What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-14 compared with 2021-02-12 · 92 added, 93 removed, 285 unchanged (39% of the section changed)

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The forward-looking statements include, but are not limited to, statements regarding:

the impact of the COVID-19 pandemic on our employees and customers;

the impact of a novel strain of coronavirus (COVID-19) pandemic on our employees and customers;

our SaaS only business model and that our belief that it affords recurring revenue visibility, more predictability and 50% faster time to value to SaaS clients;

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● If our cybersecurity systems or the systems of our vendors, partners and suppliers are breached and unauthorized access is obtained to a customer’s data or our data or IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

● Changes in the European regulatory environment regarding privacy and data protection regulations, such as the European Union’s GDPR, could expose us to risks of noncompliance and costs associated with compliance.

● Changes in the European regulatory environment regarding privacy and data protection regulations, such as the European Union’s General Data Protection Regulation (GDPR), could expose us to risks of noncompliance and costs associated with compliance.

● Privacy concerns and laws, evolving regulation of cloud computing, cross-border data transfer restrictions and other domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business.

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With our mantra of AX + BX + CX = DX™ , we guide clients to effortless Digital experience (DX) by holistically optimizing Agent experience (AX), Business experience (BX), and Customer experience (CX).

One hundred fifty leading brands use eGain cloud software to improve customer satisfaction, empower agents, reduce service cost and boost sales.

Approximately one hundred seventy-five leading brands use eGain cloud software to improve customer satisfaction, empower agents, reduce service cost and boost sales.

We have transitioned from a hybrid model, where we sold both SaaS and perpetual license solutions, to a SaaS only business model.

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We have operations in the US, UK, and India.

In December 2019, a novel strain of coronavirus (COVID-19) was first reported in Wuhan, China.

In December 2019, COVID-19 was first reported in Wuhan, China.

In March 2020, the World Health Organization characterized the outbreak of COVID-19 as a global pandemic, and the virus continues to spread in areas where we operate and sell our products and services.

Several public health organizations have recommended, and many local governments have implemented, certain measures to slow and limit the transmission of COVID-19, including shelter-in-place and social distancing orders, which has resulted in a significant deterioration of economic conditions in the countries in which we operate.

The impact of COVID-19 and the related disruptions caused to the global economy and our business did not have a material adverse impact on our business during the three and six months ended December 31, 2020.

The impact of COVID-19 and the related disruptions caused to the global economy and our business did not have a material adverse impact on our business during the three and nine months ended March 31, 2021.

In response to the outbreak of COVID-19, we have taken the following measures to date:

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Income from operations

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The transaction price allocated to the remaining performance obligation is influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency exchange rates.

As of December 31, 2020, our remaining performance obligations were $67.8 million, of which we expect to recognize $53.5 million and $14.3 million as revenue within one year and beyond one year, respectively.

As of March 31, 2021, our remaining performance obligations were $62.3 million, of which we expect to recognize $50.1 million and $12.2 million as revenue within one year and beyond one year, respectively.

We expect our remaining performance obligations to change quarterly for several reasons including the timing of new contracts and renewals, duration and size of our subscription and support arrangements, variable billing cycles and foreign exchange rate fluctuation.

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Professional services

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We further break down subscription revenue into SaaS revenue and legacy revenue, with SaaS revenue being a key metric.

The following table presents our subscription and professional services revenue during the three and six months ended December 31, 2020 and 2019, respectively:

The following table presents our subscription and professional services revenue during the three and nine months ended March 31, 2021 and 2020, respectively:

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Total revenue

Total revenue increased $1.1 million and $3.0 million during the three and six months ended December 31, 2020, compared to the same periods in fiscal year 2020, respectively, due to an increase in SaaS revenue of $2.1 million and $5.7 million during the three and six months ended December 31, 2020, compared to the same periods in fiscal year 2020.

This increase was partially offset by a decline in our legacy revenue as we continue to migrate legacy perpetual license customers to our SaaS model and a decline in professional service revenue as we continue to see a reduction in time required for an average implementation project, as a result of the improvements to our product deployment process.

