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,
2021. Our actual results may differ materially from those contained in or
implied by any forward-looking statements.
Overview

Commvault Systems, Inc. is a global data protection and information management
software company offering customers enterprise level, intelligent data
management solutions built from the ground up on a single platform and unified
code base. Commvault was incorporated in Delaware in 1996.

At Commvault, we believe in solving hard problems for our customers. To do this,
we provide capabilities which enable our customers to accelerate their digital
transformation in today's ever evolving workforce using tools that are light
touch and utilize artificial intelligence and machine learning to drive
automation. Our product portfolio empowers our customers to reduce complexity,
reign in data fragmentation, and accelerate their cloud journey. All software
functionality shares the same back-end technologies to deliver the benefits of a
holistic approach to protecting, managing, and accessing data. Our software
addresses many aspects of storage and data management in the enterprise, while
providing scalability and control of data and information. We believe our
technology provides the broadest set of capabilities in the industry, which
allows customers to reduce storage costs and administrative overhead. We also
provide our customers with a broad range of professional services.

Sources of Revenues
We derive a significant portion of our total revenues from sales of licenses of
our software applications and related appliance products. We do not customize
our software or products for a specific end-user customer. We sell our software
applications and products to end-user customers both directly through our sales
force and indirectly through our global network of value-added reseller
partners, systems integrators, corporate resellers and original equipment
manufacturers. Our software and products revenue was 45% of our total revenues
for both the nine months ended December 31, 2021 and 2020, respectively.
Our total software and products revenue in any particular period is, to a
certain extent, dependent upon our ability to generate revenues from large
customer software and products deals. Larger deals (transactions greater than
$0.1 million) represented 71% and 69% of our total software and products revenue
in the nine months ended December 31, 2021 and 2020, respectively.
Software and products revenue generated through indirect distribution channels
accounted for approximately 90% of total software and products revenue in both
the nine months ended December 31, 2021 and 2020. Software and products revenue
generated through direct distribution channels accounted for approximately 10%
of total software and products revenue in both the nine months ended
December 31, 2021 and 2020. 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 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
strategy. We plan to continue to invest in both our channel relationships and
direct sales force in the future, but we continue to expect more revenue to be
generated through indirect distribution channels over the long term. The failure
of our indirect distribution channels or our direct sales force to effectively
sell our software applications could have a material adverse effect on our
revenues and results of operations.
We have a non-exclusive distribution agreement covering our North American
commercial markets and our U.S. Federal Government market with Arrow Enterprise
Computing Solutions, Inc. ("Arrow"), a subsidiary of Arrow Electronics, Inc.
Pursuant to this distribution agreement, Arrow's primary role is to enable a
more efficient and effective distribution channel for our products and services
by managing our reseller partners and leveraging their own industry experience.
We generated 36% of our total revenues through Arrow for both the nine months
ended December 31, 2021 and 2020. If Arrow were to discontinue or reduce the
sales of our products, or if our agreement
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with Arrow were 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 such events would have a material adverse effect on our future
business.
Our services revenue was 55% of our total revenues for both the nine months
ended December 31, 2021 and 2020, respectively. Our services revenue is made up
of fees from the delivery of customer support and other professional services,
which are typically sold in connection with the sale of our software
applications. Customer support agreements provide technical support and
unspecified software updates on a when-and-if-available basis for an annual fee
based on licenses purchased and the level of service subscribed. Other
professional services include consulting, assessment and design services,
implementation and post-deployment services and training, all of which to date
have predominantly been sold in connection with the sale of software
applications. Our software-as-a-service solution, branded Metallic, is also
included in services revenue. Revenue from Metallic is recognized ratably over
the contract period.

