~~APAC~~APJ (Australia, New Zealand, Southeast Asia, ~~China)~~China, Japan). Americas, EMEA and ~~APAC~~APJ represented ~~50%~~54%, ~~36%~~31% and ~~14%~~15% of total software and products revenue, respectively, for the three months ended ~~December 31, 2017. The~~September 30, 2020. Software and products revenue increased 9% year over year ~~growth~~in the Americas and 3% in EMEA; whereas APJ declined 3%.

▪The increase in Americas software and products revenue was the result of a 9% increase in larger deal transactions revenue driven by an an increase in the volume of larger deal transactions.

▪EMEA software and products revenue increased as a result of a 4% increase in revenue on deals under $0.1 million.

▪The decrease in APJ was the result of a 19% decrease in revenue from deals under $0.1 million partially offset by a 13% increase in larger deal transactions.

Our software and products revenue in EMEA and ~~APAC was 12% and, 5%, respectively, which was partially offset by a 2% decline in the Americas.~~


▪	~~Americas enterprise transaction revenue decreased by 7% as a result of a decrease in the number of transactions which was partially offset by an increase in non-enterprise revenue.~~


▪	~~EMEA software and products revenue increased primarily due~~APJ is subject to ~~a 35% increase in enterprise transaction revenue. The increase in enterprise transaction revenue was primarily the result of an increase in the number enterprise revenue transactions.~~

~~Year over year software and products revenue growth in EMEA was positively impacted by~~ changes in foreign exchange rates as more fully discussed above in the ~~U.S. dollar weakened against~~“Foreign Currency Exchange Rates’ Impact on Results of Operations” section.

Cost of Revenues and Gross Margin ($ in millions)

–Total cost of revenues decreased $4.4 million, representing 16% of our total revenues for the ~~Euro and British pound sterling. Using average foreign exchange rates from~~three months ended September 30, 2020 compared to 19% for the ~~third~~three months ended September 30, 2019. Temporary salary cuts during the second quarter of fiscal ~~2017, third quarter fiscal 2018 EMEA~~year 2021 related to COVID-19 resulted in savings in cost of revenues.

–Cost of software and products revenue ~~would have increased 3% compared to an actual increase~~decreased $0.9 million, representing 11% of ~~12%.~~


▪	~~The increase in APAC software and products revenue was primarily the result of an increase in non-enterprise revenue.~~


▪	Our software and products revenue in EMEA and APAC 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.

~~Software and products revenue derived from enterprise transactions (transactions greater than $0.1 million) represented approximately 57% of~~ our total software and products revenue infor the three months ended ~~December 31, 2017 and approximately 56% of our software and products revenue in~~September 30, 2020 compared to 13% for the three months ended ~~December 31, 2016. Enterprise transactions increased by $1.8~~September 30, 2019. The decrease is the result of lower cost of sales associated with our appliance.

–Cost of services revenue decreased $3.5 million, ~~or 4%, in~~representing 19% of our total services revenue for the three months ended ~~December 31, 2017~~September 30, 2020 compared to 23% for the three months ended ~~December 31, 2016. This increase was driven by a 3% increase~~September 30, 2019. The decline in ~~the average dollar amount~~cost of enterprise transactions. The average dollar amount of such transactions was approximately $268,000 in the three months ended December 31, 2017 and approximately $261,000 in the three months ended December 31, 2016.

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~~Services Revenue.~~ Services revenue increased $10.5 million, or 12%, from $88.4 million in the three months ended December 31, 2016 to $98.9 million in the three months ended December 31, 2017. Services revenue represented 55% of our total revenues in the three months ended December 31, 2017 and 53% in the three months ended December 31, 2016. The increase in services revenue is primarily related to the temporary salary cuts during the second quarter of fiscal year 2021 related to COVID-19.

Operating Expenses ($ in millions)

– Sales and marketing expenses decreased $1.9 million, or 2%, primarily due to ~~a $8.7 million increase in revenue from customer support agreements~~the following:

•Decreases related to the decline of travel expenses as a result of ~~software sales~~COVID-19.

•Temporary salary cuts during the second quarter of fiscal year 2021 related to ~~new customers~~COVID-19.

– Research and ~~renewal agreements with our installed software base and includes~~development expenses increased $7.7 million, or 33%, as a ~~$2.3 million increase due to the~~ result of ~~a weakening of the US dollar versus foreign currencies.~~

~~Cost of Revenues~~. Total cost of revenues increased $3.8 million, or 18%, from $21.2 million in the three months ended December 31, 2016 to $25.0 million in the three months ended December 31, 2017. Total cost of revenues represented 14% of our total revenues in the three months ended December 31, 2017 and 13% in the three months ended December 31, 2016. An increase in the percentage of total revenues represented by software revenue has the impact of improving our overall gross margins. The costs of sales related to our appliances are recorded in the cost of software and products revenue.

~~Operating Expenses~~

~~Sales and Marketing.~~ Sales and marketing expenses increased $8.1 million, or 8%, from $97.1 million in the three months ended December 31, 2016 to $105.1 million in the three months ended December 31, 2017. The increase is due to a $5.5 millionan increase in employee compensation and related expenses ~~mainly~~ attributable to the expansion of our ~~sales force from~~engineering group.

•The increase is the ~~prior year, a $0.4 million increase in~~result of additional headcount related to the acquisition of Hedvig including the stock-based compensation ~~and a $0.9~~issued in connection with the transaction.

