What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-07 compared with 2021-11-12 · 109 added, 92 removed, 282 unchanged (42% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Opera tions

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended June 30, 2021.

110 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

(in thousands)

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Three Months Ended

September 30,

Six Months Ended

(in thousands)

2 unchanged sentences

Non-GAAP Operating Income

Non-GAAP operating income is defined as operating income, adjusted for the impact of stock-based compensation expense and amortization of acquired intangible assets.

Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations;

and (ii) such expenses can vary significantly between periods as a

result of the timing of new stock-based awards and acquisition of intangible assets.

Non-GAAP operating income (loss) is defined as operating income (loss), adjusted for the impact of stock-based compensation expense and amortization of acquired intangible assets.

underlying performance of our business operations;

and (ii) such expenses can vary significantly between periods as a result of the timing of new stock-based awards and acquisition of intangible assets.

The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America (GAAP).

The following table presents a reconciliation of GAAP income from operations to non-GAAP income from operations for each of the following periods:

The following table presents a reconciliation of GAAP (loss) income from operations to non-GAAP income from operations for each of the following periods:

Three Months Ended

September 30,

Income from operations

Six Months Ended

(Loss) Income from operations

Stock-based compensation

4 unchanged sentences

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

We believe that the assumptions and estimates associated with revenue recognition, stock-based compensation, allowance for doubtful accounts, the valuation of goodwill and intangible assets, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our consolidated financial statements.

We believe that the assumptions and estimates, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, associated with revenue recognition, stock-based compensation, allowance for doubtful accounts, the valuation of goodwill and intangible assets, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our condensed consolidated financial statements.

We evaluate these estimates on an ongoing basis.

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These embedded OEM royalties are included as subscription revenue.

Under Topic 606-10-55-65 revenue guidance (Topic 606), since these arrangements are for sales-

based licenses of intellectual property, the Company recognizes revenue only as the subsequent sale occurs.

Under Topic 606-10-55-65 revenue guidance (Topic 606), since these arrangements are for sales-based licenses of intellectual property, the Company recognizes revenue only as the subsequent sale occurs.

However, since such sales are reported by the customer with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.

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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 September 30, 2021, our remaining performance obligations were $71.9 million, of which we expect to recognize $52.8 million and $19.1 million as revenue within one year and beyond one year, respectively.

As of December 31, 2021, our remaining performance obligations were $89.8 million, of which we expect to recognize $58.7 million and $31.1 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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Three Months Ended

September 30,

Six Months Ended

Professional services

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Total operating expenses

Income from operations

(Loss) Income from operations

We classify our revenue into two categories:

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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 months ended September 30, 2021 and 2020, respectively:

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

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

1 unchanged sentence

Total revenue

Total revenue increased $2.4 million during the three months ended September 30, 2021, compared to the same period in 2020, respectively, due to an increase in SaaS revenue of $3.2 million during the three months ended September 30, 2021, compared to the same period in 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 $3.9 million and $6.2 million during the three and six months ended December 31, 2021, compared to the same periods in 2020, respectively, due to an increase in SaaS revenue of $4.3 million and $7.5 million during the three and six months ended December 31, 2021, compared to the same periods in 2020.

The increase for the three months ended December 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 six months ended December 31, 2021 was primarily due to an increase in SaaS revenue that was partially offset by a decline in our legacy revenue.

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

Dollar, Euro, and British Pound.

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 an increase of $356,000 and $233,000 in total revenue during the three months ended September 30, 2021 and 2020, respectively.

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 $121,000 and $72,000 in total revenue during the three months ended December 31, 2021 and 2020, respectively.

Foreign exchange rate fluctuation resulted in an increase of $479,000 and $515,000 for the six months ended December 31, 2021 and 2020, respectively.

Subscription Revenue

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 $3.2 million during the three months ended September 30, 2021, compared to the same period in 2020.

SaaS revenue represents 89% and 84% of total revenue for the three months ended September 30, 2021 and 2020, respectively.

This represented an increase in SaaS revenue of 20% for the three months ended September 30, 2021 as compared to the comparable period in 2020.

Excluding an increase of $296,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $2.9 million during the three months ended September 30, 2021 as compared to the comparable period in 2020.

Revenue from SaaS increased by $4.3 million and $7.5 million during the three and six months ended December 31, 2021, respectively, compared to the same periods in 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 88% of total revenue for the three and six months ended December 31, 2021, respectively, compared to 84% during the same periods in 2020.

This represented an increase in SaaS revenue of 26% and 23% for the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

Excluding increases of $107,000 and $396,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $4.2 million and $7.1 million during the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

Legacy Revenue

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 $826,000 during the three months ended September 30, 2021, compared to the same period in 2020.