Foreign Currency Exchange Rates' Impact on Results of Operations
Sales outside the United States were 49% of our total revenue for the nine
months ended December 31, 2021 and 48% of our total revenue for the nine months
ended December 31, 2020. The income statements 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, 2020, our software and products revenue would have been higher by
$1.5 million, our services revenue would have been higher by $0.8 million, our
cost of sales would have been higher by $0.2 million and our operating expenses
would have been higher by $0.7 million from non-U.S. operations for the three
months ended December 31, 2021. Using the average foreign currency exchange
rates from the nine months ended December 31, 2020, our software and products
revenue would have been lower by $2.4 million, our services revenue would have
been lower by $4.8 million, our cost of sales would have been lower by $0.9
million and our operating expenses would have been lower by $4.0 million from
non-U.S. operations for the nine months ended December 31, 2021.
In addition, we are exposed to risks of foreign currency fluctuation primarily
from cash balances, accounts receivables and intercompany accounts denominated
in foreign currencies and are subject to the resulting transaction gains and
losses, which are recorded as a component of General and administrative
expenses. We recognized net foreign currency transaction losses of approximately
$0.3 million and $0.5 million for the three and nine months ended December 31,
2021, respectively. We recognized net foreign currency transaction losses of
approximately $0.5 million and $1.7 million for the three and nine months ended
December 31, 2020, respectively.

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Critical Accounting Policies
Our condensed consolidated financial statements are prepared in accordance with
U.S. GAAP. The preparation of these condensed consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, costs and expenses and related disclosures. We
base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. In many instances, we
could have reasonably used different accounting estimates, and in other
instances changes in the accounting estimates are reasonably likely to occur
from period-to-period. Accordingly, actual results could differ significantly
from the estimates made by our management. To the extent that there are material
differences between these estimates and actual results, our future financial
statement presentation, financial condition, results of operations and cash
flows will be affected.
In many cases, the accounting treatment of a particular transaction is
specifically dictated by GAAP and does not require management's judgment in its
application, while in other cases, significant judgment is required in selecting
among available alternative accounting standards that allow different accounting
treatment for similar transactions. We consider these policies requiring
significant management judgment to be critical accounting policies. These
critical accounting policies are:
•Revenue Recognition
•Accounting for Income Taxes
•Goodwill
There have been no significant changes in our critical accounting policies
during the nine months ended December 31, 2021 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, 2021.
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Results of Operations
Three months ended December 31, 2021 compared to three months ended December 31,
2020
Revenues (in millions)
[[Image Removed: cvlt-20211231_g1.jpg]][[Image Removed: cvlt-20211231_g2.jpg]][[Image Removed: cvlt-20211231_g3.jpg]]
-Total revenues increased $14.4 million, or 8% as a result of the following:
•Driven by an increase in software and products revenue
•Software and products revenue represented 49% of our total revenue in the three
months ended December 31, 2021 and 47% of our total revenue in the three months
ended December 31, 2020.
•Larger deal revenue (deals greater than $0.1 million) represented 76% of our
software and products revenue in the three months ended December 31, 2021 and
68% of our software and products revenue in the three months ended December 31,
2020.
-Software and products revenue increased $10.0 million, or 11%, as a result of
the following:
•An increase of $14.4 million, or 24%, in larger deal revenue.
•The increase in larger deal revenue was due to a 20% increase in the volume of
larger deal revenue transactions. There were 225 larger deal revenue
transactions for the three months ended December 31, 2021, up from 187 deals for
the three months ended December 31, 2020.
•The average dollar amount of larger deal revenue transactions was approximately
$332 thousand and $322 thousand for the three months ended December 31, 2021 and
2020, respectively, representing a 3% increase.
•This increase was partially offset by a decrease of $4.4 million in
transactions less than $0.1 million.
-Services revenue represented 51% of our total revenue in the three months ended
December 31, 2021 and 53% of our total revenue in the three months ended
December 31, 2020. Services revenue increased $4.4 million primarily due to the
following:
•An increase of $8.1 million in other services revenue, driven primarily by the
year over year increase in revenue from Metallic.
•This increase is partially offset by a decrease of $3.7 million in revenue from
customer support agreements.
We track software and products revenue on a geographic basis. The geographic
regions that we track are the Americas (United States, Canada, Latin America),
EMEA (Europe, Middle East, Africa) and APJ (Australia, New Zealand, Southeast
Asia, China, Japan). Americas, EMEA and APJ represented 58%, 34% and 8% of total
software and products revenue, respectively, for the three months ended
December 31, 2021. Software and products revenue increased year over year by 32%
in the Americas and declined by 1% in EMEA and 30% in APJ.
?The increase in Americas software and products revenue was primarily the result
of a 45% increase in larger deal transactions revenue driven by an increase in
the volume of larger deal transactions.
?EMEA software and products revenue decreased as a result of an 18% decrease in
revenue on deals under $0.1 million partially offset by an increase in larger
deal transactions.
?The decrease in APJ was the result of larger deal transactions decreasing
versus the prior year period. The prior year period included several relatively
large transactions.
                                       20
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Our software and products revenue in EMEA and APJ is subject to changes in foreign exchange rates as more fully discussed above in the "Foreign Currency Exchange Rates' Impact on Results of Operations" section.