Total revenue increased $1.4 million and $4.3 million during the three and nine months ended March 31, 2021, compared to the same periods in fiscal year 2020, respectively, due to an increase in SaaS revenue of $2.1 million and $7.7 million during the three and nine months ended March 31, 2021, compared to the same periods in fiscal year 2020.

The increase for the three months ended March 31, 2021 was primarily due to an increase in SaaS revenue that was partially offset by a decline in our legacy revenue as we continue to migrate legacy perpetual license customers to our SaaS model.

The increase for the nine months ended March 31, 2021 was primarily due to an increase in SaaS revenue that was partially offset by a decline in our legacy revenue and a decline in professional service revenue as we continue to see a reduction in time required for an average implementation project, as a result of the improvements to our product deployment process.

Our revenue was impacted by foreign exchange rate fluctuation between the U.S.

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We recalculate our current period results using the comparable prior period exchange rates to exclude the impact of foreign exchange rate fluctuation.

Foreign exchange rate fluctuation resulted in increases of $72,000 and $70,000 in total revenue during the three months ended December 31, 2020 and 2019, respectively.

Foreign exchange rate fluctuation resulted in an increase of $515,000 and a decrease of $362,000 for the six months ended December 31, 2020 and 2019, respectively.

Foreign exchange rate fluctuation resulted in increases of $475,000 and $61,000 in total revenue during the three months ended March 31, 2021 and 2020, respectively.

Foreign exchange rate fluctuation resulted in an increase of $885,000 and a decrease of $534,000 for the nine months ended March 31, 2021 and 2020, respectively.

Subscription Revenue

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SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.

Revenue from SaaS increased by $2.1 million and $5.7 million during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

Revenue from SaaS increased by $2.1 million and $7.7 million during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

In connection with our SaaS transition, we are actively migrating our remaining perpetual license clients to SaaS and continue to sell SaaS to new customers.

We expect our SaaS revenue to increase on a year over year basis.

SaaS revenue represents 84% of total revenue for the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

This represented an increase in SaaS revenue of 15% and 21% for the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

Excluding increases of $119,000 and $367,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $2.0 million and $5.3 million during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

SaaS revenue represents 85% and 84% of total revenue for the three and nine months ended March 31, 2021, respectively, compared to 81% and 77% during the same periods in fiscal year 2020.

This represented an increase in SaaS revenue of 14% and 19% for the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

Excluding increases of $380,000 and $732,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $1.7 million and $7.0 million during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

Legacy Revenue

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Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer offer.

We experienced decreases of $776,000 and $2.2 million during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

We experienced decreases of $899,000 and $3.1 million during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

This decrease was primarily due to our focus in migrating our legacy customers to SaaS.

We expect these legacy fees to continue to decline in future quarters.

Excluding a decrease of $52,000 and an increase of $97,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $724,000 and $2.3 million during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

Excluding increases of $52,000 and $77,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $951,000 and $3.1 million during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

Professional Services Revenue

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Professional services revenue includes consulting, implementation and training.

Revenue from professional services decreased by $278,000 and $581,000 during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

These decreases were primarily due to continued improvements in our product deployment process resulting in a reduction in the time required for an average implementation project.

As we continue to onboard new customers and migrate legacy customers to SaaS, we expect the time required for product deployment and implementation projects to decrease.

Excluding increases of $5,000 and $51,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $283,000 and $632,000 during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

Revenue from professional services increased by $230,000 and decreased by $351,000 during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

The increase for three months ended March 31, 2021 compared to the prior year was due to new customer implementations.

The nine months ended March 31, 2021 compared to the prior year was decrease primarily due to continued improvements in our product deployment process resulting in a reduction in the time required for an average implementation project.

Excluding increases of $43,000 and $76,000 due to foreign exchange rate fluctuation, professional services revenue increased by $187,000 and decreased by $427,000 during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

Revenue by Geography

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Total revenue

Revenue from domestic sales increased by 20% from $11.0 million during the three months ended December 31, 2019 to $13.2 million during the three months ended December 31, 2020 due to increases of (i) $2.0 million in SaaS revenue and (ii) $402,000 in legacy revenue;

offset by a decrease of $225,000 in professional services revenue.