We experienced decreases of $667,000 and $1.5 million during the three and six months ended December 31, 2021, respectively, compared to the same periods in 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 an increase of $39,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $865,000 during the three months ended September 30, 2021, as compared to the comparable period in 2020.

Excluding increases of $6,000 and $49,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $661,000 and $1.5 million during the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

Professional Services Revenue

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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Percentage of total revenue

Professional services revenue includes consulting, implementation and training.

Revenue from professional services decreased by $10,000 during the three months ended September 30, 2021, compared to the same period in 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 an increase of $21,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $31,000 during the three months ended September 30, 2021, as compared to the comparable period in 2020.

Professional services revenue includes consulting, implementation, managed services and training.

Revenue from professional services increased by $253,000 and $243,000 during the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

The increase for three and six months ended December 31, 2021 compared to the prior year was primarily due to new customer implementations and an increase in managed services.

Excluding increases of $8,000 and $33,000 due to foreign exchange rate fluctuation, professional services revenue increased by $245,000 and decreased by $210,000 during the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

Revenue by Geography

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

North America

International

Total revenue

Revenue from domestic sales increased by 11% from $13.8 million during the three months ended September 30, 2020 to $15.2 million during the three months ended September 30, 2021, due to increases of $2.1 million in SaaS revenue;

partially offset by a decrease of (i) $98,000 in professional services revenue and (ii) $579,000 in legacy revenue.

Revenue from international sales increased by 18% from $5.3 million for the three months ended September 30, 2020 to $6.2 million during the three months ended September 30, 2021, due to increases of (i) $1.1 million in Saas revenue and (ii) $88,000 in professional services revenue;

partially offset by a decrease in $247,000 in legacy revenue.

Revenue from North America sales increased by 27% from $13.2 million during the three months ended December 31, 2020 to $16.8 million during the three months ended December 31, 2021 due to increases of (i) $3.7 million in SaaS revenue and (ii) $351,000 in professional services revenue;

partially offset by a decrease of $436,000 in legacy revenue.

Revenue from North America sales increased by 19% from $26.9 million during the six months ended December 31, 2020 to $32.0 million during the six months ended December 31, 2021 due to increases of (i) $5.8 million in SaaS revenue, and (ii) $253,000 in professional services revenue;

partially offset by a decrease of $1.0 million in professional services revenue.

Revenue from international sales increased by 4% from $6.1 million for the three months ended December 31, 2020 to $6.3 million during the three months ended December 31, 2021, due to increases of $593,000 in SaaS revenue;

offset by a decrease of (i) $231,000 in legacy revenue and (ii) $97,000 in professional services revenue.

Revenue from international sales increased by 11% from $11.4 million for the six months ended December 31, 2020 to $12.6 million during the six months ended December 31, 2021, due to increases of (i) $1.7 million in SaaS revenue;

and partially offset by a decrease of $479,000 in legacy revenue and (ii) $1,000 in professional services revenue.

Cost of Revenue

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 revenues increased by $265,000 during the three months ended September 30, 2021, from the comparable period in 2020.

This increase was primarily due to increases of (i) $283,000 in personnel-related costs and (ii) $125,000 in cloud-computing costs during the three months ended September 30, 2021, from the comparable period in 2020.

This was partially offset by a decrease of (i) $144,000 in outside consulting costs and (ii) $26,000 in intanglible amortization costs during the three months ended September 30, 2021, from the comparable period in 2020.

Excluding an increase of $28,000 due to foreign exchange rate fluctuation, cost of subscription revenue increased by $237,000 during the three months ended September 30, 2021, from the comparable period in 2020.

Cost of subscription revenue increased by $273,000 during the three months ended December 31, 2021, from the same period in fiscal year 2020.

This increase was primarily due to increases of (i) $249,000 in cloud-computing costs, (ii) $92,000 in personnel-related costs;

partially offset by a decrease of $73,000 in outside consulting costs.

Cost of subscription revenue increased by $538,000 during the six months ended December 31, 2021, from the same period in fiscal year 2020.

This increase was primarily due to increases of (i) $372,000 in personnel-related costs and (ii) $374,000 in cloud-computing costs;

partially offset by a decrease of $217,000 in outside consulting costs.

Excluding increases of $5,000 and $35,000 due to foreign exchange rate fluctuation, cost of subscription revenue increased by $268,000 and $503,000 during the three and six months ended December 31, 2021, respectively, from the same periods in 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 increased by $402,000 during the three months ended September 30, 2021, from the comparable period in 2020.

The increase for the three months ended September 30, 2021 was primarily due to increases in personnel-related costs of $397,000 and partially offset by a decrease of $15,000 in outside consulting costs.

Excluding an increase of $20,000 due to foreign exchange rate fluctuation, cost of professional services increased by $382,000 during the three months ended September 30, 2021, from the comparable period in 2020.

