QUANTUM CORP / DE / MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS (Form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements,
the accompanying notes, and other information included in this Quarterly Report
and our annual report for the year ended March 31, 2021. In particular, the
disclosure contained in Item 1A in our annual report, as updated by Part II,
Item 1A in this Quarterly Report, may reflect trends, demands, commitments,
events, or uncertainties that could materially impact our results of operations
and liquidity and capital resources.
The following discussion contains forward-looking statements, such as statements
regarding COVID-19's anticipated impacts on our business, our future operating
results and financial position, our business strategy and
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PREVIEW

We are a technology company whose mission is to deliver innovative solutions to
organizations across the world. We design, manufacture and sell technology and
services that help customers capture, create and share digital content, and
protect it for decades. We emphasize innovative technology in the design and
manufacture of our products to help our customers unlock the value in their
video and unstructured data in new ways to solve their most pressing business
challenges.

We generate revenue by designing, manufacturing, and selling technology and
services. Our most significant expenses are related to compensating employees;
designing, manufacturing, marketing, and selling our products and services; data
center costs in support of our cloud-based services; interest associated with
our long term debt and income taxes.

Highlights from second quarter of fiscal year 2022 included:
•Revenue increased 5% from the prior quarter and 9% year-over-year to $93
million.
•We completed the Pivot3 assets acquisition, which adds a portfolio of industry
leading hyperconverged infrastructure (HCI) and intelligent software solutions
for the security and surveillance markets.
•We completed the EnClouden assets acquisition which will enable us to expand
the addressable market for our video surveillance portfolio, offering customers
a solution using their server hardware of choice with a flexible
subscription-based software model.
•We completed the refinancing of our term loan, significantly reducing our
annual debt service and greatly increasing our financial flexibility related to
covenants and restrictions.
•We brought on industry veteran John Hurley as Chief Revenue Officer. John
brings extensive experience working with the largest global enterprise,
commercial, and service provider customers.


COVID-19 IMPACT AND RELATED ACTIONS

Since the beginning of March 2020, COVID-19 has led governments and other
authorities around the world, including federal, state and local authorities in
the United States, to impose measures intended to reduce its spread, including
restrictions on freedom of movement and business operations such as travel bans,
border closings, business limitations and closures (subject to exceptions for
essential operations and businesses), quarantines and shelter-in-place orders.
These measures may remain in place for a significant period of time.

In light of these events, we have taken actions to protect the health and safety
of our employees while continuing to serve our global customers as an essential
business. We have implemented more thorough sanitation practices as outlined by
health organizations and instituted social distancing policies at our locations
around the world, including working from home, limiting the number of employees
attending meetings, reducing the number of people in our sites at any one time,
and suspending employee travel.

We have seen a gradual stabilization in our business during the second half of
fiscal 2021 and into fiscal 2022 as customers increasingly adapted to the
COVID-19 environment. The pervasive disruption in the global supply chain
continues to have an impact on our business. Before the current disruptions in
the global supply chain our historical backlog was very limited and typically
represented less than 5% of quarterly revenues. During our second fiscal quarter
our backlog grew to $50 million from $30 million at the end of the prior
quarter. This unprecedented backlog is a result of the strong demand we have
been seeing across our business but limited by the ongoing supply constraints.
Of the $50 million ending backlog, just over 70% of the backlog was from
hyperscaler customers and just over 85% of the backlog was related to tape
products. Approximately two-thirds of the backlog is expected to be shipped in
the second half of fiscal 2022 and the remaining one-third of the backlog has
ship dates early in fiscal 2023.

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We will continue to actively monitor the impact of COVID-19 and may take further
actions altering our business operations that we determine are in the best
interests of our employees, customers, partners, suppliers, and stakeholders, or
as required by federal, state, or local authorities. See "The recent COVID-19
pandemic could adversely affect our business, results of operations and
financial condition" in Part II, Item 1A, Risk Factors, of our most recent
Annual Report on Form 10-K for more information regarding the risks we face as a
result of the COVID-19 pandemic.