Cost of Revenues and Gross Margin ($ in millions)



[[Image Removed: cvlt-20211231_g4.jpg]][[Image Removed: cvlt-20211231_g5.jpg]][[Image Removed: cvlt-20211231_g6.jpg]]
[[Image Removed: cvlt-20211231_g7.jpg]][[Image Removed: cvlt-20211231_g8.jpg]][[Image Removed: cvlt-20211231_g9.jpg]]
-Total cost of revenues increased $1.6 million, and represented 15% of our total
revenues for both the three months ended December 31, 2021 and December 31,
2020.
-Cost of software and products revenue decreased $2.6 million and represented 4%
of our total software and products revenue for the three months ended
December 31, 2021 compared to 8% for the three months ended December 31, 2020.
The decrease was the result of reduced sales of hardware associated with our
appliances, as well as reduced software royalties associated with sales of
HyperScale appliances and software. Beginning with the launch of HyperScale X in
mid fiscal 2021, we began transitioning to a software only model. HyperScale X
has also reduced software royalties relative to prior versions of HyperScale.
-Cost of services revenue increased $4.2 million, representing 25% of our total
services revenue for the three months ended December 31, 2021 compared to 22%
for the three months ended December 31, 2020. The increase in cost of services
revenue primarily related to an increase in the cost of infrastructure related
to Metallic.











                                       21

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Operating Expenses ($ in millions) [[Image Removed: cvlt-20211231_g10.jpg]][[Image Removed: cvlt-20211231_g11.jpg]][[Image Removed: cvlt-20211231_g12.jpg]]



[[Image Removed: cvlt-20211231_g13.jpg]][[Image Removed: cvlt-20211231_g14.jpg]][[Image Removed: cvlt-20211231_g15.jpg]]
- Sales and marketing expenses increased $4.7 million, or 6%, primarily due to
increases in employee compensation and sales commissions associated with
increased revenue relative to the same period in the prior year.
- Research and development expenses increased $3.6 million, or 10%, as a result
of an increase in employee compensation and related expenses attributable to the
expansion of our engineering group.
•The increase in employee compensation included an increase in stock-based
compensation of $2.9 million compared to prior year.
•Investing in research and development has been a priority for Commvault, and we
anticipate continued spending related to the development of our data and
information management software applications.
- General and administrative expenses increased $6.4 million, or 28%, primarily
due to the following:
•Increase in employee compensation and related costs relative to the same time
in the prior year.
•Stock-based compensation increased $4.1 million compared to the prior year.
•Increase in legal expenses for legal costs related to intellectual property
matters.
-Depreciation and amortization expense increased $0.1 million, from $2.3 million
in the three months ended December 31, 2020 to $2.5 million in the three months
ended December 31, 2021.

Income Tax Expense
Income tax expense was $3.0 million in the three months ended December 31, 2021
compared to expense of $1.2 million in the three months ended December 31, 2020.
The income tax expense for the three months ended December 31, 2021 and 2020
related primarily to current foreign taxes.