Cost of professional services increased $1.1 million during the three months ended December 31, 2021, from the same period in 2020.

This increase was primarily due to increases of $1.1 million in personnel-related costs, of which $1.0 million is associated with stock based-compensation cost;

partially offset with a decrease of $3,000 in outside consulting costs.

Cost of professional services increased by $1.5 million during the six months ended December 31, 2021, from the same period in 2020.

This increase was primarily due to increases of $1.5 million in personnel-related costs, all of which is mainly associated with stock based-compensation cost;

partially offset with a decrease of $18,000 in outside consulting costs.

Excluding increases of $5,000 and $28,000 due to foreign exchange rate fluctuation, cost of professional services revenue increased by $1.1 million and $1.5 million during the three and six months ended December 31, 2021, respectively, compared to the same periods in 2020.

Operating Expenses

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Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 25% to $5.6 million for the three months ended September 30, 2021, from $4.5 million in the comparable period in 2020.

Excluding a increase of $48,000 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 (i) $1.1 million in personnel-related costs and (ii) $19,000 in outside consulting costs.

Research and development expense increased 37% to $6.2 million for the three months ended December 31, 2021, from $4.5 million in the same period in 2020.

Excluding an increase of $2,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to an increase of (i) $1.6 million in personnel-related costs, of which $988,000 is associated with stock based-compensation cost, and (ii) $46,000 from outside consulting costs.

Research and development expense increased 31% to $11.8 million for the six months ended December 31, 2021, from $9.0 million in the same period in 2020.

Excluding an increase of $55,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to an increase of $2.7 million in personnel-related costs, of which $1.5 million is associated with stock based-compensation cost, and $65,000 from outside consulting costs.

Excluding any future foreign exchange rate fluctuation, we expect our research and development expense to remain relatively consistent as a percentage of total revenue in future quarters based on our product development plans.

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Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 31% to $7.4 million for the three months ended September 30, 2021, from $5.6 million in the comparable period in 2020.

Excluding an increase of $107,000 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 (i) $1.8 in personnel-related expenses and (ii) $37,000 in outside consulting costs;

offset by a decrease of $136,000 in marketing program expenses.

Sales and marketing expenses increased 30% to $8.2 million for the three months ended December 31, 2021, from $6.3 million in the same period in fiscal year 2020.

Excluding an increase of $38,000 due to foreign exchange rate fluctuation, sales and marketing expense increased primarily due to increases of (i) $1.7 million in personnel-related expenses, of which $750,000 is associated with stock based-compensation cost, and (ii) $185,000 in marketing program expenses;

offset by a decrease of $59,000 in outside consulting expenses.

Sales and marketing expenses increased 31% to $15.6 million for the six months ended December 31, 2021, from $11.9 million in the same period in fiscal year 2020.

Excluding an increase of $150,000 due to foreign exchange rate fluctuation, sales and marketing expense increased primarily due to increases of (i) $3.5 million in personnel-related expenses, of which $1.3 million is associated with stock based-compensation cost, and (ii) $51,000 in marketing program expenses;

offset by a decrease of $22,000 in outside consulting 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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Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

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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 increased 26% to $2.4 million for the three months ended September 30, 2021, from $1.9 million in the same period in 2020.

Excluding an increase of $26,000 due to foreign exchange rate fluctuation between the U.S.

Dollar, Euro, British Pound and Indian Rupee, general and administrative expense increased primarily due to increases of (i) $574,000 in personnel-related expenses, (ii) $38,000 in legal expenses, (iii) $37,000 in outside consulting costs, (iv) $11,000 in investor relations expenses;

partially offset by a decrease (i) $158,000 in bad debt expenses and (ii) $22,000 in accounting, audit, and administrative expenses.

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.

Income from Operations

General and administrative expenses increased 77% to $3.3 million for the three months ended December 31, 2021, from $1.9 million in the same period in fiscal year 2020.

Excluding an increase of $7,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to increases of (i) $1.3 million in personnel-related expenses, of which $1.1 million is associated with stock based-compensation cost, (ii) $174,000 in accounting, audit, and administrative expenses, (iii) $47,000 in outside consulting expenses, and (iv) $15,000 in legal expenses;

primarily offset by a decrease of $129,000 in bad debt expenses.

General and administrative expenses increased 51% to $5.7 million for the six months ended December 31, 2021, from $3.8 million in the same period in 2020.

Excluding an increase of $30,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to increases of (i) $1.9 million in personnel-related expenses, of which $1.6 million is associated with stock based-compensation cost, (ii) $154,000 in accounting, audit, and administrative expenses, (iii) $84,000 in outside consulting expenses, (iv) $53,000 in legal expenses, and (v) $13,000 in investor relations expense.