Revenue from domestic sales increased by $31% from $20.6 million during the six months ended December 31, 2019 to $26.9 million during the six months ended December 31, 2020 due to increases of (i) $6.1 million in SaaS revenue, (ii) $269,000 in legacy revenue, and (iii) $27,000 in professional services revenue.

Revenue from international sales decreased by 16% from $7.2 million for the three months ended December 31, 2019 to $6.1 million during the three months ended December 31, 2020, due to decreases of $1.2 million in legacy revenue and $54,000 in professional services revenue;

Revenue from domestic sales increased by 19% from $11.5 million during the three months ended March 31, 2020 to $13.6 million during the three months ended March 31, 2021 due to increases of (i) $1.3 million in SaaS revenue, (ii) $452,000 in professional services revenue, and (iii) $348,000 in legacy revenue.

Revenue from domestic sales increased by 27% from $32 million during the nine months ended March 31, 2020 to $40.6 million during the nine months ended March 31, 2021 due to increases of (i) $7.4 million in SaaS revenue, (ii) $618,000 in legacy revenue, and (iii) $478,000 in professional services revenue.

Revenue from international sales decreased by 11% from $6.9 million for the three months ended March 31, 2020 to $6.1 million during the three months ended March 31, 2021, due to decreases of $1.2 million in legacy revenue and $222,000 in professional services revenue;

offset by an increase of $714,000 in SaaS revenue.

Revenue from international sales decreased by 23% from $14.8 million for the six months ended December 31, 2019 to $11.4 million during the six months ended December 31, 2020, due to decreases of (i) $2.4 million in legacy revenue (ii) $608,000 in professional services revenue, and (iii) $390,000 in SaaS revenue.

Revenue from international sales decreased by 19% from $21.7 million for the nine months ended March 31, 2020 to $17.5 million during the nine months ended March 31, 2021, due to decreases of $3.7 million in legacy revenue and $830,000 in professional services revenue;

offset by an increase of $323,000 in SaaS revenue.

Cost of Revenue

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These expenses are comprised of cloud computing costs, personnel-related costs directly associated with cloud operations, and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.

Cost of subscription revenue decreased by $309,000 during the three months ended December 31, 2020, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of (i) $234,000 in personnel-related costs, (ii) $75,000 in cloud-computing costs, and (iii) $67,000 in intangible amortization cost;

primarily offset by an increase in outside consulting costs of $72,000.

Cost of subscription revenue decreased by $837,000 during the six months ended December 31, 2020, from the same period in fiscal year 2020.

Cost of subscription revenue decreased by $398,000 during the three months ended March 31, 2021, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of (i) $196,000 in cloud-computing costs, (ii) $149,000 in personnel-related costs, (iii) $67,000 in intangible amortization cost, and (iv) $22,000 in outside consulting costs.

Cost of subscription revenue decreased by $1.2 million during the nine months ended March 31, 2021, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of (i) $670,000 in cloud-computing costs, (ii) $608,000 in personnel-related costs, and (iii) $175,000 in intangible amortization costs;

primarily offset by an increase in outside consulting costs of $202,000.

Excluding a decrease of $5,000 and an increase of $8,000 due to foreign exchange rate fluctuation, cost of subscription revenue decreased by $304,000 and $845,000 during the three and six months ended December 31, 2020, respectively, from the same periods in fiscal year 2020.

primarily offset by an increase of $179,000 in outside consulting costs.

Excluding increases of $37,000 and $39,000 due to foreign exchange rate fluctuation, cost of subscription revenue decreased by $435,000 and $1.3 million during the three and nine months ended March 31, 2021, respectively, from the same periods in fiscal year 2020.

Excluding any future foreign exchange rate fluctuation, we expect our cost of subscription revenue to increase in absolute dollar terms but expect subscription revenue gross margins to improve.

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Cost of professional services consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, and stock based-compensation and allocated overhead.

Cost of professional services decreased by $224,000 during the three months ended December 31, 2020, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of $172,000 in personnel-related costs and $47,000 in outside consulting costs.

Cost of professional services decreased by $378,000 during the six months ended December 31, 2020, from the same period in fiscal year 2020.