•Additionally, certain Hedvig shareholders will receive cash payments totaling $14.1 million ~~increase in marketing expenses. Sales and marketing expenses~~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 ~~a percentage~~compensation expense over the course of ~~total revenues was 58% in both~~ the ~~three months ended December 31, 2017 and 2016.~~

~~Research and Development.~~30 month service period. Research and development expenses ~~increased $2.8 million, or 13%, from $21.2 million~~ in the three months ended ~~December 31, 2016~~September 30, 2020 includes $1.4 million of expense related to ~~$24.0~~this arrangement.

•These increases were partially offset by $0.6 million in savings related to temporary pay cuts during the ~~three months ended December 31, 2017. The increase is primarily due to an increase in salary and related expenses resulting from the expansion~~second quarter of ~~our engineering group. Research and development expenses as a percentage of total revenues was 13% in both the three months ended December 31, 2017 and 2016.~~ 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.~~– General and administrative expenses ~~decreased $1.2~~remained flat primarily due to the following:

•Reduction of $3.6 million ~~or 6%, from $21.6~~related to prior year expenses associated with a non-routine shareholder matter and Hedvig acquisition costs.

•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 $5.8 million and $12.9 million in the three months ended ~~December 31, 2016~~September 30, 2020 and 2019, respectively. These restructuring charges relate primarily to ~~$20.4~~severance and related costs associated with headcount reductions as well as lease abandonment charges related to the closure of three offices in the second quarter of fiscal year 2021. These charges include $0.6 million in both the three months ended September 30, 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.

–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 $2.3 million, from $2.7 million in the three months ended December 31, 2017. The decrease is the result of a decrease in stock-based compensation. General and administrative expenses in the three months ended December 31, 2017 includes $0.2 million of net foreign currency transaction losses. General and administrative expenses as a percentage of total revenues was 11% in the three months ended December 31, 2017 and 13% in the three months ended December 31, 2016.

~~Depreciation and Amortization.~~ ~~Depreciation expense increased by $0.3 million from $2.2~~September 30, 2019 to $5.1 million in the three months ended ~~December 31, 2016 to $2.5~~September 30, 2020, driven by the amortization of intangible assets acquired as a result of the Hedvig business combination in October 2019.

Income Tax Expense

Income tax benefit was $0.5 million in the three months ended ~~December 31, 2017.~~

~~Income Tax Expense~~

~~Income tax~~September 30, 2020 compared to expense ~~was $62.6~~of $0.5 million in the three months ended ~~December 31, 2017 compared to an expense of $1.7 million in~~September 30, 2019. The income tax benefit for the three months ended ~~December 31, 2016. The increase in income tax expense was~~September 30, 2020 relates primarily ~~the result of the combined impact of the lower U.S. corporate income tax rate on net deferred tax assets~~to current federal and ~~recording a full valuation allowance against the remaining value of net deferred tax assets.~~foreign benefits.

~~Impact of U.S. Tax Reform~~

The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. The Act reduces the US federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of December 31, 2017, we have not completed the accounting for the tax effects of enactment of the Act; however, as described below, we have made a reasonable estimate of the effects on existing deferred tax balances. These amounts are provisional and subject to change. The most significant impact of the legislation for the Company was a $24.3 million reduction of the value of net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S. corporate income tax rate from 35% to 21%. The Act also includes a requirement to pay a one-time transition tax on the cumulative value of earnings and profits that were previously not repatriated for U.S. income tax purposes. We have not made sufficient progress on the transition tax analysis to reasonably estimate the effects, and therefore, have not recorded provisional amounts. However, based on analysis to date the one-time transition tax is not expected to be material. No additional income taxes have been provided for any remaining undistributed

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foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

~~Valuation Allowance~~

Net deferred tax assets arise due to the recognition of income and expense items for tax purposes, which differ from those used for financial statement purposes. ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for a valuation allowance in the third quarter of fiscal 2018, the Company considered all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. The Company currently estimates that as of March 31, 2018 both the consolidated entity and its U.S. entity will have generated a cumulative three year pre-tax loss. As a result of this analysis, the Company determined that it is more likely than not that it will not realize the benefits of its gross deferred tax assets and therefore has recorded a valuation allowance to reduce the carrying value of these gross deferred tax assets, net of the impact of the reversal of taxable temporary differences, to zero.

~~Nine~~Six months ended ~~December 31, 2017~~September 30, 2020 compared to ~~nine~~six months ended ~~December 31, 2016~~September 30, 2019

Revenues (in millions)

–Total revenues increased ~~$36.2~~$14.4 million, or ~~8%, from $478.3 million~~4%.

•Software and products revenue represented 43% of our total revenue in the ~~nine~~six months ended ~~December 31, 2016 to $514.5 million~~September 30, 2020 and 40% of our total revenue in the ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2019.

~~Software~~•Larger deal revenue (deals greater than $0.1 million) represented approximately 69% of our software and ~~Products Revenue.~~products revenue in the six months ended September 30, 2020 and 63% of our software and products revenue in the six months ended September 30, 2019.

–Software and products revenue increased ~~$15.8~~$16.6 million, or 7%13%, ~~from $212.5~~as a result of the following:

•An increase of $19.8 million, or 24%, in larger deal revenue.

•An increase of 8% 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 $359 thousand and $313 thousand for the six months ended September 30, 2020 and 2019, respectively.

•These increases were partially offset by a decrease of $3.2 million in transactions less than $0.1 million.

–Services revenue represented 57% of our total revenue in the ~~nine~~six months ended ~~December 31, 2016~~September 30, 2020 and 60% of our total revenue in the six months ended September 30, 2019. Services revenue decreased $2.2 million, or 1%, primarily due to ~~$228.2~~the following:

•A decrease of $0.8 million in training and consulting services. In certain cases, the ~~nine months ended December 31, 2017. Software~~COVID-19 pandemic has impacted our ability to perform on-site professional services during the first half of the year.