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.

(Loss) Income from Operations

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

Income from operations

(Loss) Income from operations

Operating margin

Income from operations was $691,000 with an operating margin of 3% during the three months ended September 30, 2021.

Income from operations during the three months ended September 30, 2021 included (i) $2.1 million of stock-based compensation and (ii) $356,000 of amortization of costs capitalized to obtain revenue contracts.

Loss from operations was $630,000 with an operating loss margin of 2% during the three months ended December 31, 2021.

Loss from operations during the three months ended December 31, 2021 included $3.8 million of stock-based compensation and $376,000 of amortization of costs capitalized to obtain revenue contracts.

Income from operations was $60 million with a break even margin of 0% during the six months ended December 31, 2021.

Income from operations during the six months ended December 31, 2021 included $5.9 million of stock-based compensation and $732,000 of amortization of costs capitalized to obtain revenue contracts.

Interest Income, Net

Interest income, net primarily consists of interest earned on money market accounts.

Interest income, net was income of $2,000 and $3,000 during the three months ended September 30, 2021 and 2020, respectively.

Interest income, net decreased in the three months ended September 30, 2021, as compared to comparable period in 2020, primarily due to an unfavorable shift in interest rates from money market accounts.

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

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 during the three months ended December 31, 2021 and 2020, respectively.

Interest income, net was income of $4,000 and $6,000 during the six months ended December 31, 2021 and 2020, respectively.

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 Income (Expense), Net

Other income (expense), net was income of $10,000 and expense of $163,000 during the three months ended September 30, 2021 and 2020, respectively.

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

Other expense, net was expense of $29,000 and $160,000 during the three months ended December 31, 2021 and 2020, respectively.

Other income (expense), net was expense of $19,000 and $323,000 during the six months ended December 31, 2021 and 2020, respectively.

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

Income Tax Provision

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

deferred tax assets as of September 30, 2021.

deferred tax assets as of December 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 $152,000 and $148,000 for the three months ended September 30, 2021 and 2020, respectively.

We recorded income tax provisions of $46,000 and $198,000 for the three and six months ended December 31, 2021, respectively.

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

Liquidity and Capital Resources

As of September 30, 2021 and 2020, our principal sources of liquidity were cash and cash equivalents and accounts receivable, totaling $81.8 million and $89.5 million, respectively.

Our cash, cash equivalents and restricted cash were $70.4 million and $63.2 million as of September 30, 2021 and June 30, 2021, respectively.

As of December 31, 2021 and June 30, 2021, our principal sources of liquidity were cash and cash equivalents, and accounts receivable totaling $83.3 million and $89.5 million, respectively.

Our cash, cash equivalents and restricted cash were $68.5 million and $63.2 million as of December 31, 2021 and June 30, 2021, respectively.

Based upon our current business plan, we believe that existing capital resources will enable us to maintain current and planned operations for at least the next 12 months.

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Our expectations as to our future cash flows and our future cash balances are subject to a number of assumptions, including assumptions regarding anticipated increases in our revenue, our ability to retain existing customers and customer purchasing and payment patterns, many of which are beyond our control.

For the three months ended September 30, 2021 and 2020, our cash flows were as follows (in thousands):

Three Months Ended

September 30,

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

Six Months Ended

Net cash provided by operating activities

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Net cash provided by financing activities

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 increased by $1.4 million during the three months ended September 30, 2021, from the comparable period in 2020, driven primarily by the timing of payments for accounts receivable received from customers for new cloud arrangements and the renewal of existing cloud and support.

Net cash used in investing activities increased by $52,000 during the three months ended September 30, 2021, from the comparable period in 2020, driven primarily by activities related to the purchase of equipment for new employees and facility expenditures.

Cash provided by operating activities mainly consists of net income (loss) 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 $1.3 million during the six months ended December 31, 2021, from the same period in 2020, driven primarily by the timing of payments for accounts payable and accrued liabilities.

Net cash used in investing activities decreased by $41,000 during the six months ended December 31, 2021, from the same period in 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 decreased by $77,000 during the three months ended September 30, 2021, from the comparable period in 2020.

Our current proceeds consist primarily of proceeds from the exercise of employee stock options.

Net cash provided by financing activities decreased by $163,000 during the six months ended December 31, 2021, from the same period in 2020.

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

Our principal commitments consist of obligations under leases for office space.

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

As of September 30, 2021, the future non-cancelable minimum payments under these commitments were approximately $2.9 million.

As December 31, 2021, the future non-cancelable minimum payments under these commitments were approximately $4.7 million.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

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

New Accounting Pronouncements

See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed financial statements for our discussion of new accounting pronouncements adopted and those pending.

See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements for our discussion of new accounting pronouncements adopted and those pending.

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