Cost of professional services decreased $256,000 during the three months ended March 31, 2021, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of $233,000 in personnel-related costs and $50,000 in outside consulting costs.

Excluding a decrease of $5,000 and an increase of $22,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $219,000 and $400,000 during the three and six months ended December 31, 2020, respectively, compared to the same periods in fiscal year 2020.

Cost of professional services decreased by $634,000 during the nine months ended March 31, 2021, from the same period in fiscal year 2020.

This decrease was primarily due to decreases of $527,000 in personnel-related costs which was cross charge to other departments and $142,000 in outside consulting costs.

Excluding increases of $27,000 and $34,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $283,000 and $668,000 during the three and nine months ended March 31, 2021, respectively, compared to the same periods in fiscal year 2020.

Operating Expenses

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Research and development expense also includes outside consulting services contracted for research and development, and amortization of intangible assets.

Research and development expense increased 11% to $4.5 million for the three months ended December 31, 2020, from $4.1 million in the same period in fiscal year 2020.

Excluding a decrease of $16,000 due to foreign exchange rate fluctuation between the U.S.

Research and development expense increased 4% to $4.4 million for the three months ended March 31, 2021, from $4.2 million in the same period in fiscal year 2020.

Excluding an increase of $56,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, research and development expense increased primarily due to an increase of $192,000 in personnel-related costs;

offset by a decrease of $81,000 from outside consulting costs.

Research and development expense increased 12% to $9.0 million for the six months ended December 31, 2020, from $8.1 million in the same period in fiscal year 2020.

Excluding a decrease of $12,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, research and development expense increased primarily due to an increase of $1.1 million in personnel-related costs;

Research and development expense increased 9% to $13.4 million for the nine months ended March 31, 2021, from $12.3 million in the same period in fiscal year 2020.

Excluding an increase of $39,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, research and development expense increased primarily due to an increase of $1.3 million in personnel-related costs and cross charges from other departments;

offset by a decrease of $213,000 from outside consulting costs.

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Sales and marketing expenses also include amortization of commissions paid to our sales staff, lead generation activities, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead.

Sales and marketing expenses increased 30% to $6.3 million for the three months ended December 31, 2020, from $4.8 million in the same period in fiscal year 2020.

Sales and marketing expenses increased 37% to $6.9 million for the three months ended March 31, 2021, from $5.1 million in the same period in fiscal year 2020.

Excluding an increase of $137,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, sales and marketing expense increased primarily due to increases of $1.7 million in personnel-related expenses and $33,000 in outside consulting expenses;

offset by a decrease of $361,000 from marketing program expenses.

Sales and marketing expenses increased 24% to $11.9 million for the six months ended December 31, 2020, from $9.6 million in the same period in fiscal year 2020.

Dollar, Euro, British Pound and Indian Rupee, sales and marketing expense increased primarily due to increases of (i) $1.7 million in personnel-related expenses and cross charges from other departments, (ii) $37,000 in outside consulting expenses, and (iii) $18,000 in marketing program expenses.

Sales and marketing expenses increased 29% to $18.8 million for the nine months ended March 31, 2021, from $14.6 million in the same period in fiscal year 2020.

Excluding an increase of $252,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, sales and marketing expense increased primarily due to

increases of $2.4 million in personnel-related expenses and $16,000 in outside consulting expenses;

offset by a decrease of $201,000 from outside consulting costs.

increases of $4.1 million in personnel-related expenses and cross charges from other departments and $51,000 in outside consulting expenses;

offset by a decrease of $183,000 in marketing program expenses.

Excluding any future foreign exchange rate fluctuation, we expect our sales and marketing expense to increase as a percentage of total revenue in future quarters based on our current business plan.

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General and administrative expenses also include fees for professional services, provision for doubtful accounts and, to a lesser extent, occupancy costs and related overhead.

General and administrative expenses decreased 9% to $1.9 million for the three months ended December 31, 2020, from $2.0 million in the same period in fiscal year 2020.

Excluding a decrease of $3,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, general and administrative expense decreased primarily due to decreases of (i) $188,000 in accounting, audit, and administrative expenses, (ii) $80,000 in personnel-related expenses, (iii) $75,000 in legal expense, and (iv) $11,000 in outside consulting expenses;

primarily offset by an increase of $159,000 in bad debt expense.