•A decrease of $1.4 million in revenue from customer support agreements.

We track software and products revenue ~~represented 44% of our total revenues in both~~on a geographic basis. The geographic regions that are tracked are the ~~nine months ended December 31, 2017~~Americas (United States, Canada, Latin America), EMEA (Europe, Middle East, Africa) and ~~2016.~~

APJ (Australia, New Zealand, Southeast Asia, China, Japan). Americas, EMEA and ~~APAC~~APJ represented ~~53%~~61%, ~~33%~~27% and ~~14%~~12% of total software and products revenue, respectively, for the ~~nine~~six months ended ~~December 31, 2017.~~ September 30, 2020. Software and products revenue increased 34% year over year in the Americas; whereas EMEA and APJ declined 5% and 19%, respectively.

▪The ~~year-over-year change~~increase in Americas software and products revenue was primarily the result of a 46% increase in revenue from larger deal transactions compared to the first half of prior year.

▪EMEA software and products revenue decreased as a result of a 5% decrease in larger deal transactions revenue.

▪The decrease in APJ was primarily the result of a decrease in the volume of revenue from larger deal transactions.

Our software and products revenue in ~~the Americas was flat, and growth in~~ EMEA and ~~APAC was 22%~~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 ~~8%, respectively.~~Gross Margin ($ in millions)


▪	~~Americas enterprise transaction revenue increased 3% due to an increase in the average dollar value of transactions but was offset by a decrease in non-enterprise transaction revenue.~~


▪	EMEA software and products revenue increased as a result of a significant increase in enterprise transaction revenue. The significant increase in enterprise transaction revenue was driven by an increase in both the average dollar value and volume of such transactions.


▪	~~The increase in APAC software and products revenue was the result of an increase in revenue from both enterprise and non-enterprise revenue transactions.~~


▪	Our software and products revenue in EMEA and APAC 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.

~~Software and products revenue derived from enterprise transactions (transactions greater than $0.1 million) represented approximately 59%~~

–Total cost of revenues decreased $8.6 million, representing 15% of our total revenues for the six months ended September 30, 2020 compared to 18% for the six months ended September 30, 2019. Temporary salary cuts during fiscal year 2021 related to COVID-19 resulted in savings of $1.1 million in cost of revenues.

–Cost of software and products revenue ~~in the nine months ended December 31, 2017 and approximately 55%~~decreased $1.1 million, representing 9% of our total software and products revenue infor the ~~nine~~six months ended ~~December 31, 2016. Enterprise transaction revenue increased by $18.7 million, or 16%, in~~September 30, 2020 compared to 11% for the ~~nine~~six months ended ~~December 31, 2017 compared to~~September 30, 2019. The decrease is the ~~nine months ended December 31, 2016. This increase was driven by a 20% increase in the average dollar amount~~result of ~~such transactions partially offset by a 3% decline in the number~~lower cost of ~~transactions. The average~~ sales ~~price was approximately $305,000 in the nine months ended December 31, 2017 and approximately $254,000 in the nine months ended December 31, 2016. Software and products~~associated with our appliance.

–Cost of services revenue ~~derived from transactions less than $0.1~~decreased $7.5 million, ~~decreased $3.0 million, or 3%, in the nine months ended December 31, 2017 compared to the nine months ended December 31, 2016.~~

~~Services Revenue.~~ Services revenue increased $20.5 million, or 8%, from $265.8 million in the nine months ended December 31, 2016 to $286.3 million in the nine months ended December 31, 2017. Services revenue represented 56%representing 19% of our total ~~revenues in both~~services revenue for the ~~nine~~six months ended ~~December 31, 2017 and 2016.~~September 30, 2020 compared to 23% for the six months ended September 30, 2019. The ~~increase~~decline in cost of services revenue is primarily related to the decrease in expenses associated with the delivery of professional services revenue as well as temporary salary cuts during fiscal year 2021 related to COVID-19.

Operating Expenses ($ in millions)

– Sales and marketing expenses decreased $7.6 million, or 5%, primarily due to ~~a $19.7 million increase in revenue from customer support agreements~~the following:

•Decreases related to the decline of travel expenses as a result of ~~software sales~~COVID-19.

•Temporary salary cuts during fiscal year 2021 related to ~~new customers~~COVID-19.

– Research and ~~renewal agreements with our installed software base.~~

~~Cost of Revenues. Total cost of revenues~~development expenses increased ~~$6.1~~$15.3 million, or ~~10%~~33%, ~~from $63.8 million in the nine months ended December 31, 2016 to $69.9 million in the nine months ended December 31, 2017. The gross margin~~as a result of ~~our services revenue~~

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was 77% for both the nine months ended December 31, 2017 and 2016. Overall, our services revenue has lower gross margins than our software and products revenue. An increase in the percentage of total revenues represented by software revenue has the impact of improving our overall gross margins. The costs of sales related to our appliances are recorded in the cost of software and products revenue.

~~Operating Expenses~~

~~Sales and Marketing.~~ Sales and marketing expenses increased $21.6 million, or 8%, from $284.0 million in the nine months ended December 31, 2016 to $305.6 million in the nine months ended December 31, 2017. The increase is primarily due to a $17.5 millionan increase in employee compensation and related expenses ~~mainly~~ attributable to the expansion of our ~~sales force from~~engineering group.

•The increase is the ~~prior year and a $2.8~~result of additional headcount related to the acquisition of Hedvig including the stock-based compensation issued in connection with the transaction.

•Additionally, certain Hedvig shareholders will receive cash payments totaling $14.1 million ~~increase in stock-based compensation. Sales and marketing expenses~~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 ~~a percentage~~compensation expense over the course of ~~total revenues was 59% in both~~ the ~~nine months ended December 31, 2017 and 2016.~~

~~Research and Development.~~30 month service period. Research and development expenses ~~increased $8.8~~in the six months ended September 30, 2020 includes $2.8 million ~~or 14%, from $60.7~~of expense related to this arrangement.

•These increases were partially offset by $1.7 million in ~~the nine months ended December 31, 2016~~savings related to ~~$69.5 million~~temporary pay cuts in the ~~nine months ended December 31, 2017. The increase is due to salary and related expenses resulting from the expansion~~first half of ~~our engineering group. Research and development expenses as a percentage of total revenues was 13% in both the nine months ended December 31, 2017 and 2016.~~ fiscal year 2021.

~~General and Administrative.~~– General and administrative expenses ~~increased $5.0~~decreased $1.0 million, or 8%2%, ~~from $62.9~~primarily due to the following:

•Reduction of $5.5 million related to prior year expenses associated with a non-routine shareholder matter and Hedvig acquisition costs.

•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 $8.1 million and $16.9 million in the ~~nine~~six months ended ~~December 31, 2016~~September 30, 2020 and 2019, respectively. These restructuring charges relate primarily to ~~$67.9~~severance and related costs associated with headcount reductions as well as lease abandonment charges related to the closure of five offices in the first half of fiscal year 2021 and three offices in the first half of fiscal year 2020. These charges include $0.7 million for the six months ended September 30, 2020 and $1.0 million for the six months ended September 30, 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.

–Depreciation and amortization expense increased $4.8 million, from $5.3 million in the ~~nine~~six months ended December 31, 2017. The increase is primarily the result of an increase in employee compensation and related expenses. Expenses in the nine months ended December 31, 2017 includes less than $0.1 million of net foreign currency transaction losses comparedSeptember 30, 2019 to $0.4 million of net foreign currency transaction gains in the nine months ended December 31, 2016. General and administrative expenses as a percentage of total revenues was 13% in both the nine months ended December 31, 2017 and 2016.

~~Depreciation and Amortization.~~ ~~Depreciation expense increased by $0.8 million from $6.4~~$10.1 million in the ~~nine~~six months ended ~~December 31, 2016 to $7.2 million~~September 30, 2020, driven by the amortization of intangible assets acquired as a result of the Hedvig business combination in ~~the nine months ended December 31, 2017.~~October 2019.

Income Tax Expense

Income tax expense was ~~$55.3~~$4.2 million in the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 compared to ~~$0.8~~expense of $2.6 million in the ~~nine~~six months ended ~~December 31, 2016. The increase in income~~September 30, 2019. In the fourth quarter of fiscal 2020, we recorded a current tax ~~expense was primarily the result~~benefit of approximately $10.0 million which represented our estimate of the ~~combined impact~~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 ~~lower U.S. corporate income tax rate on deferred tax assets and recording a valuation allowance against~~net operating loss carryback benefit we will realize from the ~~remaining value of net deferred tax assets.~~CARES Act.

Liquidity and Capital Resources

As of ~~December 31, 2017,~~September 30, 2020, our cash and cash equivalents balance of ~~$314.5~~$383.2 million primarily consisted of ~~cash and money market funds.~~cash. In addition, ~~as of December 31, 2017~~ we have approximately $10.8 million of short-term investments invested in U.S. Treasury ~~Bills totaling $131.0 million.~~Bills. In recent fiscal years, our principal source of liquidity has been cash provided by operations.

As of ~~December 31, 2017,~~September 30, 2020, the amount of cash and cash equivalents held outside of the United States by our foreign legal entities was approximately ~~$184~~$162.7 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 ~~repatriated~~needed to repatriate funds from outside of the United States, such repatriation ~~could~~would likely be subject to restrictions by local laws and/or tax consequences including foreign withholding taxes. As a result of recent corporate tax reform in the United States, we are obligated to pay a one time income tax on the cumulative total of any foreign earnings which have not been repatriated. We currently estimate this one time tax will be immaterial. Prospectively, we believe that as a result of this tax reform, we will likely be able to repatriate foreign earnings without paying U.S. income tax. However, we will remain subject to restrictions by local laws and/or tax consequences including foreign withholding taxes.

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We have a five-year $250 million revolving credit facility (the “Credit Facility”) that expires in June 2019. The Credit Facility is available for share repurchases, general corporate purposes, and lettersdid not repurchase any shares of credit. The Credit Facility contains financial maintenance covenants including a leverage ratio and interest coverage ratio. The Credit Facility also contains certain customary events of default which would permit the lenders to, among other things, declare all loans then outstanding to be immediately due and payable if such default is not cured within applicable grace periods. The Credit Facility also limits our ability to incur certain additional indebtedness, create or permit liens on assets, make acquisitions, make investments, loans or advances, sell or transfer assets, pay dividends or distributions, and engage in certain transactions with foreign affiliates. Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to London Interbank Offered Rate plus 1.50% subject to increases based on actual leverage. The unused balance on the Credit Facility is also subject to a 0.25% annual interest charge subject to increases based on our actual leverage. As of December 31, 2017, there were no borrowings under the Credit Facility and we believe we are in compliance with all covenants.

~~During the nine months ended December 31, 2017, we repurchased $91.3 million of~~ common stock ~~shares~~ under our share repurchase ~~program.~~program during the three and six months ended September 30, 2020. 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. ~~On January 17, 2018, the Board~~As of ~~Directors extended the expiration date of the share~~October 27, 2020, $200.0 million remained in our current stock repurchase ~~program to~~authorization which expires on March 31, ~~2019 and authorized a $100.0 million increase to the existing share repurchase program so that $133.7 million is now available.~~2022.

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):


	Six Months Ended September 30,
	2020		2019
Net cash provided by operating activities	$	42,242	$	55,119
Net cash provided by investing activities	29,138		31,262
Net cash provided by (used in) financing activities	5,271		(33,701)
Effects of exchange rate-changes in cash	10,420		(3,047)
Net increase in cash, cash equivalents and restricted cash	$	87,071	$	49,633

Nine Months Ended December 31,
2017 2016
Net cash provided by operating activities $ 60,828
$ 71,054
Net cash used in investing activities (15,597 ) (26,160 )
Net cash used in financing activities (73,596 ) (5,950 )
Effects of exchange rate-changes in cash 13,368
(10,639 )
Net increase (decrease) in cash and cash equivalents $ (14,997 ) $ 28,305

–Net cash provided by operating activities was ~~$60.8 million in the nine months ended December 31, 2017 and $71.1 million in the nine months ended December 31, 2016. In the nine months ended December 31, 2017, cash provided~~impacted by ~~operating activities was primarily due to~~ net loss adjusted for the impact of non-cash charges ~~and an increase in deferred revenue. These amounts were~~ partially offset by a decrease in accrued liabilities and increases in both accounts receivable and other current assets. Cash flow from operations in the nine month period ended December 31, 2017 also includes $7.9 of excess tax benefits for exercised stock options and vested restricted stock units. In prior periods excess tax benefits were classified as financing activities. In the nine months ended December 31, 2016,expenses.

– Net cash provided by ~~operating activities was primarily due to net loss adjusted for the impact of non-cash charges, and an increase in deferred revenue and accrued expenses.~~

Net cash used in investing activities was $15.6 million for the nine months ended December 31, 2017 and $26.2 million in the nine months ended December 31, 2016. In the nine months ended December 31, 2017, cash used in investing activities was related to ~~$10.3~~net proceeds from the maturity of short-term investments of $32.8 million ~~in net purchases of U.S. Treasury Bills and $5.3~~partially offset by $3.7 million of capital expenditures. ~~In the nine months ended December 31, 2016, cash used in investing activities was related to $21.7 million in net purchases of U.S. Treasury Bills and $4.5 million of capital expenditures.~~

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–Net cash ~~used in~~provided by financing activities was $73.6 million in the nine months ended December 31, 2017 and $6.0 million in the nine months ended December 31, 2016. The cash used in financing activities in the nine months ended December 31, 2017 was the result of $91.3 million of repurchases of common shares partially offset by $17.7 million of proceeds from the exercise of stock options and our employee stock purchase program. The cash used in financing activities in the nine months ended December 31, 2016 was due to $25.0 million of common stock repurchases, partially offset by $14.3$5.3 million of proceeds from the exercise of stock options and purchases of our stock under the employee stock purchase plan as well as $4.8 million of excess tax benefits recognized as a result of the stock option exercises and restricted stock vesting. As a result of the adoption of new accounting guidance, excess tax benefits are now included in cash from operating activities.Employee Stock Purchase Plan.

Working capital ~~decreased $8.6~~increased $59.2 million from ~~$318.1~~$185.1 million as of March 31, ~~2017~~2020 to ~~$309.5~~$244.3 million as of ~~December 31, 2017.~~September 30, 2020. The net ~~decrease~~increase in working capital is ~~due~~ primarily ~~to our use~~the result of ~~cash to repurchase common shares offset by~~ cash flow from ~~operations and proceeds from the exercise of stock options and purchases under the employee stock purchase plan .~~ 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, ~~including borrowing under our revolving credit facility,~~ 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.

Off-Balance Sheet Arrangements

As of ~~December 31, 2017, other than our operating leases,~~September 30, 2020, we dodid 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 ~~standard.~~standards.

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

As of ~~December 31, 2017,~~September 30, 2020, our cash and cash equivalents and short-term investments consisted primarily of ~~money market funds~~cash and U.S. Treasury Bills. Due to the short-term nature of these investments, we are not subject to any material interest rate risk on these balances.

Foreign Currency Risk

Economic Exposure

As a global company, we face exposure to adverse movements in foreign currency exchange rates. Our international sales are generally denominated in foreign currencies and this revenue could be materially affected by currency fluctuations. Approximately ~~46%~~45% of our sales were outside the United States for the ~~nine~~six months ended ~~December 31, 2017.~~September 30, 2020. Our primary exposures are to fluctuations in exchange rates for the U.S. dollar versus the Euro, and to a lesser extent, the Australian dollar, British pound sterling, Canadian dollar, Chinese yuan, Indian rupee, Korean won and Singapore dollar. Changes in currency exchange rates could adversely affect our reported revenues and require us to reduce our prices to remain competitive in foreign markets, which could also have a material adverse effect on our results of operations. Historically, we have periodically reviewed and revised the pricing of our products available to our customers in foreign countries and we have not maintained excess cash balances in foreign accounts.

~~Table of Contents~~

Transaction Exposure

Our exposure to foreign currency transaction gains and losses is primarily the result of certain net receivables due from our foreign subsidiaries and customers being denominated in currencies other than the functional currency of the subsidiary. Our foreign subsidiaries conduct their businesses in local currency and we generally do not maintain excess U.S. dollar cash balances in foreign accounts.