                                       22
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Nine months ended December 31, 2021 compared to nine months ended December 31,
2020
Revenues (in millions)
[[Image Removed: cvlt-20211231_g16.jpg]][[Image Removed: cvlt-20211231_g17.jpg]][[Image Removed: cvlt-20211231_g18.jpg]]
-Total revenues increased $31.5 million, or 6%.
•Driven by an increase in software and products revenue.
•Software and products revenue represented 45% of our total revenue in both the
nine months ended December 31, 2021 and December 31, 2020.
•Larger deal revenue (deals greater than $0.1 million) represented 71% of our
software and products revenue in the nine months ended December 31, 2021 and 69%
of our software and products revenue in the nine months ended December 31, 2020.
-Software and products revenue increased $18.5 million, or 8%, as a result of
the following:
•An increase of $18.2 million, or 11%, in larger deal revenue. This was driven
by an increase of 21% in the volume of larger deal revenue transactions, which
included 573 deals for the nine months ended December 31, 2021, up from 475
deals for the nine months ended December 31, 2020.
•The average dollar amount of larger deal revenue transactions was approximately
$317 thousand and $344 thousand for the nine months ended December 31, 2021 and
2020, respectively, an 8% decrease. The prior year included a high seven-figure
transaction that significantly impacted the average dollar amount per
transaction.
•An increase of $0.3 million in transactions less than $0.1 million.
-Services revenue represented 55% of our total revenue in both the nine months
ended December 31, 2021 and December 31, 2020. Services revenue increased $13.0
million primarily due to the following:
•An increase of $18.3 million in other services revenue, driven primarily by the
year over year increase in revenue from Metallic.
•This increase was partially offset by a decrease of $5.3 million in revenue
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 APJ (Australia, New Zealand,
Southeast Asia, China, Japan). Americas, EMEA and APJ represented 60%, 30% and
10% of total software and products revenue, respectively, for the nine months
ended December 31, 2021. Software and products revenue increased year over year
by 15% in the Americas and 3% in EMEA and declined 13% in APJ.
?The increase in Americas software and products revenue was primarily the result
of a 15% increase in larger deal transactions revenue driven by an increase in
the volume of larger deal transactions.
?EMEA software and products revenue increased as a result of a 12% increase in
revenue on larger deal transactions, partially offset by a decrease in
transactions less than $0.1 million.
?The decrease in APJ was the result of a decrease in larger deal transactions
compared to the same period in the prior year.

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


                                       23
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Cost of Revenues and Gross Margin ($ in millions)



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-Total cost of revenues increased $2.0 million and represented 15% of our total
revenues for both the nine months ended December 31, 2021 and December 31, 2020.
-Cost of software and products revenue decreased $11.2 million and represented
4% of our total software and products revenue for the nine months ended
December 31, 2021 compared to 9% for the nine months ended December 31, 2020.
The decrease was the result of reduced sales of hardware associated with our
appliances as well as reduced software royalties associated with sales of
HyperScale appliances and software. Beginning with the launch of HyperScale X in
mid fiscal 2021, we began transitioning to a software only model. HyperScale X
also has reduced software royalties relative to prior versions of HyperScale.
-Cost of services revenue increased $13.2 million, representing 24% of our total
services revenue for the nine months ended December 31, 2021 compared to 20% for
the nine months ended December 31, 2020. The increase in cost of services
revenue related to an increase in the cost of infrastructure related to
Metallic, as well as an increase in employee compensation and related expenses
compared to the prior year due to temporary pay cuts enacted in 2021.













                                       24

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Operating Expenses ($ in millions) [[Image Removed: cvlt-20211231_g25.jpg]][[Image Removed: cvlt-20211231_g26.jpg]][[Image Removed: cvlt-20211231_g27.jpg]]



[[Image Removed: cvlt-20211231_g28.jpg]][[Image Removed: cvlt-20211231_g29.jpg]][[Image Removed: cvlt-20211231_g30.jpg]]
- Sales and marketing expenses increased $3.2 million, or 1%, primarily due to
an increase in employee compensation and sales commissions associated with
increased revenue.
- Research and development expenses increased $15.3 million, or 16%, as a result
of an increase in employee compensation and related expenses attributable to the
expansion of our engineering group.
•Increase in employee compensation including an increase in stock-based
compensation of $7.0 million compared to prior year.
•Investing in research and development has been a priority for Commvault, and we
anticipate continued spending related to the development of our data and
information management software applications.
- General and administrative expenses increased $11.9 million, or 17%, primarily
due to the following:
•Increase in employee compensation and related expenses compared to the prior
year. Stock-based compensation increased $7.2 million compared to the prior
year.
•Increase in legal expenses for legal costs related to intellectual property
matters partially offset by a $2.5 million settlement gain net against related
legal expenses that was recorded in General and administrative expense.
- 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 $2.1 million and $19.7
million in the nine months ended December 31, 2021 and 2020, respectively. These
restructuring charges relate primarily to severance and related costs associated
with headcount reductions. These charges include $0.4 million and $1.9 million
in the nine months ended December 31, 2021 and 2020, 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.
                                       25
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-Depreciation and amortization expense decreased $5.4 million, from $12.4
million in the nine months ended December 31, 2020 to $7.1 million in the nine
months ended December 31, 2021, driven by the elimination of amortization of
intangible assets related to Hedvig due to their impairment in the second
quarter of fiscal 2021.

Income Tax Expense
Income tax expense was $5.6 million in the nine months ended December 31, 2021
compared to expense of $5.4 million in the nine months ended December 31, 2020.
The income tax expense for the nine months ended December 31, 2021 and 2020
relates primarily to current foreign taxes.


Liquidity and Capital Resources
As of December 31, 2021, our cash balance was $233.7 million. In recent fiscal
years, our principal source of liquidity has been cash provided by operations.
As of December 31, 2021, the amount of cash and cash equivalents held outside of
the United States by our foreign legal entities was approximately $171.6
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 need to
repatriate funds from outside of the United States, such repatriation would
likely be subject to restrictions by local laws and/or tax consequences
including foreign withholding taxes.
We have a five-year $100 million senior secured revolving credit facility (the
"Credit Facility") with J.P. Morgan. 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 lender 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 Secured Overnight Financing Rate plus 1.25%
subject to increases based on our 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, 2021, there were no
borrowings under the Credit Facility and we were in compliance with all
covenants.
During the nine months ended December 31, 2021, we repurchased $265.4 million of
our common stock under our share repurchase program. Our stock repurchase
program has been funded by our existing cash and cash equivalent balances, as
well as cash flows provided by our operations.
Our Board has approved, and we intend to execute, a capital allocation policy
that provides for the repurchase of $200 million of our common stock for the
period from February 1, 2021 through the end of our 2022 fiscal year, plus the
use of approximately 75% of our fiscal 2022 free cash flow for additional
repurchases during fiscal year 2022. Since February 1, 2021 through December 31,
2021 we have repurchased $327.5 million of common stock.
Our summarized cash flow information is as follows (in thousands):

Nine Months Ended December 31,


                                                                             2021                    2020
Net cash provided by operating activities                            $          90,064          $     59,247
Net cash (used in) provided by investing activities                             (6,355)               26,806
Net cash used in financing activities                                         (242,335)              (26,129)
Effects of exchange rate-changes in cash                                        (4,920)               21,563
Net (decrease) increase in cash and cash equivalents                 $

(163,546) $ 81,487


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- Net cash provided by operating activities was impacted by net income adjusted
for the impact of non-cash charges, an increase in accounts receivable and
deferred commissions and a decrease in accrued liabilities.
- Net cash used in investing activities was related to $3.6 million in the
purchase of equity securities and $3.3 million of capital expenditures,
partially offset by proceeds of $0.5 million related to the sale of an equity
investment.
- Net cash used in financing activities was the result of $265.4 million of
repurchases of common shares partially offset by $23.7 million of proceeds from
the exercise of stock options.
Working capital decreased $133.1 million from $234.4 million as of March 31,
2021 to $101.3 million as of December 31, 2021. The net decrease in working
capital was primarily the result of cash used for share repurchases during the
quarter.
We believe that our existing cash, cash equivalents and our cash from operations
will be sufficient to meet our anticipated cash needs for working capital,
income taxes, capital expenditures and potential stock repurchases for at least
the next twelve months. We may seek additional funding through public or private
financings or other arrangements during this period. Adequate funds may not be
available when needed or may not be available on terms favorable to us, or at
all. If additional funds are raised by issuing equity securities, dilution to
existing stockholders will result. If we raise additional funds by obtaining
loans from third parties, the terms of those financing arrangements may include
negative covenants or other restrictions on our business that could impair our
operational flexibility, and would also require us to fund additional interest
expense. If funding is insufficient at any time in the future, we may be unable
to develop or enhance our products or services, take advantage of business
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition and results of
operations.

Off-Balance Sheet Arrangements
As of December 31, 2021, we did not have off-balance sheet financing
arrangements, including any relationships with unconsolidated entities or
financial partnerships, such as entities often referred to as structured finance
or special purpose entities.

Indemnifications


Certain of our software licensing agreements contain certain provisions that
indemnify our customers from any claim, suit or proceeding arising from alleged
or actual intellectual property infringement. These provisions continue in
perpetuity along with our software licensing agreements. We have never incurred
a liability relating to one of these indemnification provisions in the past and
we believe that the likelihood of any future payout relating to these provisions
is remote. Therefore, we have not recorded a liability during any period related
to these indemnification provisions.

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

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