                             RESULTS OF OPERATIONS
                                           Three Months Ended September 30,                 Six Months Ended September 30,
(in thousands)                                2021                    2020                    2021                    2020
Total revenue                          $         93,180          $    

85 821 $ 182,278 $ 159,126
Total cost of sales (1)

                        54,793                47,087                   106,612                89,540
Gross profit                                     38,387                38,734                    75,666                69,586
Operating expenses
Research and development (1)                     12,389                10,233                    23,680                20,395
Sales and marketing (1)                          15,462                13,153                    29,414                24,723
General and administrative (1)                   11,466                10,263                    23,293                21,825
Restructuring charges                                 8                 1,585                       274                 2,637
Total operating expenses                         39,325                35,234                    76,661                69,580
Income (loss) from operations                      (938)                3,500                      (995)                    6
Other income (expense), net                         126                  (312)                      (71)                 (697)
Interest expense                                 (3,070)               (7,578)                   (6,956)              (14,015)
Loss on debt extinguishment, net                 (4,960)                    -                    (4,960)                    -
Net loss before income taxes                     (8,842)               (4,390)                  (12,982)              (14,706)
Income tax provision                                411                   202                       424                   622
Net loss                               $         (9,253)         $     (4,592)         $        (13,406)         $    (15,328)

(1) Includes stock-based compensation as follows:

                                              Three Months Ended September 30,                 Six Months Ended September 30,
(in thousands)                                   2021                    2020                    2021                    2020
Cost of revenue                          $             298          $        227          $            591          $        396
Research and development                             1,331                   591                     2,863                 1,062
Sales and marketing                                    613                   495                     1,113                   832
General and administrative                             830                 1,279                     1,706                 2,260
  Total                                  $           3,072          $      2,592          $          6,273          $      4,550



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Comparison of the Three Months Ended September 30, 2021 and 2020

Revenue
                                                    Three Months Ended September 30,
(dollars in thousands)                                 % of                                    % of
                                   2021               revenue              2020               revenue            $ Change            % Change
Product revenue
  Primary storage systems      $  16,683                  18            $ 20,610                  24            $ (3,927)                (19)
  Secondary storage systems       26,259                  28              18,903                  22               7,356                  39
  Devices and media               11,713                  13              11,337                  13                 376                   3
   Total product revenue          54,655                  59              50,850                  59               3,805                   7
Service revenue                   34,359                  37              31,494                  37               2,865                   9
Royalty revenue                    4,166                   4               3,477                   4                 689                  20
Total revenue                  $  93,180                 100            $ 85,821                 100            $  7,359                   9




Product revenue
In the three months ended September 30, 2021, product revenue increased $3.8
million, or 7%, as compared to the same period in 2020. Secondary storage
systems represented $7.4 million, or a 39% increase, driven by higher demand in
our hyperscale, backup and archive use cases. Primary storage systems decreased
$3.9 million, or 19%, partially driven by our transition to a recurring software
subscription licensing model which results in a shift from product to services
revenue.
Service revenue
We offer a broad range of services including product maintenance,
implementation, and training as well as software subscriptions. Service revenue
is primarily comprised of customer field support contracts which provide
standard support services for our hardware. Standard service contracts may be
extended or include enhanced service, such as faster service response times.
Service revenue increased 9% in the three months ended September 30, 2021
compared to the same period in 2020 driven partially by growing sales of our
recurring software subscription offerings as well as service revenue associated
with newly acquired businesses.
Royalty revenue
We receive royalties from third parties that license our LTO media patents
through our membership in the LTO consortium. Royalty revenue increased $0.7
million, or 20%, in the three months ended September 30, 2021 compared to the
same period in 2020 due to increased market volume of LTO media.

Gross profit and margin

                                                         Three Months Ended September 30,
(dollars in thousands)                                     Gross                                    Gross
                                       2021               margin %              2020               margin %            $ Change          Basis point change
Product gross profit               $  13,531                 24.8            $ 15,852                 31.2            $ (2,321)                  (640)
Service gross profit                  20,690                 60.2              19,405                 61.6               1,285                   (140)
Royalty gross profit                   4,166                100.0               3,477                100.0                 689                      -
Gross profit                       $  38,387                 41.2            $ 38,734                 45.1            $   (347)                  (390)



Product Gross Margin
Product gross margin decreased 640 basis points for the three months ended
September 30, 2021, as compared with the same period in 2020. This decrease was
due primarily to a product mix weighted towards lower margin offerings and cost
pressures as a result of constraints in the global supply chain.
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Service Gross Margin
Service gross margins decreased 140 basis points for the three months ended
September 30, 2021, as compared with the same period in 2020. This was partially
driven by cost pressures as a result of certain constraints in the global supply
chain.
Royalty Gross Margin
Royalties do not have significant related cost of sales.

Operating expenses
                                                          Three Months Ended September 30,
(dollars in thousands)                                       % of                                    % of
                                         2021               revenue              2020               revenue            $ Change            % Change
Research and development             $  12,389                13.3            $ 10,233                11.9            $  2,156                 21
Sales and marketing                     15,462                16.6              13,153                15.3               2,309                 18
General and administrative              11,466                12.3              10,263                12.0               1,203                 12
Restructuring charges                        8                   -               1,585                 1.8              (1,577)               (99)
  Total operating expenses           $  39,325                42.2            $ 35,234                41.1            $  4,091                 12



In the three months ended September 30, 2021, research and development expense
increased $2.2 million, or 21%, as compared with the same period in 2020. This
increase was primarily driven by an increase in personnel costs due to increased
headcount focused on new product development. This increase in headcount
includes those employees added through acquisitions over the year.
In the three months ended September 30, 2021, sales and marketing expenses
increased $2.3 million, or 18%, as compared with the same period in 2020. This
increase was driven by increased headcount as we invest in strategic areas to
accelerate growth. This increase in headcount includes those employees added
through acquisitions over the year. Both marketing expense and travel expense
have also increased over the prior year as COVID-19 restrictions ease.
In the three months ended September 30, 2021, general and administrative
expenses increased $1.2 million, or 12%, as compared with the same period in
2020. This increase was due primarily to increased legal and other expenses
related to our long-term debt amendments and business acquisition related
activities.
In the three months ended September 30, 2021, restructuring expenses decreased
$1.6 million, or 99%, as compared with the same period in 2020. The decrease was
the result of one-time workforce reductions in the prior year.

Other Income (Expense)
                                                             Three Months Ended September 30,
(dollars in thousands)                                             % of                                     % of
                                            2021                  revenue               2020               revenue             $ Change             % Change
Other income (expense)               $           126                   0            $    (312)                  -            $      438                 140
Interest expense                              (3,070)                  3               (7,578)                  9                 4,508                  59
Loss on debt extinguishment                   (4,960)                  5                    -                   -                (4,960)                     n/a



The increase in other income (expense), net during the three months ended
September 30, 2021 compared with the same period in 2020 was related primarily
to fluctuations in foreign currency exchange rates.
In the three months ended September 30, 2021, interest expense decreased $4.5
million, or 59%, as compared with the same period in 2020 due to a lower
principal balance and a lower effective interest rate.
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Loss on debt extinguishment, net during the three months ended September 30,
2021 was related to prepayment of our Senior Secured Term Loan that occurred
during the period offset by the $10.0 million gain on the forgiveness of the
Paycheck Protection Program Loan.

Income Taxes
                                                         Three Months Ended September 30,
(dollars in thousands)                                       % of                                    % of
                                        2021                revenue              2020               revenue             $ Change            % Change
Income tax provision               $       411                   -            $    202                   -            $     209                 103



The income tax provision for the three months ended September 30, 2021 and 2020
is primarily influenced by foreign and state income taxes. Due to our history of
net losses in the United States, the protracted period for utilizing tax
attributes in certain foreign jurisdictions, and the difficulty in predicting
future results, we believe that we cannot rely on projections of future taxable
income to realize most of our deferred tax assets. Accordingly, we have
established a full valuation allowance against our U.S. and certain foreign net
deferred tax assets. Significant management judgement is required in assessing
our ability to realize any future benefit from our net deferred tax assets. We
intend to maintain this valuation allowance until sufficient positive evidence
exists to support its reversal. Our income tax expense recorded in the future
will be reduced to the extent that sufficient positive evidence materializes to
support a reversal of, or decrease in, our valuation allowance.

Comparison of the Six Months Ended September 30, 2021 and 2020
Revenue
                                                         Six Months Ended September 30,
(dollars in thousands)                                       % of                                      % of
                                     2021                  revenue                2020               revenue             $ Change             % Change
Product revenue
  Primary storage systems              27,994                     15  %       $  30,824                     19  %       $ (2,830)                     (9) %
  Secondary storage systems            54,463                     30             37,395                     24            17,068                      46
  Devices and media                    24,329                     13             22,318                     14             2,011                       9
   Total product revenue       $      106,786                     58  %       $  90,537                     57  %       $ 16,249                      18
Service revenue                        67,189                     37             61,880                     39             5,309                       9
Royalty revenue                         8,303                      5              6,709                      4             1,594                      24
Total revenue                  $      182,278                    100  %       $ 159,126                    100  %       $ 23,152                      15




Product revenue
In the six months ended September 30, 2021, product revenue increased $16.2
million, or 18%, as compared to the same period in 2020. Secondary storage
systems represented $17.1 million of the increase, driven primarily by a growing
customer base in the hyperscale segment. Devices and media represented $2.0
million of the increase, driven by higher volume of LTO media sold through our
high-volume channel partners. Primary storage systems decreased $2.8 million
driven partially by driven by our transition to a recurring software
subscription licensing model which results in a shift from product to services
revenue.
Service revenue
We offer a broad range of services including product maintenance,
implementation, and training as well as software subscriptions. Service revenue
is primarily comprised of customer field support contracts which provide
standard support services for our hardware. Standard service contracts may be
extended or include enhanced service, such as faster service response times.
Service revenue increased $5.3 million, or 9% in the six months ended
September 30, 2021 compared to the same period in 2020, driven partially by the
increase in recurring software subscription revenue. Growth is also driven by a
higher level of installation and professional services attached to our product
sales.
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Royalty revenue
We receive royalties from third parties that license our LTO media patents
through our membership in the LTO consortium. Royalty revenue increased $1.6
million, or 24%, in the six months ended September 30, 2021 compared to the same
period in 2020 due to higher overall market volume.

Gross Profit and Margin
                                                             Six Months Ended September 30,
(dollars in thousands)                                           Gross                                     Gross
                                         2021                  margin %               2020               margin %              $ Change          Basis point change
Product gross profit               $       26,922                    25.2  %       $ 25,157                    27.8  %       $   1,765                   (260)
Service gross profit                       40,441                    60.2            37,720                    61.0              2,721                    (80)
Royalty gross profit                        8,303                   100.0             6,709                   100.0              1,594                      -
Gross profit                       $       75,666                    41.5  %       $ 69,586                    43.7  %       $   6,080                   (220)



Product Gross Margin
Product gross margin decreased 260 basis points for the six months ended
September 30, 2021, as compared with the same period in 2020. This decrease was
primarily the result of a less favorable product mix to our enterprise
customers, as well as cost pressures as a result of constraints in the global
supply chain.
Service Gross Margin
Service gross margin decreased 80 basis points for the six months ended
September 30, 2021, as compared with the same period in 2020. This decrease was
partially due to cost pressures as a result of constraints in the global supply
chain.
Royalty Gross Margin
Royalties do not have significant related cost of sales.

Operating expenses
                                                              Six Months Ended September 30,
(dollars in thousands)                                             % of                                     % of
                                           2021                  revenue               2020               revenue             $ Change             % Change
Research and development             $       23,680                   12.9  %       $ 20,395                   12.8  %       $  3,285                     16  %
Sales and marketing                          29,414                   16.1            24,723                   15.5             4,691                     19
General and administrative                   23,293                   12.8            21,825                   13.7             1,468                      7
Restructuring charges                           274                    0.2             2,637                    1.7            (2,363)                   (90)
  Total operating expenses           $       76,661                   42.1  %       $ 69,580                   43.7  %       $  7,081                     10



In the six months ended September 30, 2021, research and development expense
increased $3.3 million, or 16%, as compared with the same period in 2020. This
increase was primarily driven by an increase in personnel costs due to increased
headcount focused on new product development. This increase in headcount
includes those employees added through acquisitions over the year.
In the six months ended September 30, 2021, sales and marketing expenses
increased $4.7 million, or 19%, as compared with the same period in 2020. This
increase was driven by increased headcount as we invest in strategic areas to
accelerate growth. This increase in headcount includes those employees added
through acquisitions over the year. Both marketing expense and travel expense
have also increased over the prior year as COVID-19 restrictions ease.
In the six months ended September 30, 2021, general and administrative expenses
increased $1.5 million, or 7% as compared with the same period in 2020. This
increase was due primarily to increased legal and other expenses related to our
long-term debt amendments and business acquisition related activities.

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In the six months ended September 30, 2021, restructuring expenses decreased
$2.4 million, or 90% as compared with the same period in 2020. The decrease was
the result of a reduction in workforce to improve operational efficiency and
rationalize our cost structure in the prior year.

Other Income (Expense)
                                                              Six Months Ended September 30,
(dollars in thousands)                                           % of                                      % of
                                           2021                 revenue               2020               revenue              $ Change              % Change
Other income (expense)               $         (71)                  0            $    (697)                     -  %       $      626                      90  %
Interest expense                            (6,956)                 (4)             (14,015)                    (9)              7,059                     (50)
Loss on debt extinguishment                 (4,960)                 (3)                   -                      -              (4,960)                       n/a


The change in other income (expenses), net during the half-year ended
September 30, 2021 and 2020 was mainly related to exchange rate fluctuations.

In the past six months September 30, 2021, interest expense has decreased $ 7.1 million, or 50%, compared to the same period in 2020 mainly due to a lower principal balance and a lower effective interest rate on term debt.

Loss on debt extinguishment, net during the six months ended September 30, 2021
was related to prepayment of our Senior Secured Term Loan that occurred during
the period offset by the $10.0 million gain on the forgiveness of the Paycheck
Protection Program loan.

Income Taxes
                                                            Six Months Ended September 30,
(dollars in thousands)                                          % of                                     % of
                                         2021                 revenue               2020               revenue              $ Change             % Change
Income tax provision               $         424                      -  %       $    622                      -  %       $    (198)                    (32) %



The income tax provision for the six months ended September 30, 2021 and 2020 is
primarily influenced by foreign and state income taxes. Due to our history of
net losses in the United States, the protracted period for utilizing tax
attributes in certain foreign jurisdictions, and the difficulty in predicting
future results, we believe that we cannot rely on projections of future taxable
income to realize most of our deferred tax assets. Accordingly, we have
established a full valuation allowance against our U.S. and certain foreign net
deferred tax assets. Significant management judgement is required in assessing
our ability to realize any future benefit from our net deferred tax assets. We
intend to maintain this valuation allowance until sufficient positive evidence
exists to support its reversal. Our income tax expense recorded in the future
will be reduced to the extent that sufficient positive evidence materializes to
support a reversal of, or decrease in, our valuation allowance.



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LIQUIDITY AND CAPITAL RESOURCES
We had cash and cash equivalents of $22.8 million as of September 30, 2021,
which consisted primarily of bank deposits and money market accounts.
We consider liquidity in terms of the sufficiency of internal and external cash
resources to fund our operating, investing and financing activities. Our
principal sources of liquidity include cash from operating activities, cash and
cash equivalents on our balance sheet and amounts available under our PNC Credit
Facility. We require significant cash resources to meet obligations to pay
principal and interest on our outstanding debt, provide for our research and
development activities, fund our working capital needs, and make capital
expenditures. Our future liquidity requirements will depend on multiple factors,
including our research and development plans and capital asset needs. We are
subject to the risks arising from COVID-19 which have caused substantial
financial market volatility and have adversely affected both the U.S. and the
global economy. We believe that these social and economic impacts have had a
negative effect on sales due to disruptions in our supply chain and a decline in
our customers' ability or willingness to purchase our products and services. The
extent of the impact will depend, in part, on how long the negative trends in
customer demand and supply chain levels will continue. We expect the impact of
COVID-19 to continue to have a significant impact on our liquidity and capital
resources.
We are subject to various debt covenants under our Credit Agreements. Our
failure to comply with our debt covenants could materially and adversely affect
our financial condition and ability to service our obligations. For additional
information about our debt, see the sections entitled "Risk Factors-Risks
Related to Our Business Operations" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources"
in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Term Loan
On August 5, 2021 (the "Closing Date"), we entered into a senior secured term
loan to borrow an aggregate of $100.0 million, (the "Term Loan"). A portion of
the proceeds were used to repay in full all outstanding borrowings under the
Senior Secured Term Loan. Borrowings under the Term Loan mature on August 5,
2026. Principal is payable at a rate per annum equal to (a) 2.5% of the original
principal balance thereof during the first year following the Closing Date and
(b) 5% of the original principal balance thereof thereafter. Principal and
interest payments are payable on a quarterly basis.

Revolving Credit Facility
On September 30, 2021, we amended the PNC Credit Facility. The amendment, among
other things (a) extended the maturity date to August 5, 2026; (b) reduced the
principal amount of the revolving commitments to a maximum amount equal to the
lesser of: (i) $30.0 million or (ii) the amount of the borrowing base, as
defined in the PNC Credit Facility agreement;(c) replaced existing debt
covenants with net leverage ratio, minimum liquidity and fixed charges coverage
ratio covenants; and, (d) removed the requirement to maintain a $5.0 million
restricted cash reserve with PNC.

Paycheck Protection Program Loan
In July 2021, we received notice from PNC that the Paycheck Protection Program
Loan and related accrued interest was approved for forgiveness in full by the
U.S. Small Business Administration. We recorded the amount forgiven as gain on
debt extinguishment of $10.0 million in the three and six months ended September
30, 2021.

Cash Flows

The following table summarizes our consolidated cash flows for the periods indicated.

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                                                                 Six Months Ended September 30,
(in thousands)                                                   2021                      2020
Cash provided by (used in):
  Operating activities                                    $        (15,262)         $       (19,297)
  Investing activities                                              (7,396)                  (1,434)
  Financing activities                                              12,716                   26,866
  Effect of exchange rate changes                                       12                      (96)
Net increase (decrease) in cash and cash equivalents and
restricted cash                                           $         (9,930)         $         6,039


Cash used in operating activities

Net cash used in operating activities was $15.3 million for the six months ended
September 30, 2021. This use of cash was primarily attributable to changes in
working capital of $14.6 million driven by increases in manufacturing and
service part inventories of $7.0 million, a decrease in deferred revenue of $9.0
million and a net changes in other assets and liabilities of $5.8 million. These
were partially offset by cash generated by a $10.0 million decrease in accounts
receivables. The decrease in deferred revenue reflects the seasonal nature of
service contract renewals.

Net cash used in operating activities was $19.3 million for the six months ended
September 30, 2020. This use of cash was primarily attributable to changes in
working capital of $19.1 million driven by the increases in manufacturing and
service inventory of $13.2 million and a decrease in deferred revenue of $12.6
million. These were partially offset by a decrease in accounts receivable of
$7.6 million. The decrease in deferred revenue reflects the seasonal nature of
service contract renewals which peak in the fourth fiscal quarter.

Cash used in investing activities

Net cash used in investing activities for the six months ended September 30,
2021 was attributable to cash paid for our acquisition of Pivot3 of $5.0 million
and capital expenditures of $2.4 million.

The net cash used in investing activities was $ 1.4 million in the past six months
September 30, 2020 related to capital expenditure.

Cash provided by fundraising activities

Net cash provided by financing activities for the six months ended September 30,
2021 was related primarily to borrowings under our credit facility, and proceeds
from the new Term Loan offset by the repayment in full of the Senior Secured
Term Loan.

Net cash provided by financing activities was $26.9 million in the six months
ended September 30, 2020 which included Senior Secured Term Loan borrowings of
$19.4 million, $10.0 million in borrowings under the Paycheck Protection Program
and the net pay-down of our Amended PNC Credit Facility.

Commitments and contingencies

Our contingent liabilities consist primarily of certain financial guarantees,
both express and implied, related to product liability and potential
infringement of intellectual property. We have little history of costs
associated with such indemnification requirements and contingent liabilities
associated with product liability may be mitigated by our insurance coverage. In
the normal course of business to facilitate transactions of our services and
products, we indemnify certain parties with respect to certain matters, such as
intellectual property infringement or other claims. We also have indemnification
agreements with our current and former officers and directors. It is not
possible to determine the maximum potential amount under these indemnification
agreements due to the limited history of our indemnification claims, and the
unique facts and circumstances involved in each particular agreement.
Historically, payments made by us under these agreements have not had a material
impact on our operating results, financial position or cash flows.

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We are also subject to ordinary course litigation and potential costs related to
our financial statement restatement activities and related legal costs.

Off-balance sheet provisions

With the exception of the indemnification commitments described under “- Commitments and contingencies” above, we currently have no other off-balance sheet arrangements and do not hold any interests in variable interest entities.

Contractual obligations

We have contractual obligations and commercial commitments, some of which, such
as purchase obligations, are not recognized as liabilities in our financial
statements. There have not been any other material changes to the contractual
obligations disclosed in our Annual Report on Form 10-K for the fiscal year
ended March 31, 2021.

Critical Accounting Estimates and Policies
The preparation of our consolidated financial statements in accordance with
generally accepted accounting principles requires management to make judgments,
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes included elsewhere in this Quarterly
Report on Form 10-Q. On an ongoing basis, we evaluate estimates, which are based
on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. We consider certain accounting policies to
be critical to understanding our financial statements because the application of
these policies requires significant judgment on the part of management, which
could have a material impact on our financial statements if actual performance
should differ from historical experience or if our assumptions were to change.
Our accounting policies that include estimates that require management's
subjective or complex judgments about the effects of matters that are inherently
uncertain are summarized in our most recently filed Annual Report on
Form 10-K for the fiscal year ended March 31, 2021 under the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources-Critical Accounting Policies." For
additional information on our significant accounting policies, see Note 1 to our
unaudited condensed consolidated financial statements included elsewhere in this
Quarterly Report on Form 10-Q.

Recently published and adopted accounting position papers

See Note 1 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and in our latest Annual Report on Form 10-K.

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