General and administrative expenses decreased 7% to $3.8 million for the six months ended December 31, 2020, from $4.1 million in the same period in fiscal year 2020.

General and administrative expenses increased 11% to $2.0 million for the three months ended March 31, 2021, from $1.8 million in the same period in fiscal year 2020.

Excluding an increase of $27,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, general and administrative expense decreased primarily due to decreases of (i) $173,000 in personnel-related expenses, (ii) $113,000 in accounting, audit, and administrative expenses, (iii) $91,000 in legal expenses, and (iv) $31,000 in outside consulting expenses;

primarily offset by an increase of $85,000 in bad debt expense.

Excluding any future foreign exchange rate fluctuation, we expect our general and administrative expense to increase or remain relatively consistent as a percentage of total revenue in future quarters based on our current business plan.

Dollar, Euro, British Pound and Indian Rupee, general and administrative expense increased primarily due to increases of (i) $109,000 in bad debt expenses, (ii) $76,000 in legal expenses, (iii) $72,000 in outside consulting expenses, and (iv) $17,000 in accounting, audit, and administrative expenses;

primarily offset by a decrease of $118,000 in personnel-related expenses.

General and administrative expenses decreased 2% to $5.8 million for the nine months ended March 31, 2021, from $5.9 million in the same period in fiscal year 2020.

Excluding an increase of $42,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, general and administrative expense decreased primarily due to decreases of (i) $285,000 in personnel-related expenses, (ii) $95,000 in accounting, audit, and administrative expenses, and (iii) $15,000 in legal expenses;

primarily offset by increases of $194,000 in bad debt expenses and $41,000 in outside consulting expenses.

Excluding any future foreign exchange rate fluctuation, we expect our general and administrative expense to remain relatively consistent as a percentage of total revenue in future quarters based on our current business plan.

Income from Operations

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Operating margin

Income from operations was $1.9 million with an operating margin of 10% during the three months ended December 31, 2020.

Income from operations during the three months ended December 31, 2020 included $426,000 of stock-based compensation and $312,000 of amortized costs capitalized to obtain revenue contracts.

Income from operations was $4.2 million with an operating margin of $11% during the six months ended December 31, 2020.

Income from operations during the six months ended December 31, 2020 included (i) $896,000 of stock-based compensation;

(ii) $562,000 of amortized costs capitalized to obtain revenue contracts;

Income from operations was $1.6 million with an operating margin of 8% during the three months ended March 31, 2021.

Income from operations during the three months ended March 31, 2021 included $368,000 of stock-based compensation and $309,000 of amortization of costs capitalized to obtain revenue contracts.

Income from operations was $5.8 million with an operating margin of 10% during the nine months ended March 31, 2021.

Income from operations during the nine months ended March 31, 2021 included (i) $1.3 million of stock-based compensation;

(ii) $872,000 of amortization of costs capitalized to obtain revenue contracts;

and (iii) $26,000 of amortization of intangible assets.

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Interest income, net consists of interest earned on money market accounts and interest paid on bank borrowings.

Interest income, net was income of $2,000 and $124,000 during the three months ended December 31, 2020 and 2019, respectively.

Interest income, net was income of $6,000 and $271,000 during the six months ended December 31, 2020 and 2019, respectively.

Interest income, net decreased in the three and six months ended December 31, 2020, compared to the same periods in fiscal year 2020, primarily due to an unfavorable shift of interest rates from money market accounts.

Interest income, net was income of $5,000 and $113,000 during the three months ended March 31, 2021 and 2020, respectively.

Interest income, net was income of $10,000 and $384,000 during the nine months ended March 31, 2021 and 2020, respectively.

Interest income, net decreased in the three and nine months ended March 31, 2021, compared to the same periods in fiscal year 2020, primarily due to an unfavorable shift of interest rates from money market accounts.

We expect interest income in future quarters to remain relatively low compared to previous periods, as we continue to see low yields in interest rates for the duration of and possibly beyond the COVID-19 pandemic.

Other Expense, Net

Other expense, net was $160,000 and $186,000 during the three months ended December 31, 2020 and 2019, respectively.