Foreign currency transaction gains and losses are recorded in ~~“General~~General and administrative ~~expenses”~~expenses in the Consolidated Statements of ~~Income (Loss). We recognized a net foreign currency transaction loss of $0.2 million and less than $0.1 million in the three and nine months ended December 31, 2017.~~Operations. We recognized net foreign currency transaction losses of $1.2 million and $0.4 million for the three and six months ended September 30, 2020, respectively. We recognized net foreign transaction gain of $0.1 million and a loss of less than $0.1 million ~~and gain of $0.4 million in~~for the three and ~~nine~~six months ended ~~December 31, 2016.~~September 30, 2019, respectively. The net foreign currency transaction gains and losses recorded in ~~“General~~General and ~~administrative”~~administrative expenses include settlement gains and losses on forward contracts disclosed below.

To date, we have selectively hedged our exposure to foreign currency transaction gains and losses on the balance sheet through the use of forward contracts, which were not designated as hedging instruments. The duration of forward contracts utilized for hedging our balance sheet exposure is generally one to three months. Gains and losses from these contracts are recorded in general and administrative expenses. As of December 31, 2017 and March 31, 2017, we did not have any forward contracts outstanding. We recorded net realized loss of $0.2 million and gains of less than $0.1 million related to the settlement of forward exchange contracts in the three and nine months ended December 31, 2017. We recorded net realized gains and losses of less than $0.1 million related to the settlement of forward exchange contracts in the three and nine months ended December 31, 2016. In the future, we may enter into additional foreign currency based hedging contracts to reduce our exposure to significant fluctuations in currency exchange rates on the balance sheet.

Item 4 - Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of ~~the~~ our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of ~~December 31, 2017.~~September 30, 2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of ~~December 31, 2017.~~September 30, 2020.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the ~~third~~second quarter of fiscal ~~2018~~2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our ~~disclosures~~disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. 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 the policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

~~Table of Contents~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are subject to claims in legal proceedings arising in the normal course of our business. ~~Except as discussed below, we~~We do not believe that we are currently party to any pending legal action that could reasonably be expected to have a material adverse effect on our business or operating results.

On September 10, 2014, a purported class action complaint was filed in the United States District Court for the District of New Jersey against the Company, our Chief Executive Officer and our Chief Financial Officer. The case is captioned In re Commvault Systems, Inc. Securities Litigation (Master File No. 3:14-cv-05628-MAS-LHG). The suit alleges that we made materially false and misleading statements, or failed to disclose material facts, regarding our financial results, business, operations and prospects in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The suit is purportedly brought on behalf of purchasers of our common stock during the period from May 7, 2013 through April 24, 2014, and seeks compensatory damages, costs and expenses, as well as equitable or other relief. Lead plaintiff, the Arkansas Teachers Retirement System, was appointed on January 12, 2015, and on March 18, 2015, an amended complaint was filed by the plaintiffs. On December 17, 2015, the defendant’s motion to dismiss the case was granted and the case dismissed; however, the plaintiffs were permitted to re-file their claim, which they did on February 5, 2016. Defendants filed another motion to dismiss on April 5, 2016, which was denied by the court on September 30, 2016. Thereafter, discovery commenced. On October 2, 2017, the parties entered into an agreement in principle to settle the action for $12.5 million. The parties signed a stipulation of settlement on November 30, 2017. We have not recorded an accrual for this matter as the settlement amount is to be funded solely by our insurers. The settlement is subject to final documentation and court approval. There can be no assurance that the settlement will ultimately be approved or that it will become final. If the settlement does not occur and litigation continues, we believe that we have meritorious defenses and intend to defend the case vigorously. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter if the litigation continues.

On April 12, 2017, a shareholder derivative complaint was filed in the United States District Court for the District of New Jersey against the Company (nominally), certain of its executive officers and certain members of the board of directors. The complaint is entitled Murashko v. Hammer, et al. (Civ. No. 3:17-cv-02533-PGS-TJB). The plaintiff filed an amended complaint on July 14, 2017. The amended complaint largely repeats the allegations made in the securities litigation also pending in the United States District Court for the District of New Jersey (In re Commvault Systems, Inc. Securities Litigation (Master File No. 3:14-cv-05628-PGS-LHG), claiming that the defendant officers and directors breached their fiduciary duties to the Company by causing, or allowing, the Company to manipulate its financial results and conceal the state of its business prospects. The suit also alleges that certain executive officers engaged in unlawful insider trading in 2013 and/or 2014 based on their knowledge of the information that was supposedly concealed. The allegations asserted in the shareholder derivative action purport to cover a period from 2013 through the present. As a derivative action, the complaint does not seek damages from the Company, but rather seeks to recover from the defendant officers and directors on behalf of the Company compensatory damages, restitution, costs and expenses, as well as equitable or other relief. On August 29, 2017, all of the defendants, including the Company, filed a motion to dismiss the derivative action, and a hearing took place on December 18, 2017. On November 30, 2017, a virtually identical shareholder derivative complaint was filed in state court in New Jersey entitled Lee v. Hammer, et al., Civ. 201-17 (N.J. Super. Ct.). The Lee case has been voluntarily stayed by agreement of the parties pending a ruling on the motion to dismiss in the Murashko complaint. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of these matters. We are unable at this time to determine whether the outcome of the litigations will have a material impact on our results of operations, financial condition or cash flows. As of December 31, 2017, we have not recorded an accrual for these matters.

On February 27, 2017, Realtime Data LLC d/b/a/ IXO (“Realtime”), a non-practicing entity, sued us and Spectra Logic Corporation in the Eastern District of Texas for alleged infringement of four patents: U.S. Patent Nos. 9,054,728, 7,415,530, 9,116,908, and 8,717,204. Realtime dismissed the case in Texas and refiled this case in the District of Delaware on July 10, 2017. Realtime has sued numerous other companies for infringement of these and other patents. Realtime seeks monetary damages and an injunction. We responded to the complaint by filing a motion to dismiss on the grounds that the patents are directed to patent-ineligible subject matter. The Court has not yet ruled on this motion. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation will have a material impact on our results of operations, financial condition or cash flows. We intend to defend ourselves vigorously. As of December 31, 2017, we have not recorded an accrual for this matter.

~~Table of Contents~~

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, ~~2017,~~2020, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. If any of the risks actually occur, our business, financial conditions or results of operations could be negatively affected. In that case, the trading price of our stock could decline, and our stockholders may lose part or all of their investment.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

~~During the third fiscal quarter of the fiscal 2018, we repurchased $80.1 million of common stock, or 1,498,966 shares, under our share repurchase program. A summary~~There were no purchases of our ~~repurchases of~~ common stock during the three months ended ~~December 31, 2017 is as follows:~~September 30, 2020.

Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Approximate dollar value of shares that may yet be purchased under the program
October 2017 321,600
$ 51.81
321,600
$ 97,090,726

November 2017 1,177,366
$ 53.84
1,177,366
$ 33,749,434

December 2017 —
$ —
—
$ 33,749,434
*
Three months ended December 31, 2017 1,498,966
$ 53.40
1,498,966

*On January 17, 2018, the Board of Directors extended the expiration date of the share repurchase program to March 31, 2019 and authorized a $100.0 million increase to the existing share repurchase program so that $133.7 million is now available.

Item 3. Defaults upon Senior Securities

~~None~~None.

Item 4. Mine Safety Disclosures

Not ~~Applicable~~Applicable.

Item 5. Other Information

~~None~~As reported in our 8-K filed on August 28, 2020, at our fiscal 2020 Annual Meeting of Stockholders held on August 27, 2020, the stockholders approved the Commvault Systems, Inc. Omnibus Incentive Plan as amended by the Fourth Amendment (the “Incentive Plan”), pursuant to which we may grant awards to its officers, employees, directors, consultants, independent contractors and agents and those of its affiliates. Awards that may be granted under the Incentive Plan include stock options, stock appreciation rights, full value awards (including restricted stock, restricted stock units, performance shares or units and other stock-based awards) and cash-based awards. The Fourth Amendment increased the number of shares available for issuance under the Incentive Plan by 1,000,000 shares for a total of 8,050,000 shares of Common Stock.

A more complete description of the Incentive Plan is contained in our proxy statement, dated July 7, 2020, as filed with the Securities and Exchange Commission (“Proxy Statement”), under the heading “Proposal 4 - Approval of Commvault Systems, Inc. Omnibus Incentive Plan, as amended by the Fourth Amendment” which is incorporated herein by reference. The descriptions of the Incentive Plan set forth herein and in the Proxy Statement are qualified in their entirety by reference to the complete text of the Commvault Systems, Inc. Omnibus Incentive Plan (as amended by the Fourth Amendment Thereof), which is incorporated by reference to Exhibit 10.1 hereof.

Item 6. Exhibits

~~A list of exhibits filed herewith is included on the Exhibit Index, which immediately precedes such exhibits and is incorporated herein by reference.~~


Exhibit No.			Description
3.1			Amended and Restated Certificate of Incorporation of Commvault Systems, Inc., as amended (incorporated by reference to Exhibit 3.1 to the Registrant's Form 8-K filed August 28, 2020)
3.2			Third Amended and Restated Bylaws of Commvault Systems, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Form 8-K filed August 28, 2020)
10.1			Commvault Systems, Inc. Omnibus Incentive Plan (as amended by the Fourth Amendment Thereof)
31.1			Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Label Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~Table of Contents~~

Signatures

Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Commvault Systems, Inc.

Dated:

~~January 25, 2018~~October 28, 2020

By:

/s/ ~~N. Robert Hammer~~Sanjay Mirchandani

~~N. Robert Hammer~~Sanjay Mirchandani

~~Chairman,~~Director, President and Chief Executive Officer

Dated:

~~January 25, 2018~~October 28, 2020

By:

/s/ Brian Carolan

Brian Carolan

Vice President and Chief Financial Officer

~~Table of Contents~~

~~EXHIBIT INDEX~~



~~Exhibit~~ ~~No.~~	~~Description~~
~~31.1~~	~~Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
~~31.2~~	~~Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
~~32.1~~	~~Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~32.2~~	~~Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~101.INS~~	~~XBRL Instance Document~~
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

3531



	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016 As Adjusted - See Note 2			2017			2016 As Adjusted - See Note 2
Revenues:
Software and products	$	81,443		$	78,655		$	228,224		$	212,473
Services	98,923			88,406			286,254			265,800
Total revenues	180,366			167,061			514,478			478,273
Cost of revenues:
Software and products	1,234			772			3,125			2,306
Services	23,723			20,394			66,760			61,512
Total cost of revenues	24,957			21,166			69,885			63,818
Gross margin	155,409			145,895			444,593			414,455
Operating expenses:
Sales and marketing	105,106			97,053			305,610			283,979
Research and development	23,981			21,227			69,451			60,676
General and administrative	20,387			21,610			67,858			62,862
Depreciation and amortization	2,457			2,163			7,212			6,382
Total operating expenses	151,931			142,053			450,131			413,899
Income (loss) from operations	3,478			3,842			(5,538		)	556
Interest expense	(232		)	(233		)	(698		)	(724		)
Interest income	588			312			1,560			843
Equity in loss of affiliate	(158		)	(300		)	(281		)	(544		)
Income (loss) before income taxes	3,676			3,621			(4,957		)	131
Income tax expense	62,621			1,662			55,282			836
Net income (loss)	$	(58,945	)	$	1,959		$	(60,239	)	$	(705	)
Net income (loss) per common share:
Basic	$	(1.30	)	$	0.04		$	(1.33	)	$	(0.02	)
Diluted	$	(1.30	)	$	0.04		$	(1.33	)	$	(0.02	)
Weighted average common shares outstanding:
Basic	45,291			45,099			45,340			44,645
Diluted	45,291			47,115			45,340			44,645



	Three Months Ended December 31, 2016
	Unaudited
	As Reported			Adjustments			Adjusted for Adoption of ASC 606
Revenues:
Software and products	$	77,322		$	1,333		$	78,655
Services	88,519			(113		)	88,406
Total revenues	165,841			1,220			167,061
Total cost of revenues	21,166			—			21,166
Gross margin	144,675			1,220			145,895
Total operating expenses	143,433			(1,380		)	142,053
Income from operations	1,242			2,600			3,842
Interest expense	(233		)	—			(233		)
Interest income	312			—			312
Equity in loss of affiliate	(300		)	—			(300		)
Income before income taxes	1,021			2,600			3,621
Income tax expense	1,063			599			1,662
Net income (loss)	$	(42	)	$	2,001		$	1,959



	Nine Months Ended December 31, 2016
	Unaudited
	As Reported			Adjustments			Adjusted for Adoption of ASC 606
Revenues:
Software and products	$	211,716		$	757		$	212,473
Services	265,871			(71		)	265,800
Total revenues	477,587			686			478,273
Total cost of revenues	63,818			—			63,818
Gross margin	413,769			686			414,455
Total operating expenses	415,832			(1,933		)	413,899
Income (loss) from operations	(2,063		)	2,619			556
Interest expense	(724		)	—			(724		)
Interest income	843			—			843
Equity in loss of affiliate	(544		)	—			(544		)
Income (loss) before income taxes	(2,488		)	2,619			131
Income tax expense	160			676			836
Net income (loss)	$	(2,648	)	$	1,943		$	(705	)



	March 31, 2017
	Unaudited Balance Sheet Data
	As Reported			Adjustments			Adjusted for Adoption of ASC 606
Current assets:
Trade accounts receivable	$	132,761		$	7,323		$	140,084
Total current assets	$	598,736		$	7,323		$	606,059
Deferred tax assets, net	$	61,018		$	(10,790	)	$	50,228
Deferred commissions	$	—		$	30,378		$	30,378
Total assets	$	802,967		$	26,911		$	829,878
Current Liabilities:
Deferred revenue	$	206,777		$	2,322		$	209,099
Total current liabilities	$	285,595		$	2,322		$	287,917
Other liabilities	$	3,934		$	292		$	4,226
Accumulated deficit	$	(239,974	)	$	24,297		$	(215,677	)
Total stockholders’ equity	$	442,635		$	24,297		$	466,932
Total liabilities and stockholders’ equity	$	802,967		$	26,911		$	829,878



	Three Months Ended December 31, 2017
	Americas		EMEA		APAC		Total
Software and Products Revenue	$	40,783	$	29,472	$	11,188	$	81,443
Customer Support Revenue	59,225		19,478		9,151		87,854
Professional Services	6,287		2,944		1,838		11,069
Total Revenue	$	106,295	$	51,894	$	22,177	$	180,366



	Nine Months Ended December 31, 2017
	Americas		EMEA		APAC		Total
Software and Products Revenue	$	121,498	$	74,293	$	32,433	$	228,224
Customer Support Revenue	173,619		55,214		26,688		255,521
Professional Services	17,113		8,248		5,372		30,733
Total Revenue	$	312,230	$	137,755	$	64,493	$	514,478



	December 31,			March 31,
	2017			2017
Land	$	9,445		$	9,445
Buildings	103,244			103,244
Computers, servers and other equipment	38,412			35,274
Furniture and fixtures	15,656			14,912
Leasehold improvements	9,254			7,040
Purchased software	1,494			1,335
Construction in process	749			1,147
	178,254			172,397
Less: Accumulated depreciation and amortization	(48,622		)	(40,078		)
	$	129,632		$	132,319



Options	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding as of March 31, 2017	5,300		$	44.74
Options granted	—		—
Options exercised	(442	)	29.27
Options forfeited	(20	)	43.40
Options expired	(25	)	68.85
Outstanding as of December 31, 2017	4,813		$	46.04	4.13	$	66,006
Exercisable as of December 31, 2017	4,554		$	46.09	3.97	$	64,086



Non-vested Restricted Stock Units	Number of Awards		Weighted Average Grant Date Fair Value
Non-vested as of March 31, 2017	2,396		$	45.53
Awarded	1,191		59.91
Vested	(1,108	)	58.32
Forfeited	(90	)	46.69
Non-vested as of December 31, 2017	2,389		$	51.24



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced programs	Approximate dollar value of shares that may yet be purchased under the program
October 2017	321,600	$	51.81	321,600	$	97,090,726
November 2017	1,177,366	$	53.84	1,177,366	$	33,749,434
December 2017	—	$	—	—	$	33,749,434	*
Three months ended December 31, 2017	1,498,966	$	53.40	1,498,966