Other expense, net was $323,000 and $21,000 during the six months ended December 31, 2020 and 2019, respectively.

Other expense, net primarily included foreign exchange rate fluctuations on international trade receivables.

Other Income (Expense), Net

Other income (expense), net was expense of $378,000 and income of $65,000 during the three months ended March 31, 2021 and 2020, respectively.

Other income (expense), net was expense of $700,000 and income of $44,000 during the nine months ended March 31, 2021 and 2020, respectively.

Other income (expense), net primarily included foreign exchange rate fluctuations on international trade receivables.

Income Tax (Provision) Benefit

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Due to cumulative losses, we maintain a valuation allowance against U.S.

deferred tax assets as of December 31, 2020.

deferred tax assets as of March 31, 2021.

We consider all available evidence, both positive and negative, including but not limited to earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets.

We recorded income tax provisions of $132,000 and $280,000 for the three and six months ended December 31, 2020, respectively.

We recorded a tax benefit of $33,000 and provision of $156,000 for the three and six months ended December 31, 2019, respectively.

We recorded income tax benefit of $57,000 and provision of $223,000 for the three and nine months ended March 31, 2021, respectively.

We recorded income tax provisions of $68,000 and $224,000 for the three and nine months ended March 31, 2020, respectively.

Liquidity and Capital Resources

At December 31, 2020 and June 30, 2020, our principal sources of liquidity were cash and cash equivalents, and accounts receivable totaling $70.9 million and $69.3 million, respectively.

Our cash, cash equivalents and restricted cash were $54.2 million and $46.6 million as of December 31, 2020 and June 30, 2020, respectively.

For the six months ended December 31, 2020 and 2019, our cash flows were as follows (in thousands):

Six Months Ended

At March 31, 2021 and June 30, 2020, our principal sources of liquidity were cash and cash equivalents, and accounts receivable totaling $69.4 million and $69.3 million, respectively.

Our cash, cash equivalents and restricted cash were $53.4 million and $46.6 million as of March 31, 2021 and June 30, 2020, respectively.

For the nine months ended March 31, 2021 and 2020, our cash flows were as follows (in thousands):

Nine Months Ended

Net cash provided by operating activities

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Cash provided by operating activities mainly consists of net income adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, the timing of employee related costs including commissions and bonus payments, and changes in operating assets and liabilities during the year.

Net cash provided by operating activities decreased by $2.1 million during the six months ended December 31, 2020, from the same period in fiscal year 2020, driven primarily by the timing of prepayments received from customers for new cloud arrangements and the renewal of existing cloud and support arrangements, as well as the timing of accrued liability payouts.

Net cash used in investing activities increased by $192,000 during the six months ended December 31, 2020, from the same period in fiscal year 2020, driven primarily by activities related to the purchase of equipment for new employees and facility expenditures.

Net cash provided by operating activities decreased by $3.4 million during the nine months ended March 31, 2021, from the same period in fiscal year 2020, driven primarily by the timing of prepayments received from customers for new cloud arrangements and the renewal of existing cloud and support arrangements, as well as the timing of accrued liability payouts.

Net cash used in investing activities increased by $15,000 during the nine months ended March 31, 2021, from the same period in fiscal year 2020, driven primarily by activities related to the purchase of equipment for new employees and facility expenditures.

Historically, cash used in investing activities has been used to purchase equipment and software to support our business and growth.

Net cash provided by financing activities increased by $636,000 during the six months ended December 31, 2020, from the same period in fiscal year 2020.

Net cash provided by financing activities increased by $670,000 during the nine months ended March 31, 2021, from the same period in fiscal year 2020.

Our current proceeds consist primarily of proceeds from the exercise of employee stock options and our employee stock purchase plan.

1 unchanged sentence

Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases .

As December 30, 2020, the future non-cancelable minimum payments under these commitments were approximately $2.5 million.

As March 31, 2021, the future non-cancelable minimum payments under these commitments were approximately $2.8 million.

Off-Balance Sheet Arrangements

As of December 31, 2020, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

As of March 31, 2021, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

New Accounting Pronouncements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis